Market Updates

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Market Updates

Fall 2016

The industrial market is “hangin’ in there”.  While it is harder for landlords to push lease rates, it is do-able in certain product types in certain submarkets.  The east side and southeast sides of town remain tight in all product categories.  The north and northwest sides are experiencing a slow-down in demand for larger distribution spaces (those in excess of 30,000 SF) and free standing buildings. 

Properties between downtown and the Beltway remain in high demand as the residential developers absorb dirt once occupied by warehouses/shops and tax assessments simply drive industrial users away from the urban core.  Other than in free standing metal buildings in north/northwest Houston where asking rates are falling, lease rates seem to have stabilized.  In this market, short term deals are getting done and eye-popping rate increases are becoming less likely.

On the purchase side, asset valuations remain overheated.  Nonetheless, low interest rates combined with historically high rental rates continue to drive interest in ownership for a lot of locally owned/operated businesses.  It simply may be time to accept that the days of $20 - $30 per SF industrial properties are over.

Fall 2013

Rates are up everywhere! The “shoe is on the other foot” and landlord’s are pushing rents. It is not a tenant market…at all.

A lack of new construction catering to smaller (sub-30,000 SF) users is aiding inside-the-belt landlords but there is not a huge number of 50,000+ SF options either.

There is even trickle down to less-desirable locations as local businesses seek some form of relief from rising taxes and rental rates.

With nothing on the horizon except possibly rising interest rates, renew early and often and if you think you need more space next door – and it becomes available- grab it!

Summer 2015

The market for warehouse space remains tight but slack is coming. Citywide vacancy is less than 5% but you can almost feel the air going out of the balloon as oil once again dips into the mid $40’s per barrel.  Occupancies are tight but the number of subleases available is on the rise.  Deal velocity is slowing and concessions from owners will be on the increase as they realize the number of companies demanding space is shrinking. 

Rents city-wide remain at or near record highs but are flattening and there will be downward pressure as institutional owners see vacancy tick-up.  Asset valuations (price) remain absurdly high…a function of low interest rates, residual owner perception of value when they could name any price and what rent in comparable buildings will buy. 

What does this mean?  If you have to renew now not much you can do…if you are looking in late 2015 or early 2016 I suspect things will be different! Rates and prices are going to come down and now the question is how far down will they go….

Spring 2012

The market for warehouse space is selectively tight. Banks are lending but not as liberally, making speculative construction difficult despite improved occupancy percentages and higher rates.
Mulit-tenant options near the container terminal (far east Houston) are good, but limited for tenants seeking less than 50,000 SF. Most landlords are holding out for the “big” tenant. Distribution spaces less than 40,000 SF are well leased across the city. Second generation dock spaces in northwest Houston are particularly limited. The same thing can be said for near SW market.

Economical free-standing buildings with lower building-to-land coverage ratios and good quality stabilization are in high demand. Rates on new freestanding buildings are easily 45% more than new multi-tenant options with similar office percentages.

What does this mean? Landlords are in a position to push rates for selective sizes and quality for the first time in several years. “Sub-par” property is still sub-par: take a paying tenant. Tenants in “average to above-average property” in good submarkets don’t get greedy and think you’re going to get a Spring 2009 rate: it aint’ happenin’.

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