The Southwest Industrial Market May Surprise You
A new report from JLL has the southwest industrial submarket catching people's attention. Large users that have been priced out of the northwest and southwest but still desire easy access to major transportation corridors and infrastructure are seriously considering Southwest Houston. Vacancy has been trending down since 2009, reaching just 4% in Q2 2016. At 564k SF, net absorption in Q2 far surpassed the 254k SF average of the previous two years. But tenants are waiting to lock down new product; the only delivery this quarter had no pre-leasing.
Tenants are attracted by declining rents, landing at $5.87/SF after six consecutive quarters of decline, a 1.7% drop quarter-over-quarter and 7.8% drop year-over-year. Things look likely to continue on that course. The Southwest has the third-largest development pipeline of any submarket, the bulk of it speculative. Only 40% of the space is pre-leased. With the majority set to deliver in 2016, the area will likely see significant vacant supply inventory later this year, signaling continued opportunity for tenants.
