October Brings Houston’s Highest Industrial Leasing Activity This Year
While Houston’s industrial demand dropped off faster than its supply pipeline last quarter, October was the strongest month for industrial leasing so far this year, according to a new report from JLL.
About 3.4M SF of industrial leasing activity occurred in October, outpacing the city's previous high of 3.3M SF seen in June, according to JLL’s chart of the week released Monday.
October’s leasing activity was led by four deals exceeding 300K SF, bringing year-to-date transaction volume to 27.5M SF and surpassing 2020’s annual total.
There were only two leases over 300K SF in the third quarter, according to a Savills report, including Distribution Alternatives' deal for 855K SF at 30815 Kingsland Blvd. in the southwest submarket and Technip FMC's contract for 462K SF at 1777 to 1803 Gears Road in the region's north submarket.
October leases included an 840K SF lease and a 340K SF lease in the west submarket, a 410K SF lease in the north submarket and a 320K SF lease in the northwest submarket, according to JLL, which declined to provide more specific details.
October’s activity marked a “grand entrance” for the fourth quarter, according to the report, which says 2022 brought historically high leasing volume to Houston. And while 2023’s leasing volume lags the previous year, every month in 2023 has far exceeded the monthly leasing average for the period between 2015 and 2019, according to JLL.
October and June were ahead of the average monthly leasing volume from 2020 to the present. The 2015 to 2019 monthly average was about 1.6M SF. The average since 2020 was 3.2M SF, according to the report.
“October has set a course to drive demand through year-end,” JLL said. “This strong momentum will be boosted by the pipeline of active pursuits expected to transact before the holiday season.”
Despite high leasing volume compared to pre-pandemic years, analysts expect Houston’s industrial vacancy to rise. In the third quarter, Houston’s industrial leasing was down 25% from the previous year, though supply deliveries were only down 10%, according to the Savills report.
“Nationwide, the industrial market has seen a little bit of a slowdown compared to what we've seen in prior quarters,” Savills Research Manager Deandre Prescott previously told Bisnow. “Houston's no different. In Houston, we’ve seen positive absorption, but there’s so much supply coming online you’re starting to see vacancies trend upwards.”
Houston had another 23.9M SF of industrial property under construction as of the third quarter, according to the Savills report.
