Industrial

23Q4
Houston

The Houston industrial market, supported by the Port of Houston as well as

population and positive in-migration trends, continued to grow during the year,
albeit slower than the record-setting pace in previous years. As construction
accelerated post-pandemic, developers completed buildings faster than tenants
could absorb in 2023, which caused a slight increase in vacancy. Developers took
notice and slowed construction, resulting in 43% less square footage under
construction at the end of the year compared to this time period last year.
Tenant activity remains positive, with fourth quarter’s nearly 9 million square feet
of leasing transactions a jump of over 1 million square feet from third quarter.
With tenant activity forecasted to remain robust, much of the added supply is
expected to be absorbed in the coming year as the market rebalances after the
elevated activity experienced post-pandemic.

Danny Rice | President

Accelerating success.
 Industrial Key Takeaways

23Q4
• Construction starts slow

Houston
• Deliveries and absorption drop
• Leasing activity up for quarter
• Vacancy rises

YOY YOY Under YOY Overall Asking Lease YOY

Vacancy Rate Net Absorption Construction Rates (NNN)

7.0% FORECAST
2.4M SF FORECAST
21.1M SF FORECAST
$9.39/SF FORECAST

Houston Highlights
The industrial market’s activity slowed on all levels during the fourth quarter with new supply outpacing net absorption each
quarter during the year. For this year, twice as much new product, 31.6 MSF, has been delivered than absorbed, with completions
just under the record-level 32.9 MSF in 2020. Leasing activity jumped 1.1 MSF to 8.9 MSF from the previous quarter, with this
year’s 35.9 MSF about 25% down from each of the last two years’ record levels. The overall vacancy rate increased 50 basis points
to 7.0% from 6.5% in Q3 2023 with new product vacancies contributing to the uptick. Developers have reduced the construction
level to 21.1 MSF following the record-level 37.2 MSF year-over-year. Positive net absorption this quarter was 2.4 MSF, bringing
the 2023 total to 17.3 MSF, about 60% of 2022’s net absorption of 28.9 MSF. Rents nudged up to $9.39 NNN PSF from $9.35.

Market Indicators Market Fundamentals

3.8% 2.3% $72
Houston Houston annual WTI Spot Price, 20,000,000 9.0%

Unemployment % change in U.S. benchmark 18,000,000 8.0%

Rate employment for light sweet 16,000,000 7.0%

crude 14,000,000
6.0%

Historic Comparison 12,000,000

10,000,000
5.0%

4.0%
8,000,000
22Q4 23Q3 23Q4 6,000,000
3.0%

2.0%
Total Inventory 4,000,000
716.7 741.0 750.7
(in Millions of SF) 2,000,000 1.0%

0 0.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
New Supply
5.4 9.7 4.9
(in Millions of SF) 2018 2019 2020 2021 2022 2023

Absorption New Supply Total Vacancy

Net Absorption Absorption New Supply Total Vacancy
7.3 6.7 2.3
(in Millions of SF)

Overall Vacancy 5.2% 6.5% 7.0% The overall industrial vacancy rate in Houston increased by 50
basis points during the fourth quarter. All activity indicators have
Under shown declines after two years of setting historical records in
Construction 37.2 22.3 21.1 various categories at unsustainable levels.
(in Millions of SF)
Despite a slowdown throughout the year in construction
Overall Asking levels, which are now at a more moderate and healthier pace,
$8.48 $9.35 $9.39
Lease Rates (NNN) completions surged by 30.6%, just below the record set in 2020.

Recent Transactions *Colliers’ Transaction

Lease* Lease Lease Lease* Lease

Barker Cypress Dist. Center The Uplands Twinwood 8235 Plummer St - Bldg 2 Market Street Logistics North Central Dist. Center
Northwest Outliers Business Park Southeast Outer Loop Center North Hardy Toll Road
142.1k SF Sugar Land 525k SF Southeast Outer Loop 409.8k SF
546k SF 49k SF
Houston
Industrial

23Q4

Executive Summary
By Trey Horne, Industrial Associate

The Houston industrial market recorded signs of a slowdown their options even while concessions for new space are
during fourth quarter. Developers responded to market holding steady.
dynamics by reducing construction levels to 21.1 million
The Port of Houston continues as a key economic driver for
square feet, a notable decrease from the previous year’s
the industrial market, ending the year with cargo volumes
record of 37.2 million square feet.
down 4% compared to 2022’s record-setting year, a decrease
New supply consistently outpaced net absorption throughout signaling a return to pre-pandemic shipping patterns. Loaded
the year, with deliveries totaling 31.6 million square feet, exports recorded their highest December ever, driven largely
slightly less than the record 32.9 million square feet set in by the demand for resin.
2020. Positive net absorption in fourth quarter of 2.4 million
Project 11 is on track as it completes the first segment of
square feet contributed to a 2023 total of 17.4 million square
a multi-year expansion project to deepen and widen the
feet, a little more than half the annual deliveries.
Houston Ship Channel by late 2026. The newest Wharf 6 at
Leasing activity remains strong, with fourth quarter showing the Bayport Container Terminal is now fully operating, adding
an increase to 8.9 million square feet from the previous much-needed cargo volume capacity, and improvements and
quarter, contributing to the annual total of 35.9 million square upgrades are also underway on Wharves 4 and 5.
feet. This quarter’s activity was led by:
Driven by the Port of Houston’s ongoing expansion, the
• Waaree Energies, India’s solar panel manufacturer Southeast is leading all other submarkets year-to-date with
opening its first U.S. location, leasing 546,000 square feet 26.5% of square footage under construction and 25.7% of
at The Uplands Twinwood Business Park in Sugar Land, delivery totals. For net absorption, the Southeast came in
and second among submarkets, with 4.1 million square feet, or
23.5% of the total.
• ExxonMobil, who leased 525,000 square feet at Houston
Tradeport in the Southeast. The overall vacancy rate increased by 50 basis points during
fourth quarter, up to 7.0% from 6.5%, with new product
For all of 2023, Distribution Alternatives’ 855,610-square-foot
vacancies playing a role in this uptick. The 131 buildings
lease in Kingsland Ranch Logistics Park in Brookshire was
currently underway are 34.3% preleased.
noted as the largest lease signed.
With a tightened spec development pipeline for 2024, we
Although the economic picture is uncertain, leasing velocity in
expect the vacancy rate to go down as leasing activity remains
2024 should increase as tenants are being pressed to make
strong. Houston’s industrial market will continue to benefit
decisions as expirations occur, although groups wanting to
from the metro’s positive economic outlook based on the
make big expansion moves are somewhat hesitant to commit
area’s continued growth in population and employment.
immediately. Most tenants with renewal options are exercising

Colliers | Houston | 23Q4 | Industrial Report

 Houston
Industrial

23Q4
Under Construction
Institutional Inventory - 500,000 SF or Greater
The buildings in the table below represent a sampling of the developments currently underway in Houston’s industrial market.

% Leased/ Est. Delivery Developer/Owner/

Business Park/Address Submarket RBA Owned Date Tenant
Panattoni Development
Target Distribution Northeast Hwy 90 1,400,000 100% Q1 2024
Company
Hillwood Development
Beltway66 Logistics Park Building 1 South Hwy 35 1,200,000 100% Q1 2024
Corporation

Port 99 Logistics Building 1 East-Southeast Far 1,027,490 0% Q2 2024 Provident Realty Advisors

Generation Park Northeast Hwy 90 1,026,270 0% Q1 2024 CA Ventures

Grand Central West Industrial Park

Northwest Outliers 843,360 0% Q4 2024 PinPoint Commercial
Building 2
Cedar Port Industrial Park Logistics Capital Development
East-Southeast Far 800,405 0% Q1 2024
Center II Partners
Clay Development &
Twinwood Distribution Center III Sugar Land 767,520 0% Q4 2024
Construction

Packwell East-Southeast Far 725,000 100% Q1 2024 Angler Construction

Construction Activity
Houston Industrial Construction
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Construction by Submarket
# of Buildings Available SF
131 14,011,312
Total SF Pre-Leased
21,072,724 33.4%

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Note: Includes all under-construction industrial and flex buildings
10,000+ SF

Source: CoStar

Colliers | Houston | 23Q4 | Industrial Report

Houston
Industrial

23Q4
Market Statistics
Total Direct Sublease Total Previous Net Net Avg Direct
Inventory Availability Availability Availability Vacancy Vacancy Absorption Absorption Under Deliveries Asking Rate
SF Rate Rate Rate Rate Rate Current YTD Construction YTD (NNN)

HOUSTON TOTAL 750,711,886 9.0% 1.0% 10.0% 7.0% 6.5% 2,348,038 17,263,322 21,072,724 31,608,337 $9.39

Inner Loop Corridor

CBD Northwest 10,747,376 4.5% 0.5% 4.9% 2.3% 2.2% (4,076) 27,142 0 0 $10.45
Downtown 30,428,451 9.1% 0.5% 9.6% 6.6% 4.8% 134,398 (109,997) 0 0 $6.89
North Inner Loop 5,025,307 7.3% 0.8% 8.1% 4.9% 4.8% (30,875) (176,143) 0 0 $2.68

Southwest Inner Loop 5,427,824 11.8% 1.1% 12.9% 8.8% 4.3% 50,424 60,254 0 0 $11.39

INNER LOOP TOTAL 51,628,958 8.2% 0.6% 8.8% 5.8% 4.2% 149,871 (198,744) 0 0 $7.60

Liberty County

Liberty County 2,044,622 4.5% 1.6% 6.0% 5.2% 5.6% 0 (64,265) 20,000 0 $0.00

LIBERTY CO TOTAL 2,044,622 4.5% 1.6% 6.0% 5.2% 5.6% 0 (64,265) 20,000 0 $0.00

North Corridor

North Fwy Tomball Pky 38,407,122 9.1% 1.3% 10.4% 8.3% 7.5% 202,210 41,366 790,592 712,175 $10.54

North Hardy Toll Rd 47,490,869 10.0% 3.4% 13.3% 11.0% 7.8% 65,111 1,976,000 1,057,309 1,498,444 $9.89

North Outer Loop 27,026,353 9.1% 0.1% 9.2% 5.9% 5.1% 108,643 49,175 206,136 424,404 $6.47

The Woodlands/Conroe 29,135,591 9.0% 0.1% 9.2% 6.7% 3.2% 34,521 351,304 573,712 1,254,498 $12.75

NORTH TOTAL 142,059,935 9.4% 1.5% 10.9% 8.4% 6.3% 410,485 2,417,845 2,627,749 3,889,521 $10.08

Northeast Corridor

Northeast Hwy 321 2,544,747 5.0% 5.5% 10.5% 6.3% 2.2% (117,768) 135,990 0 1,070,598 $9.84

Northeast Hwy 90 27,507,482 17.1% 0.9% 18.1% 6.5% 5.0% (415,385) (116,095) 4,094,076 2,103,517 $7.40

Northeast I-10 7,032,225 16.3% 0.0% 16.3% 15.5% 15.5% 199,847 583,053 0 851,139 $6.63

Northeast Inner Loop 13,123,572 1.2% 0.1% 1.3% 1.5% 1.4% (13,907) 107,647 0 429,647 $6.00

NORTHEAST TOTAL 50,208,026 12.2% 0.8% 13.1% 6.5% 5.3% (347,213) 710,595 4,094,076 4,454,901 $7.07

Northwest Corridor

Hwy 290 Tomball Pky 33,291,073 10.2% 2.0% 12.2% 9.7% 9.7% (35,746) 1,098,969 0 2,306,418 $8.99

Northwest Hwy 6 19,944,167 9.6% 0.8% 10.4% 11.1% 16.5% 947,885 2,307,293 216,003 3,470,675 $11.00

Northwest Inner Loop 61,143,396 5.8% 0.3% 6.1% 5.3% 5.2% (48,767) (525,399) 0 192,400 $10.42

Northwest Near 19,114,049 6.6% 0.7% 7.3% 5.1% 5.6% 36,430 (74,038) 0 249,065 $7.32

Northwest Outliers 42,514,616 7.2% 1.9% 9.1% 4.4% 4.1% 39,469 2,701,778 1,409,025 630,878 $11.23

West Outer Loop 30,960,750 6.8% 0.7% 7.5% 4.2% 5.1% 188,517 (28,403) 736,676 84,122 $10.34

NORTHWEST TOTAL 206,968,051 7.4% 1.1% 8.4% 6.2% 6.8% 1,127,788 5,480,200 2,361,704 6,933,558 $10.04

South Corridor

South Hwy 35 43,699,105 10.0% 1.4% 11.4% 5.8% 4.8% (53,080) 1,728,736 3,445,390 2,708,828 $9.52

South Inner Loop 12,000,247 3.1% 0.5% 3.6% 2.0% 1.8% (19,206) 205,279 62,000 0 $13.48
SOUTH TOTAL 55,699,352 8.5% 1.2% 9.7% 4.9% 4.1% (72,286) 1,934,015 3,507,390 2,708,828 $9.83
Southeast Corridor

East I-10 Outer Loop 15,596,372 3.0% 0.0% 3.0% 0.9% 1.1% 28,283 98,235 0 0 $10.03

East-Southeast Far 102,659,033 11.5% 1.0% 12.4% 8.9% 9.2% 270,931 3,728,472 5,589,245 8,116,551 $9.48

Southeast Outer Loop 19,571,212 3.5% 0.8% 4.3% 3.5% 2.8% (51,140) 227,551 0 332,064 $6.47
SOUTHEAST TOTAL 137,826,617 9.4% 0.8% 10.2% 7.2% 7.4% 248,074 4,054,258 5,589,245 8,448,615 $9.26
Southwest Corridor
Highway 59/Highway
27,682,644 5.3% 0.8% 6.1% 4.7% 4.1% (139,793) 71,256 316,530 0 $9.39
90
Southwest Far 23,399,466 13.2% 0.2% 13.5% 6.9% 8.7% 525,519 1,632,172 1,593,226 1,421,298 $9.39

Southwest Outer Loop 13,543,038 5.1% 0.5% 5.6% 5.4% 4.5% (134,239) 29,817 0 0 $11.90

Sugar Land 39,651,177 14.8% 0.3% 15.1% 13.7% 12.1% 579,832 1,196,173 962,804 3,751,616 $8.56

SOUTHWEST TOTAL 104,276,325 10.7% 0.4% 11.1% 8.7% 8.2% 831,319 2,929,418 2,872,560 5,172,914 $9.07

Colliers | Houston | 23Q4 | Industrial Report

501 offices in Market Contacts:
Patsy Fretwell

66 countries on Research Director

Houston

6 continents
+1 713 830 2125
[email protected]

Danny Rice
President
Houston
United States: 156
+1 713 830 2130
Canada: 45 [email protected]
Latin America: 20
Asia Pacific: 99 William Uhalt
EMEA: 112 Research Manager
Houston
+1 713 830 2137
[email protected]

Contributor:
Trey Horne
Associate
Houston
$4.5B +1 713 830 2178
[email protected]
in revenue

2B
square feet under management Colliers’ statistical criteria includes industrial
properties classified as industrial and flex that are
10,000+ SF.

19,000 + Copyright © 2024 Colliers

The information contained herein has been obtained from
sources deemed reliable. While every reasonable effort has
been made to ensure its accuracy, we cannot guarantee it. No
professionals and staff responsibility is assumed for any inaccuracies. Readers are
encouraged to consult their professional advisors prior to acting
on any of the material contained in this report.

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