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Throughout 2017, the Northwest submarket in Houston was a hotbed of industrial activity, with warehouse and distribution centers reigning supreme. The Northwest submarket contains 156 million sq. ft. of inventory, with Warehouse/Distribution representing 116 million sq. ft. of that total, Manufacturing 23 million sq. ft., and Flex space 17 million sq. ft. Of the more than 549 million sq. ft. of industrial buildings in Houston, the largest concentration is in the Northwest submarket, tallying 3,200 properties representing 28.4% of the total stock. As of the end of the fourth quarter, the northwest submarket’s vacancy rate was 5.8%, with 631,308 sq. ft. of positive absorption in 2017 and 1,527,322 sq. ft. of new industrial product delivered.
Furthermore, warehouse and distribution centers in the coveted Northwest submarket are a good indicator of Houston’s diversified economy. A testament to those developments are the two largest speculative projects underway; 525 Cane Island Parkway in West Ten Business Park, a 673,785-sq.-ft. distribution center in Katy that broke ground in late September 2017, with plans to deliver in July 2018; and Northwest Logistics Center, a 411,442-sq.-ft. distribution center located at 6751 N. Eldridge Parkway on a 26-acre site just south of Hwy. 290 and west of Beltway 8, with a scheduled completion date of June 2018. Considering the shortage of bulk distribution space available for lease, and the ever-growing demand from retailers for Warehouse/Distribution space, both projects are awaiting pre-leasing activity.
Ultimately, it’s easy to understand why companies such as Ford Motor Company, Staples, Exel, plus oil and gas firms such as National Oilwell Varco and GE Oil and Gas, have each selected locations in the heart of Houston’s Northwest industrial submarket due in part to the immediate access of main roads connecting the largest metros in the state. Recently, Rooms To Go signed a 373,860-sq.-ft. lease in the Mason Ranch Industrial Park. In addition, Amazon’s largest Houston development to-date is close to being up and running. Construction of the 1 million-sq.-ft. distribution center began in March 2017, with completion scheduled within the next 30 days. The fulfillment center is located on an 88.5-acre tract between State Highway 90 and Interstate 10, near Igloo’s 420,000-sq.-ft. Katy East Distribution Center, as well as Rooms To Go’s large distribution center.
And finally, every day in the Northwest submarket, hundreds of thousands of people travel up and down US 290 between I-610 and the Harris/Waller County line. Despite the oil downturn during the past several years, thousands more will join in that traffic flow because the population growth rate of the Houston region is exploding. The US 290 corridor’s current population of about 698,000 is projected to expand to 1.1 million between the years 2010 and 2040. In June of 2011, construction began on the Highway 290 Project with the I-610/US 290 interchange and has extended to 13 program projects along the 38-mile stretch. In August 2017, the US 290 Program celebrated a major milestone, as motorists were switched onto new US 290 inbound pavement between Pinemont and the direct connector to I-10. The traffic switch improves mobility by providing a dedicated lane to the Mangum/Dacoma exit ramp, two lanes to the I-10 connector, and two lanes continuing to I-610. In November 2017, the portion of the inbound mainlanes from West 34th to the I-610 West Loop was opened to traffic as well, while the switch allows construction to continue on the High Occupancy Vehicle (HOV) structure. The project is on schedule for substantial completion in 2018.
The Houston economy continued to improve in December. Employment grew, and business-cycle and leading indexes were suggestive of healthy economic output and future growth. The unemployment rate in Houston was 4.9% in December, slightly above November, but still on par with the average rate in the second half of 2017. For comparison, the unemployment rate in Texas was 3.9%, and the U.S. rate stood at 4.1%.
Director of Research
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