HOUSTON INDUSTRIAL & MANUFACTURING CAPITAL MARKETS: GROWTH ANCHORED BY PORT AND EXPANDING SUBMARKETS

October 2025 – Mary Doetterl, Research Director, Lee & Associates – Houston

Houston’s industrial market continues to demonstrate resilience in 2025, even as broader capital markets navigate elevated interest rates and tighter lending conditions. Investor focus remains strong on modern logistics and distribution facilities, while manufacturing growth in the North and Northwest submarkets is adding an important new dimension to the region’s industrial history.

According to Lee & Associates’ latest Houston industrial report, citywide net absorption reached 13.6 million square feet, while vacancy ticked up modestly to 6.6%, and asking rents climbed to $9.33 per square foot. These healthy fundamentals position Houston as a top performer nationally, even in a more selective capital environment.

The Port of Houston handled more than 3.8 million TEUs in the first half of 2025, ranking as the busiest U.S. port by tonnage. This surge in container activity underscores persistent demand for distribution space, while also reinforcing Houston’s competitive advantage as a hub for manufacturing supply chains and regional logistics.

“As more advanced manufacturing projects take root in the Houston industrial market, investors are beginning to view these markets as more attractive and lower-risk opportunities for capital,” said Thomas Leger, Executive Principal with Lee & Associates.

Manufacturing properties are increasingly drawing attention, particularly in the North and Northwest submarkets. In Q2 2025, the North submarket posted 646,803 square feet of positive absorption, while the Northwest added 1.5 to million square feet overall. These markets are benefiting from reshoring and nearshoring trends that are bringing production capacity closer to end consumers, with facilities that often blend manufacturing and distribution capabilities.

What’s Driving Houston’s Manufacturing Market?

Several key factors are fueling growth:

  • Energy & Petrochemical Base: Houston’s deep ties to energy and chemicals support advanced fabrication, equipment manufacturing, and processing facilities.
  • Population Growth: Expanding consumer demand in one of the fastest-growing metros creates need for regional food processing, construction materials, and household goods production.
  • Reshoring & Nearshoring: Companies are moving operations closer to U.S. demand centers, and Houston’s central Gulf Coast location with access to highways, rail, and port facilities makes it a strategic choice.
  • Workforce & Infrastructure: A skilled labor pool and strong logistics infrastructure allow manufacturers to scale while staying connected to both domestic and global trade routes.

Headline Manufacturing Deals in 2025

Two transactions in particular showcase Houston’s growing role in advanced manufacturing:

  • Eli Lilly: $6.5B Biomanufacturing Plant in Generation Park, Northeast submarket.  This 236-acre project represents one of the largest life sciences investments in Houston’s history, bringing biopharmaceutical production capacity and more than 600 permanent jobs.
  • Foxconn / Ingrasys: AI Server & Hardware Facility in the Northwest submarket. Foxconn invested $142 million in facilities to expand server and AI hardware manufacturing, underscoring the city’s role in the next generation of technological production.
  • Apple: Server Manufacturing Facility in the Northwest submarket. Apple announced plans for a 250,000-square-foot server manufacturing facility, set to open in 2026 as part of its broader $500B U.S. investment plan. The project underscores Houston’s rising profile in tech-driven advanced manufacturing.

 

Capital Market Pricing Snapshot

  • Manufacturing Buildings:
    • Average sale pricing in 2025 has trended around $140 to $150 per square foot with cap rates near 7.25%, reflecting the specialized nature and more limited buyer pool.
    • Lease rates averaged $0.73 per square foot NNN in Q1 2025, climbing to $0.92 per square foot in Q2 2025, driven by demand for advanced production and biomanufacturing space.
  • Distribution Facilities:
    • Sales averaged closer to $150 to $160 per square foot with cap rates around 7.0%, as investors continue to prize bulk logistics and modern distribution centers tied to port and e-commerce activity.
    • Asking rents averaged $0.79 per square foot NNN, with newer Class A space quoting between $0.80 per square foot to $0.90 per square foot.
  • Office/Warehouse Properties:
    • Averaged $166 per square foot in recent transactions, reflecting steady demand from service companies and light industrial tenants.
      “Despite the current capital market challenges, Houston’s industrial sector is proving to be a bright spot for investors. The combination of port activity, population growth, and the city’s role in global trade continues to drive long-term confidence in this asset class,” added Mary Doetterl, Research Director with Lee & Associates.Looking forward, Houston’s industrial capital markets spanning manufacturing, distribution, and office/warehouse facilities are poised to benefit from long-term demographic and economic tailwinds. Persistent e-commerce growth, global trade flows, and supply chain realignment are creating durable demand. While financing challenges remain in the short term, Houston is well positioned to attract capital seeking stability and growth in a market that blends strong fundamentals with long-term upside.

About Lee & Associates – Houston

Lee & Associates – Houston is a fully-integrated commercial real estate company with unrivaled market knowledge and an unwavering commitment to integrity and excellence. Our business-minded brokers specialize in office, industrial, and land real estate investments. Lee & Associates – Houston is part of a nationwide network of brokers in more than 80 offices in North America. The brokerage is uniquely qualified to support our client’s real estate needs in Houston, across Texas, and throughout the US. For more information, visit lee-associates.com/houston.