This year, we have seen a boom in the industrial market with the rise of e-commerce. With the pandemic, there has been tremendous growth in order to meet the supply chain demand. As a result, a handful of areas of Houston have seen larger growth than others - simply because of the availability of land and infrastructure. As these new industrial buildings emerge in the Greater Houston area, we're noticing specific trends follow.

West Houston

As we see an increase in companies making the move to Texas, Houston has become a major target market for those leaving places like California, Michigan, and more. In West Houston specifically, we are seeing large distributors resettling the area along with construction on distribution buildings. The accessibility of land and the metropolitan infrastructure are two primary factors that make the area so desirable. With easy access to major highways such as I-10 that service two large Texas cities, namely San Antonio and Austin, this area makes it convenient for businesses looking to plant roots with their distribution facilities. Despite the hiccups and delays, there is a great demand for e-commerce, resulting in increased construction for distribution facilities.

Southwest Houston

The Southwest submarket is also very active, and we are seeing more development in that area. There is high demand for buildings around 6,000 to 50,000 square-feet, and many are going under contract prior to even breaking ground. This region consists of mainly new builds, as there is little existing product, and many of the businesses moving to this are prefer to purchase rather than lease. We're also seeing that a large portion of the buildings in this area are being used for cold storage and food to help meet the demand that e-commerce has brought to the market. It is likely that we will continue to see the demand for larger spaces as the new year begins.

Building & Market Trends

Lastly, we have noticed a major increase in the height of buildings in the industrial realm due to a need for increased space. This change in height provides companies with the room and storage needed to meet the demand for retail. With major delays in shipping, supply shortages, and more, many companies are also opting to include trailer storage on-site in an effort to alleviate some of the roadblocks currently faced due to shipping logistics. This additional storage also cuts costs, as distributors no longer need to lease a separate yard for these trailers. In a market where oil and gas is one of the main industries, we are seeing the price of oil affecting costs across the board; therefore, real estate and building prices have surged. As a result of rising inflation, some developers are being cautious because of the threat of future price increase. As the new year approaches, we can expect these submarkets to remain very active and tenants should prepare for annual rate escalations to increase over the norm.

Conclusion

While Houston is the fourth most populous city in the U.S., there is still room for growth. These Houston area submarkets and suburbs have disposable land for both homes and businesses to expand their operations. Our interconnected system of highways is one of the appealing factors businesses look for when expanding to a new area. Even during the pandemic, we continue to see overall growth for the industrial side of our business, and we are looking forward to seeing this continue in 2022.

 

By: Preston Yaggi, SIOR, CCIM

Preston Yaggi, SIOR, CCIM, joined Lee & Associates - Houston in 2015 as a Principal. He specializes in the leasing and sales of industrial properties, as well as the design-build and build-to-suit processes. While he has been involved in many deals throughout the Houston market and surrounding areas, Preston focuses on the Northwest and West submarkets of the city. He is consistently a top producer at the firm and participates in over 50 deals annually.

Lee & Associates - Houston is a fully-integrated, commercial real estate company. Our business-minded brokers specialize in office, industrial and land real estate investments. As the fastest-growing, broker-owned firm in the nation, we are uniquely qualified to support our clients’ needs in the local, national and international markets. To learn more visit www.lee-associates.com/houston.