Houston Industrial | North | Submarket Spotlight
The North submarket contains 93 million sq. ft. of inventory, with Warehouse/Distribution representing 70 million sq. ft. of that total, Manufacturing 12 million sq. ft., and Flex space 10 million sq. ft. Of the more than 542 million sq. ft. of industrial buildings in Houston, the second largest concentration is in the North submarket, tallying 2,100 properties representing 17% of the total stock. As of the end of the second quarter, the North submarket’s vacancy rate was 9.0%, with 140,318 sq. ft. of positive absorption in 2017 and 400,064 sq. ft. of new industrial product delivered.
Whereas a growing population signifies greater demand—and as a result, increased supply—the projected annual population growth rate for north Houston from 2017 to 2022 is 2.6%, down from the 4.1% historical annual growth rate recorded from 2000 to 2017. North Houston’s geographical domain includes the surrounding areas of Conroe, Spring, Willis, and the Woodlands, with an estimated total number of businesses for 2017 calculated at 43,629, comprising 485,512 employees. These businesses and employees are estimated to amass into 457,503 households with an average income of $88,477. The above-mentioned demographics combined with WalletHub’s report on the best large cities to start a business, supports the statement that the industrial spirit is confident in Houston. The report says The Bayou City ranks No. 18 for 2017—a jump from the No. 21 spot in 2016. Houston excels with a No. 5 business environment ranking, but is in the middle of the pack for access to resources at No. 86.
To further boost the business environment and promote greater ease of connectivity in the north Houston area, a new 13.7-mile stretch of the Grand Parkway (SH 99) opened in 2016, connecting I-45(N) (the North Freeway) near Spring/Woodlands to US 59(N) (the Eastex Freeway) through northern Harris and southern Montgomery counties, allowing drivers to travel faster from The Woodlands to Humble and Kingwood—a key advantage for ecommerce or regional warehouse and distribution centers.
North Houston is also home to George Bush Intercontinental Airport (IAH), a world-class commercial air transport hub that positions Houston as a dynamic and diverse global gateway city. IAH is a key part of Texas’ airport network, which accounted for $71.1 billion in international trade in 2015. In that year, IAH helped facilitate about $15 billion in trade, supporting 38,000 Texas jobs and generating $5.4 billion in gross state product. The airport’s size and diverse capabilities have helped Texas become the nation’s largest exporter—and the world’s 10th-largest economy. Cargo activity at IAH represented 429,000 metric tons of freight ranking 18th in the nation and 59th in the world for trade tonnage. In addition, IAH serves a dozen all-cargo airlines and receives 22 regularly scheduled all-cargo international flights each week.
In the investment sales arena, data from Real Capital Analytics indicates investor appetite has remained strong in the North submarket, causing year-to-date sales volume to increase to $77.2 million, resulting in a year-over-year change of 108%. Recent significant transactions include Exeter purchasing five buildings at Bammel Business Park, representing 246,450 sq. ft. The properties, which are located at 4822 N Sam Houston Pkwy W., were built in 2008. Another notable recent deal saw Vino Patel Real Estate buying the ProDirectional property at 850 Conroe Park W. Dr. in Conroe. The 104,325-sq.-ft., warehouse was constructed in 2015 and was 100% leased at the time of sale. Lastly, year-to-date results for capital flows reflected that 87% of acquisitions were made by private investors and 13% institutional in the North submarket during 2017. This is in comparison to 80% of acquisitions being made by private investors, 14% institutional investors, and 6% REIT/Listed throughout 2016.
In the wake of Hurricane Harvey, Texas begins the recovery process, although the extent of the storm’s wrath won’t be known for months. The greater Houston area economy is equipped to make a strong resurgence from the rage of Harvey on the merits of its size, diversity and distinction as the nation’s energy capital. While there will be a significant disruption to the regional economy in the near term, Houstonians will begin to rebuild and major infrastructure spending will take place, setting in motion a line of attack for an ongoing economic recovery.