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Houston Industrial Market Commercial Real Estate Submarket Spotlight South - Hobby Airport

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Industrial vacancy in the South submarket remains tight

As of the end of the first quarter of 2018, the vacancy rate in the South submarket stood at 3.5% for industrial space, up 20 basis points quarter-over-quarter, and 50 basis points year-over-year. Overall vacancy has remained below 4.0% for 17 consecutive quarters, and has maintained a low 5-year, and 10-year average of 3.4%.

Houston Industrial Market Commercial Real Estate Submarket Spotlight South

Demand slows

Net absorption stood at -20,727 sq. ft. as of the end of the first quarter of 2018, about 50,000 sq. ft. less of space moved into than Q4 2017 at -68,894 sq. ft. Year-over-year move-in’s registered much higher at 273,794 sq. ft. During the last four quarters, the South submarket has had more tenants moving out of space than tenants moving in; as a result, the submarket has reported slow demand.  With little new space being added to the market, requirements are limited to available inventory. In the South submarket, there is approximately 47 million sq. ft. of industrial space made up of 36 million sq. ft. of Warehouse/Distribution space, 9 million sq. ft. of Manufacturing, and 2 million sq. ft. of Flex.

Houston Industrial Market Commercial Real Estate Submarket Spotlight South

NNN average asking rates remain steady

The South submarket saw overall triple-net average rates drop $0.26 per sq. ft. quarter-over-quarter to close Q1 2018 at $5.25. Warehouse/distribution rates remained unchanged for the third consecutive quarter at $5.49, while manufacturing rates have also lingered within a few cents of $4.75 per sq. ft. during the same time period. Of the approximate 2 million sq. ft. of Flex space in the South submarket, rates are at $9.22 per sq. ft., averaging $9.46 during the past five years.

Houston Industrial Market Commercial Real Estate Submarket Spotlight South

4-star rating point of pride at Hobby Airport

This is the third straight year Hobby Airport earned a four-star rating from Skytrax, with the facility and services earning nearly 140 scores of 4.5 or higher on its detailed checklist covering 44 categories.

The 2018 results, make Houston only the third city in the world with two airports (George Bush Intercontinental and William P. Hobby), given a 4-star rating. The other two cities are Tokyo and Seoul.

Houston Industrial Market Commercial Real Estate Submarket Spotlight South


Leta Wauson
Director of Research
leta.wauson@naipartners.com
tel 713 275 9618

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