Houston Q2 2011 Industrial Outlook (FINAL)[1]

8/6/2019 Houston Q2 2011 Industrial Outlook (FINAL)[1]

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on pointHouston . Industrial Outlook . Q2 2011Houston's industrial market

continues to outperformthe nation.

Tenant power is eroding as available space diminishes.

Rental rate growth is expected to continue into the remainder of 2011

and 2012.


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Jones Lang LaSalle On Point Houston Industrial Outlook Q2 2011 4

Houston industrial overview, cont.

Houston property clock

Peaking

market

Falling

market

Risingmarket

Bottomingmarket

Landlord

lev

erage T

en

antleverage

Outlook

The Northwest and Southeast Houston submarketscontinue to garner the attention of users in

search of larger blocks of distribution space. As demand for quality space increases, new

developments in North / Northwest Houston can be expected into 2012 as prospectors look to

capitalize on improving market conditions. In the near term, absorption numbers should continue to

improve throughout the year as speculative constructionremains limited. As the inventory crunch

on Big Box properties persists in the face of rising demand, rental rate growth across Houston is

expected to continue its upward trend. Developers searching for quality sites are apt to venturefarther into the various submarkets in search of less expensive land.

Crane-served and crane-ready buildings between 20,000 and 50,000 square feet will continue to behighly sought after as oil and gas service companies continue to increase activity. We have alsoseen an influx of foreign companies seeking opportunities in the United States with Houston being acommon front-runner due to its favorable business climate and affordable real estate. The risingpriceof oil will continue to spur demand for single-tenant service oriented manufacturing buildingsbelow 100,000 square feet. Increased activity offshore should have a positive impact on theSoutheast submarket later in the year. Current market conditions will carry into the third and fourthquarters as companies attempt to finalize real estate decisions for 2011 and early 2012.

NortheastCBD, South

Northwest, SoutheastNorth, Southwest


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Pricing trends

The average asking rental rate for available Industrial space was $0.40 per square foot permonth at the end of the second quarter 2011 in the Houston market area.

Lease rates for first generation crane-ready buildings are favorable to landlords as demandoutweighs supply.

Houston industrial overview, cont.

YTD net absorption

Demand tr ends

Demand is being fueled by numerous factors including 1) increasing population; 2) employmentrate growth; 3) positive trade indicators; 4) increased activity in the oil and gas sector, and ; 5) adiversified economy.

Net absorption for the overall Houston Industrial market was positive 1,698,100 square feet in thesecond quarter of 2011.

Average rental rate

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

CBD North Northeast Northwest Southeast Southern Southwest -200,000 -150,000 -100,000 -50,000 0 50,000 100,000 150,000 200,000

CBD

North

Northeast

Northwest

Southeast

Southern

Southwest


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Methodology

Theleasedindustrialsectorexcludesowneroccupiedproductfromthemarketsdataset,andprovidesarentalequivalentperspectiveforindustrialbuildingsthatareleasedbytenants. Buildingscanmoveintoandoutofthisdatasetbaseduponbeingpurchasedorsoldbyaparticularuser.

Recent lease transactions

Tenant name Location Submarket Deal type Size (s.f.)

Schenker Logistics 6911 Fairbanks N Houston Northwest New Lease 147,000

Palmer Logistics 200 Portwall St. Northeast New Lease 140,000

Packwell Inc. 8786 Wallisville Rd. Northeast Renewal 136,928

Sercel Inc. 10570 Bissonnet St. Southwest Renewal 99,000

J.A.M. Distributing Company 6100-6120 Donoho St. Southern New Lease 54,820

Total leased industrial market (excluding owner occupied facilities)

Supply total

stock (s.f.)

Vacancy

rate

Availability

rate

Demand

Q2 2011 net

absorption (s.f.)

Pricing

Average rental

rate (nnn)

Total l eased indus tr ial market 212,620,637 8.4% 13.7% 1,228,742 $4.72

Warehouse/distribution 171,625,706 9.0% 14.6% 757,142 $4.83

Manufacturing 21,951,409 5.0% 10.4% 157,595 $3.94

Total leased flex market 23,716,991 13.9% 18.3% -97,019 $8.39

Houston leased industrial market [excluding owner occupied facilities]


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CBD 10300 N Loop Freeway E

RBA 289,209 s.f.

Buyer Interplast Group, Ltd.

Seller International Paper Company

Price (p.s.f.) $34.06

Date sold Q2 2011

Southeast 8451 Market St. (Investment Sale)

RBA 120,810 s.f.

Buyer Mayfield Properties

Seller The National Realty Group, Inc.

Price (p.s.f.) $33.11

Date sold Q4 2010

Southwest 14623 Fairway Pines

RBA 152,844 s.f.

Buyer The Allied Group

Seller Crow Holdings

Price (p.s.f.) $50.00

Date sold Q2 2011

Houston select salesBased on Sales from Q2 2010 Through Q2 2011

Houston Citywide

RBA 1,200,000 s.f.

Buyer Cabot Properties, Inc.

Seller Granite Properties, Inc.

Price (p.s.f.) N/A

Date sold Q1 2011

Northwest 777 Igloo Rd.

RBA 914,195 s.f.

Buyer Cole Credit Property Trust III, Inc.

Seller Igloo Products Corp.

Price (p.s.f.) $41.68

Date sold Q2 2010

Northwest 16101 Vallen Dr.

RBA 174,139 s.f.

Buyer Western Well Tool, Inc.

Seller The KhoshbinCompany

Price (p.s.f.) $74.65

Date sold Q3 2010


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Statistics

Large block availabilities

Construction map

Contacts

Appendix


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Houston industrial market statistics

SubmarketTotal

inventory(s.f.)

Directvacancy

(%)

Totalvacancy

(%)

Directavailability

(%)

Totalavailability

(%)

Q2 direct netabsorption

(s.f.)

YTD 2011directnet absorption

(s.f.)

Q2 total netabsorption

(s.f.)

YTD 2011 totalnet absorption

(s.f.)

Average directasking rent

($ p.s.f.)

Average totalasking rent

($ p.s.f.)

Underconstruction

(s.f.)

YTDcompletions

(s.f.)

CBD

Warehouse / Distribution 37,933,008 4.8% 4.9% 9.9% 10.2% 224,546 170,770 224,546 170,770 $4.12 $4.12 0 0

Manufacturing 6,308,973 6.2% 6.2% 15.5% 15.5% 1,500 -76,100 1,500 -76,100 $3.02 $3.02 0 0

Total industrial 47,427,962 4.7% 4.8% 10.3% 10.4% 226,046 94,670 226,046 94,670 $3.88 $3.88 0 0

Flex / R&D 2,791,579 10.3% 10.3% 16.2% 16.2% 4,800 4,020 4,800 33,218 $11.80 $11.80 0 0

North

Warehouse / Distribution 34,219,677 5.8% 6.0% 9.3% 10.4% 327,582 296,826 327,582 316,026 $6.41 $6.04 670,767 206,036

Manufacturing 7,067,652 2.0% 2.0% 3.8% 5.2% 0 -16,000 0 -16,000 $3.82 $4.03 0 0

Total industrial 50,188,829 5.2% 5.4% 8.4% 9.4% 446,081 268,382 446,081 287,632 $5.67 $5.45 670,767 206,036

Flex / R&D 5,766,375 11.5% 11.9% 15.4% 17.9% 162,592 185,254 166,118 188,780 $10.67 $10.67 34,709 34,709

Northeast

Warehouse / Distribution 20,998,519 6.5% 6.8% 10.1% 10.5% 210,382 127,823 210,382 127,823 $4.48 $4.48 0 0

Manufacturing 5,525,178 2.5% 4.8% 9.3% 11.6% 35,816 -7,014 35,816 -136,014 $2.64 $2.64 0 0

Total industrial 27,839,327 5.4% 6.1% 9.6% 10.3% 246,198 120,818 246,198 -8,182 $3.98 $3.98 0 0

Flex / R&D 341,190 26.6% 26.6% 22.6% 22.6% 0 958 0 958 N/A N/A 0 0

Northwest

Warehouse / Distribution 78,871,213 5.1% 5.5% 9.1% 10.1% 27,260 -148,100 -2,440 -215,660 $4.92 $4.91 251,787 300,000

Manufacturing 11,318,680 1.7% 1.7% 3.7% 5.1% 100,100 117,100 -100,100 117,100 $4.43 $4.63 0 0

Total industrial 97,947,189 4.9% 5.1% 8.4% 9.5% 261,000 152,577 231,300 85,017 $4.89 $4.92 251,787 300,000

Flex / R&D 9,869,806 9.1% 9.4% 12.3% 12.8% -73,345 614,478 -79,495 606,658 $7.10 $7.13 0 0

Vacancy: Physically vacant space. Total Vacancy includes both direct and sublease space.

Availabili ty: Space being marketed for lease by owner or sublessor, regardless of occupancy. Total Availability includes both direct and sublease space.

Net Absorption: The net change in occupancy over a measured period of time.

Average Asking Rent: Direct monthly values presented on a NNN basis, then weighted by the amount of direct available space in a building.

Statistics reflect the total industrial market, including owner occupied facilities


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Houston industrial market statistics, cont.

SubmarketTotal

inventory(s.f.)

Directvacancy

(%)

Totalvacancy

(%)

Directavailability

(%)

Totalavailability

(%)

Q2 direct netabsorption

(s.f.)

YTD 2011directnet absorption

(s.f.)

Q2 total netabsorption

(s.f.)

YTD 2011 totalnet absorption

(s.f.)

Average directasking rent

($ p.s.f.)

Average totalasking rent

($ p.s.f.)

Underconstruction

(s.f.)

YTDcompletions

(s.f.)

Southeast

Warehouse / Distribution 53,261,524 7.7% 7.8% 12.1% 12.5% 494,530 771,676 494,530 771,676 $4.41 $4.46 495,170 118,000

Manufacturing 11,945,342 0.0% 0.0% 0.7% 0.7% 0 143,045 0 143,045 $5.80 $5.80 0 0

Total industrial 74,605,198 5.8% 5.8% 9.6% 9.8% 534,936 1,147,977 534,936 1,097,977 $4.47 $4.52 495,170 118,000

Flex / R&D 1,802,007 15.7% 16.1% 18.8% 19.2% 8,008 0 2,683 -6,887 $6.43 $6.43 0 0

Southern

Warehouse / Distribution 25,447,956 3.5% 4.0% 8.4% 8.9% 80,777 82,327 -35,328 -33,778 $4.64 $4.64 0 0

Manufacturing 6,093,978 2.1% 2.1% 3.0% 3.0% 52,500 30,000 52,500 30,000 $3.90 $3.90 0 0

Total industrial 34,336,567 3.0% 3.4% 6.9% 7.3% 170,777 156,827 54,672 40,722 $4.54 $4.54 0 0

Flex / R&D 1,834,024 11.5% 11.5% 17.9% 17.9% -36,915 -22,981 -36,915 -22,981 $8.35 $8.35 0 0

Southwest

Warehouse / Distribution 31,847,387 7.7% 7.9% 10.9% 11.4% -247,875 -191,123 -234,281 -177,529 $5.90 $5.89 543,797 99,500

Manufacturing 5,363,693 3.0% 3.0% 7.5% 8.8% -28,821 -28,821 -28,821 -28,821 $5.04 $5.04 0 0

Total industrial 45,933,558 6.2% 6.4% 9.0% 9.6% -121,352 -42,100 -107,758 -28,506 $5.78 $5.78 543,797 99,500

Flex / R&D 7,261,554 11.7% 11.7% 14.8% 14.9% -23,700 -43,425 -23,700 -43,425 $8.23 $8.23 0 0

Total market

Warehouse / Distribution 282,716,030 5.9% 6.1% 10.1% 10.7% 1,116,327 1,109,333 984,116 908,462 $4.87 $4.88 1,961,521 723,536

Manufacturing 53,623,496 2.7% 2.4% 5.3% 6.2% 161,095 162,210 161,095 33,210 $3.84 $3.96 0 0

Total industrial 378,417,703 5.1% 5.4% 8.9% 9.6% 1,830,311 1,965,776 1,698,100 1,635,905 $4.74 $4.77 1,961,521 723,536

Flex / R&D 29,575,362 11.2% 11.4% 14.7% 15.4% 27,339 724,203 19,390 742,220 $8.14 $8.16 34,709 34,709

Vacancy: Physically vacant space. Total Vacancy includes both direct and sublease space.

Availabili ty: Space being marketed for lease by owner or sublessor, regardless of occupancy. Total Availability includes both direct and sublease space.

Net Absorption: The net change in occupancy over a measured period of time.

Average Asking Rent: Direct monthly values presented on a NNN basis, then weighted by the amount of direct available space in a building.

Statistics reflect the total industrial market, including owner occupied facilities


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Houston industrial buildings with large block availabilities

CBD

2 Blocks

551,430 SF

6501 Navigation Blvd. (M) - 286,000 SF

3480-3484 W 11thSt. (W) - 265,430 SF

Manufacturing

Warehouse

Manufacturing

Warehouse

Warehouse

DistributionWarehouse

Distribution

Contiguous blocks greater than 250,000 square feet; (M): Manufacturing; (D): Distribution; (F): Flex; (W): Warehouse

North

0 Blocks

Northeast

Blocks

535,300 SF

8501 E I-10 Fwy (M) 298,000 SF

10000 N Loop Fwy E (W) 237,300 SF

Northwest

4 Blocks

1,184,122 SF

8760 Clay Rd. (W) 339,664 SF

369020 Jackrabbit Rd. (D) 315,020 SF

11711 Clay Rd. (W) 275,600 SF

6535 Guhn Rd. (D) 253,838 SF


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Houston industrial buildings with large block availabilities, cont.

Distribution

Distribution

Warehouse

Distribution

Distribution

Distribution

DistributionWarehouse

Warehouse Warehouse Distribution

Contiguous blocks greater than 250,000 square feet; (M): Manufacturing; (D): Distribution; (F): Flex; (W): Warehouse

Southeast

9 Blocks

3,729,280 SF

359 Pike Ct. (D) 710,200 SF

4906 Broadway St. (D) 605,879 SF

9501 Bay Area Blvd. (W) 480,480 SF

359 Old Underwood Rd. (D) 450,000 SF

5151 Rice Farm Rd. (D) 312,000 SF

1701 S 16thSt. (D) 309,481 SF

13031 Bay Area Blvd. (D) 296,400 SF

9401 Bay Area Blvd. (W) 294,840 SF

10000 Manchester St . (W) 270,000 SF

Southern

1 Block

397,002 SF

7110-7198 Mykawa Rd. (W) -397,002 SF

Southwest

1 Block

369,439 SF

1601 Gillingham Ln. (D) 369,439 SF


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Houston contacts

Research

Lauren Kelley

Research Assistant

+1 713 888 4046

[email protected]

Brokerage

Bob Berry, SIOR

Executive Vice President

+1 713 888 4028

[email protected]

Ryan Fuselier

Vice President

+1 713 888 4032

[email protected]

Richard Quarles, CCIMSenior Associate

+1 713 888 4019

[email protected]


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Houston Q2 2011 Industrial Outlook (FINAL)[1]

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