Avison Young releases third quarter 2024 industrial market report for Houston

Houston, TX – Avison Young today released its Third Quarter 2024 Industrial Market Report for Houston. Houston's industrial market absorbed 5.7 million square feet (msf) in the third quarter of 2024, a 9.6% increase from the third quarter of 2023. Despite year-to-date absorption being down 27% from the same period last year, it remains above the quarterly pre-pandemic average.

Deals under 250,000 sf have accounted for a substantial 69.1% of total leasing volume post-pandemic, with deals under 100,000 sf making up 44.1% of the market. While deals over 250,000 sf saw a surge during the pandemic, their leasing volume has since declined by 5.5%.

“Historically, the majority of Houston's industrial transactions have been for space under 250,000 sf. While there was a push for space above 250,000 sf immediately after the pandemic, the demand for industrial space has normalized, reaffirming the dominance of small- to medium-sized deals in the market,” said Drew Coupe, Principal and industrial tenant representation specialist with Avison Young.

Leasing activity in the third quarter of 2024 rebounded to near pre-pandemic levels, reaching 8.4 msf in new deals. While year-to-date leasing demand has eased slightly by 9.7% compared to last year, it remains significantly above the pre-Covid average by 10.8%. This indicates the market is returning to a more sustainable level after experiencing a period of exceptional growth.

Houston’s industrial construction activity and construction starts have fallen to their lowest levels since 2017. Deliveries are at 1.5 msf and the pipeline is at 10.3 msf in the third quarter of 2024. The absorption of new industrial space has also slowed down as the market returns to normalcy following the pandemic-induced boom. However, with less product coming online and strong fundamentals, new space is being steadily absorbed, reducing the vacancy rate by 33 basis points from a year ago.

Houston's Port continues to experience strong growth, with container traffic increasing by 19.5% year-over-year, handling 4.1 million TEUs in the past 12 months. However, the ongoing labor dispute between the International Longshoremen's Association (ILA) and the United States Maritime Alliance (USMX) remains a concern. If a permanent agreement is not reached by January 15, 2025, the port could face further disruptions and delays, impacting the flow of goods.