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The hottest niche in Houston’s recovering real estate market is warehouses, evidence of the city’s growing position as a distribution center for consumer goods in a rapidly evolving retail environment.
Vacancies in office and manufacturing space continue to edge upward locally, and Houston just posted its slowest quarterly growth in retail space in six quarters. But demand for warehouses is strong, fueled largely by population growth and consumers’ growing preference for shopping online.
Commercial tenants in distribution and consumer goods leased more than 6.7 million square feet of space over the last two years in Houston, a 60% increase over the two years prior, real estate service firm JLL reported. Of 27 industrial facilities completed in Houston in the fourth quarter of 2016, 25 were warehouse and distribution spaces, according to market research by CBRE.
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Demand pushed rental rates up more than 20% between 2015 and 2016, to 59 cents per square foot for warehouse space. A decade ago, rates ran about 38 cents.
As Houston’s distribution infrastructure bulks up, the region might eventually take on a bigger role nationally in moving goods from Port Houston throughout the heartland. More immediately, the jobs promised by projects underway help the city closer to a rebound from the prolonged energy slump.
“Warehouse distribution is definitely the shining star in industrial real estate,” said Travis Land of NAI Partners.
The online-based retail model pioneered by Amazon has affected industrial real estate markets nationally. Warehouse distribution in particular is benefitting from the need to speed up deliveries.
| By Dylan Baddour Houston Chronicle
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