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June 20, 2024 (HOUSTON) –<\/strong><\/p>\n The Houston Industrial Metro Area is a formidable distribution powerhouse. It features state-of-the-art facilities and expedient access to the premier port of the Gulf Coast. The sprawling port city has long been a crucial factor in meeting the logistics needs of some of the nation\u2019s largest companies. In recent years, notably in the midst of the COVID-19 pandemic and beyond, demand for distribution space has surged significantly. This can primarily be attributed to the heightened use and advancement of e-commerce by consumers.<\/p>\n In correlation with the elevated demand, the previous four years have seen an unprecedented spike in new development activity of distribution facilities following the pandemic. Majority of the newly available space has been highly sought after by major retailers looking to expand their services to meet the demand from a new era of consumers taking advantage of the convenience to shop from the comfort of their homes.<\/p>\n As observed thus far in 2024, the remaining surplus of newly delivered space is being leased at a stable rate. Although the number of occupiers seeking additional space for expansion has decreased compared to the pandemic-fueled frenzy, smaller tenants looking to upgrade their operations to newer, modern buildings are taking full advantage of the recently delivered space on the market. This has played a significant role in the shift of the average lease size from an above-average range back to regularity.<\/p>\n Recent leasing data from Lee & Associates \u2013 Houston Research captured this continued return to normalcy in the industrial distribution market through mid-2024, particularly in terms of the average lease size. An analysis of signed leases for distribution space before and after the peak of the pandemic indicates that the average deal size has now returned to standard sizing last seen in 2018 and 2019. Mid-year leasing data shows the average distribution lease size is currently approximately 80,000 square feet, down from around 100,000 square feet noted in the peak pandemic years of 2020 and 2021.<\/p>\n To underscore the current distribution deal size trajectory, Richard Glass, SIOR, and Principal at Lee & Associates \u2013 Houston highlighted the fact the progress of a portion of the proposed distribution pipeline is dependent on the lease-up of existing inventory. Glass remarks, \u201cwhile we did have a slow start to the year, we are now seeing decent activity as a result of stabilization in terms of the development pipeline.\u201d<\/p>\n Overall, with general economic conditions in Houston\u2019s industrial distribution market remaining more robust than in other metro areas across the nation, and with total TEUs up 12% year-to-date at Port Houston, the increase in deal sizes is warranted. While trepidation stemming from interest rates has the potential to continue to affect certain deals far north of the 80,000-square-foot average, indicators reveal that deals under the 250,000-square-foot mark will proceed to prevail through the later portion of the year.<\/p>\n