Avison Young releases Second Quarter 2023 Industrial Market Report for Houston

Avison Young releases Second Quarter 2023 Industrial Market Report for Houston July 25, 2023

Avison Young releases Second Quarter 2023 Industrial Market Report for Houston

Vacancy rate rises as new product comes online

Houston, TX – Avison Young today released its Second Quarter 2023 Industrial Market Report for Houston. The Houston industrial market gained 9.4 million square feet (msf) of positive net absorption during the first half of 2023. Although occupiers absorbed 3.7 msf in the second quarter of 2023, net absorption is down 32.9% compared to the first quarter and 61.6% from the prior year. The slowdown over the past year comes on the heels of the record pace achieved as consumers drove demand for e-commerce, fueling an increase in construction and a leasing boom.

“Demand for large spaces over 500,000 sf has significantly slowed; however, leasing activity for space under 500,000 sf is robust and has driven another excellent quarter of positive absorption,” said Rand Stephens, Principal and industrial market specialist.

The market-wide vacancy rate increased 60 basis points (bps) quarter-over-quarter to 6.5% as new construction deliveries outpaced demand and are still actively marketed. Despite the quarterly spike in vacancy, Houston’s industrial market fundamentals are strong, as vacancy remains 250 bps below its peak of 9.0% in early 2021.

“Rental rates for industrial space in Houston continue to increase to unprecedented levels,” said Drew Coupe, Principal and industrial tenant representation specialist. “However, as deliveries are trending to outpace absorption through the end of 2023, we will likely see a plateau in rate increases sometime in 2024.”

Developers completed nearly 7.9 msf of new projects in the second quarter of 2023, bringing the year-to-date delivery total to 14.8 msf. Yet, there remains 29.7 msf of new product underway, of which developers are expected to deliver at least 24.8 msf by year-end 2023.

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