Houston developers build record-breaking 32.4 msf of new industrial product in 2023

Houston's industrial sector experienced explosive growth, with 32.4 million square feet (msf) of new space constructed in 2023. Driven by the e-commerce boom, strong population growth and large occupiers entering the market, big box development over 500k sf accounted for 42% of the new product delivered in 2023.  Big box development has significantly expanded by 8.7 msf from 2016 to 2019 and reached a peak in 2022 with an increase of 16.1 msf from 2016. Vacancy rates in these big boxes have also risen by 17.4% year-over-year, largely due to the record amount of new supply outpacing demand.  While nearly half of the big box developments are pre-leased, some large companies are downsizing. For example, Safavieh, a high-end furniture manufacturer, originally planned to occupy 1.0 msf at the AmeriPort Industrial Park but has since reduced that to half the space. Wayfair also stopped plans to open a 1.2 msf distribution center at Prologis Presidents Park and is looking to sublease the space instead. The trend of rising vacancy rates in big boxes suggests that there could be a temporary oversupply situation, especially as demand has slowed to pre-pandemic levels. However, smaller industrial spaces remain in higher demand and could eventually face a shortage of new spaces beyond 2024.