Houston's Industrial Dichotomy
You can’t really talk about Houston’s industrial sector as a whole, according to NAI partners Joel Michael and Chris Caudill—niches within the product type are just too different. Joel says petrochemical strength is creating a frenzy for rail-served distribution product in east Houston. His Cedar Port Industrial Park is flourishing in Baytown; he says he has 10 active deals working, ranging from 25 to 125 acres. (Eight are rail-served requirements.) The park is already home to Home Depot and Walmart, and Joel says he got two more large retail distribution inquiries in the last few months.
On the other hand, Chris says solid overall industrial fundamentals are hiding how much manufacturing is struggling. Sales are still happening because money is so cheap, he says, but leasing has slowed dramatically. That could have a big impact on the southwest submarket, where 1M SF of spec space is about to deliver at Highway 90 and Beltway 8. He expects overbuilding in select pockets to spark rent concessions in manufacturing product over the next six to 12 months. NAI Partners chief research and data scientist Nat Holland gave an explanation for the weakening: nearly 67% of Houston’s manufacturing job activity is tied to rig count, with one rig corresponding to 36 manufacturing jobs.
