Q3 Houston Industrial Market Report

Houston’s industrial market continues to outpace the market’s other real estate sectors with trailing 12-month net absorption ranking among the top 3 in the United States despite leasing activity slipping in recent quarters. Inflation concerns and general economic volatility have weighed on the market, set within the context of historically high new supply being delivered, similar to other fast-growing Sun Belt markets. Still, the overall health of the Houston industrial market is fundamentally strong.

Nearly 28 million square feet have been taken down so far year-to-date, a nearly 30 percent dip from the 39 million square feet leased over the same period a year ago. Absorption is slowing just as a record wave of nearly 36 million square feet of supply is being delivered, over 70 percent of which is unleased. The vacancy rate is now at 6.8 percent and continues to rise as new construction is outpacing demand. The glut of vacant space has dampened rent growth; however, construction starts have slowed the past few quarters helping landlords to not feel compelled to greatly increase tenant concession packages.

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