Q2-2012 Houston Industrial Market Report

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Q2 2012 | INDUSTRIAL MARKET HOUSTON INDUSTRIAL MARKET RESEARCH & FORECAST REPORT Strong Second Quarter Pushes Houston’s Mid-Year Industrial Leasing Activity to 6.7M SF Houston’s industrial market remains one of the top ten healthiest U.S. Industrial Markets with low vacancy, stable rental rates and positive absorption. Houston posted 1.8M SF of positive net absorption in the second quarter pushing the yearto-date total to 3.0M SF. Leasing activity reached 3.8M SF in the second quarter pushing the mid-year total to 6.7M SF. Houston’s average industrial vacancy rate decreased from 5.3% to 5.1% in the second quarter. The overall average quoted industrial rental rate decreased from $5.51 to $5.50 per SF NNN between quarters, but increased by 3.0% on a year-over-year basis from $5.34 per SF NNN. Houston’s lack of available industrial inventory has spurred demand for new product. Developers have responded to the demand and currently have over 2.3M SF under construction. Much of the increased activity has been driven by build-to-suit projects for companies expanding in and relocating to the Houston market; however, there is now more spec development, 1.4M SF, than build-tosuit at this time. As Houston’s available industrial inventory shrinks, we believe the demand for new projects will continue to increase, both for build-to-suit and spec development. The Houston metropolitan area added 88,000 jobs between May 2011 and May 2012, an annual increase of 3.4%. Unemployment fell to 6.9% from 8.1% one year ago. Houston area home sales increased by 23.8% compared to May 2011 sales. With continued expansion in the energy industry and a strong housing market, Houston’s economy is expected to remain healthy for both the near and long-term. JOB GROWTH & UNEMPLOYMENT (Not Seasonally Adjusted) UNEMPLOYMENT HOUSTON TEXAS U.S. 5/11 8.1% 7.8% 8.7% 5/12 6.9% 6.9% 7.9% CITYWIDE MARKET INDICATORS Houston Net Absorption (SF) Average Rental Rate per SF Vacancy SF Delivered SF Under Construction 2Q-11 1.3M $5.34 5.7% 550K 980K 2Q-12 1.8M $5.50 5.1% 1.1M 2.3M ABSORPTION, NEW SUPPLY & VACANCY RATES 2,000,000 1,500,000 1,000,000 500,000 0 -500,000 -1,000,000 8% 7% 6% 5% 4% 3% 2% JOB GROWTH HOUSTON TEXAS U.S. ANNUAL # OF JOBS ADDED CHANGE 3.4% 2.2% 1.4% 88.0k 228.5k 1.8m Absorption New Supply Vacancy www.colliers.com/houston RESEARCH & FORECAST REPORT | Q2 2012 | HOUSTON INDUSTRIAL MARKET Vacancy & Availability Houston’s industrial vacancy averaged 5.1% in the second quarter, 20 basis points below the 5.3% vacancy rate posted in the first quarter. At the close of the second quarter, Houston had 24.6M SF of vacant industrial space citywide, 921K SF less than the previous quarter. Among the major industrial corridors, the Northwest submarket held the largest amount of vacant space with 5.6M SF (4.3% vacancy), followed by the Southeast submarket with 5.0M SF vacant (6.0% vacancy), the Southwest submarket with 4.4M SF vacant (6.9% vacancy), and the North submarket with 3.9M SF vacant (5.5% vacancy). Houston’s industrial construction pipeline had 2.3M SF of projects underway at the end of the second quarter, including 1.4M SF of spec development. The largest project under construction is a 475,000SF state-of-the-art foodservice distribution facility that will be the new Gulf Coast regional distribution hub for the Ben E. Keith Company. The facility is being constructed on an 82-acre tract located in Missouri City in the Beltway Crossing Business Park. A list of additional buildings currently under construction can be found on Page 4 of this report. The largest spec project in the pipeline is a 267,200-SF distribution warehouse located on Okanella Lane in the Northwest Inner Loop industrial submarket. on a year-over-year basis from $5.34 per SF NNN. By property type, the average quoted NNN rental rates are as follows: $5.06 per SF for Distribution space; $4.23 per SF for Bulk Warehouse space; $6.64 per SF for Flex/Service space; with Tech/R&D space averaging $6.30 per SF. Bray International 13788 West Road May-12 80,200 SF Tyco Valves & Control2 Bayport North Industrial Park April-12 44,800SF Stephens Office Supply, Inc.1, 2 Alamo Crossing Commerce Center May-12 41,458 SF Drilltec Technologies, Inc. 3500 Brittmoore Rd May-12 Absorption & Demand Houston’s industrial market posted 1.8M SF of positive net absorption in the second quarter pushing the year-to-date total to 3.0M SF. Among Houston’s major industrial corridors, the North and Northwest submarkets outperformed all others in the second quarter, posting the highest positive net quarterly absorption of 1.1M SF and 415K SF respectively. The Northeast submarket followed with 254K SF of positive net absorption. There were several major tenant moveins contributing to net absorption gains in the first quarter, including National Oilwell Varco (128,000 SF); Sutong Tire (99,840 SF); OldCastle Building Envelope Inc. (61,194 SF); Houston Plate Processing (48,688 SF); Allied Stone (43,382 SF); and Supreme Pet Supplies (42,660 SF). 40,595 SF United Plastics Group Inc.1 Alamo Crossing Commerce Center Apr-12 36,439 SF Abacus Plumbing 15851 Vickery Drive Apr-12 33,450 SF GMI Mann Warehouses, Inc.2 4410 Clinton May-12 30,000 SF American International Shipping LLC 8201 La Porte Fwy. Apr-12 27,417 SF Spirit Delivery & Distribution Pine Timbers Distribution Center Apr-12 25,680 SF HWC Wire & Cable Co. 8920 Lawndale Avenue Apr-12 22,000 SF Instyle Granite & Marble 4315 Dacoma Jun-12 20,000 SF Batterson LP 3901 Airline Drive May-12 Leasing Houston’s industrial leasing activity reached 3.8M SF in the second quarter, pushing the year-to-date total to over 6.7M SF. A list of Houston’s top industrial leases signed to date includes: Emser Tile2 9835 A Genard Road Jun-12 Fortune Rag Company, Ltd Navigation Business Park May-12 20,000 SF GHX Industrial, LLC 6507 West Little York Road Jun-12 18,000 SF 1 Colliers Rental Rates Although Houston’s overall average quoted industrial rental rate decreased from $5.51 to $5.50 per SF NNN between quarters, it increased by 3.0% 417,350 SF International transaction Renewal 3 Expansion 2 84,791 SF COLLIERS INTERNATIONAL | P. 2 RESEARCH & FORECAST REPORT | Q2 2012 | HOUSTON INDUSTRIAL MARKET Sales Activity 2Q 2012 Total Volume: No. of Properties: Total SF: Average $/SF: Average Cap Rate: $427.5M 51 13.5M $39 8.0% The National Realty Group, Inc. sold a 10,000-SF, Class B industrial warehouse to Transtar AC Supply, Inc. for $85 per SF. The building, located at 1231 Price Plaza Dr. in the Northwest Outlier Industrial submarket, is a single-tenant warehouse which is 100% occupied by Baker Distributing. Metal Coatings Corp. purchased an 82,000-SF, Class B multi-tenant industrial warehouse from Richland Investments, Inc. for $35 per SF. The property, located on Westhollow Parkway in Sugar Land industrial submarket was 100% occupied at the time of sale. Oxiteno USA, LLC purchased a 24,250 SF chemical manufacturing facility from Old World Industries, Inc. for $619 per SF, which included equipment for processing chemicals. The property is located at 9801 Bay Area Blvd. in Pasadena, TX. Petronash Americas LLC purchased a 40,000-SF manufacturing building from KW Industries for $57 per SF. The property is located at 510 Industrial Blvd. in Sugar Land, TX. The buyer, an engineering and manufacturing company servicing the oil & gas industry, will occupy the building. Houston’s industrial investment activity increased between quarters, with 51 properties being sold in the second quarter compared to 46 in the first quarter. Some of the second quarter transactions include the following: HOUSTON INDUSTRIAL MARKET SUMMARY Houston Industrial Market Statistical Summary 2nd Quarter 2012 Market Greater Houston Total NW Inner Loop Downtown North Inner Loop SW Inner Loop Total Inner Loop North Fwy/Tomball Pky North Hardy Toll Rd North Outer Loop The Woodlands/Conroe Total North Corridor Northeast Hwy 321 Northeast Hwy 90 Northeast I-10 Northeast Inner Loop Total Northeast Corridor Hwy 290/Tomball Pky Northwest Hwy 6 Northwest Inner Loop Northwest Near Northwest Outlier West Outer Loop Total Northwest Corridor South Highway 35 South Inner Loop Total South Corridor East I-10 Outer Loop East-SE Far SE Outer Loop Total Southeast Corridor Highway 59/Highway 90 Southwest Far Southwest Outer Loop Fort Bend County/Sugar Land Total Southwest Corridor Rentable Area 483,649,091 12,328,230 32,666,651 5,265,017 7,858,518 58,118,416 14,101,569 24,845,891 17,668,453 13,305,895 69,921,808 1,188,527 15,741,663 3,897,753 11,725,987 32,553,930 14,991,866 5,092,219 61,822,721 16,057,659 12,664,809 22,147,007 132,776,281 30,222,267 13,801,162 44,023,429 15,582,008 46,389,438 20,995,067 82,966,513 21,897,222 10,361,444 12,748,688 18,281,360 63,288,714 Direct Vacant SF 23,939,845 473,340 1,790,705 479,090 94,826 2,837,961 886,492 1,359,679 909,127 660,530 3,815,828 1,980 281,665 54,186 528,208 866,039 671,520 158,116 2,942,557 542,016 341,929 692,743 5,348,881 1,183,966 580,075 1,764,041 115,135 4,413,656 468,667 4,997,458 1,072,926 913,157 836,548 1,487,006 4,309,637 Direct Vacancy Rate 4.9% 3.8% 5.5% 9.1% 1.2% 4.9% 6.3% 5.5% 5.1% 5.0% 5.5% 0.2% 1.8% 1.4% 4.5% 2.7% 4.5% 3.1% 4.8% 3.4% 2.7% 3.1% 4.0% 3.9% 4.2% 4.0% 0.7% 9.5% 2.2% 6.0% 4.9% 8.8% 6.6% 8.1% 6.8% Sublet Vacant SF 677,649 17,332 7,617 22,500 47,449 7,500 129,000 136,500 31,786 11,520 143,341 64,112 49,055 299,814 58,961 42,000 100,961 5,325 5,325 87,600 87,600 Sublet Vacancy Rate 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% 0.2% 0.1% 0.6% 0.8% 0.0% 0.0% 0.4% 0.2% 0.2% 0.2% 0.4% 0.4% 0.0% 0.2% 0.2% 0.3% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.5% 0.1% Total Vacant SF 24,617,494 473,340 1,790,705 479,090 94,826 2,837,961 903,824 1,367,296 909,127 683,030 3,863,277 9,480 410,665 54,186 528,208 1,002,539 703,306 169,636 3,085,898 606,128 390,984 692,743 5,648,695 1,242,927 622,075 1,865,002 115,135 4,418,981 468,667 5,002,783 1,072,926 913,157 836,548 1,574,606 4,397,237 Total Vacancy Rate 5.1% 3.8% 5.5% 9.1% 1.2% 4.9% 6.4% 5.5% 5.1% 5.1% 5.5% 0.8% 2.6% 1.4% 4.5% 3.1% 4.7% 3.3% 5.0% 3.8% 3.1% 3.1% 4.3% 4.1% 4.5% 4.2% 0.7% 9.5% 2.2% 6.0% 4.9% 8.8% 6.6% 8.6% 6.9% 2Q12 Net Absorption 1,802,467 29,979 8,183 15,909 54,071 430,520 154,872 389,349 (7,906) 966,835 (7,500) 143,471 10,594 107,145 253,710 (82,405) (21,032) (19,023) 54,308 34,699 448,565 415,112 (38,961) 56,896 17,935 10,500 221,610 (6,365) 225,745 144,728 (15,192) 19,421 (279,898) (130,941) YTD 2012 Net Absorption 3,034,582 89,513 (33,405) 90,139 58,943 205,190 506,133 176,129 373,933 42,049 1,098,244 (7,500) 78,386 100,344 99,859 271,089 10,443 (22,757) 352,464 493,339 2,321 661,211 1,497,021 (155,878) (118,561) (274,439) 61,500 44,919 54,053 160,472 222,362 71,564 41,147 (258,068) 77,005 2Q12 Completions 1,128,463 140,243 180,058 45,380 365,681 20,000 20,000 600,800 600,800 45,727 96,255 141,982 YTD 2012 Completions 1,722,868 373,243 180,058 146,630 699,931 20,000 20,000 89,919 40,452 45,835 176,206 20,000 20,000 600,800 600,800 59,227 50,449 96,255 205,931 SF Under Construction 2,315,843 239,235 80,415 45,840 65,000 430,490 108,548 303,273 335,542 22,500 62,375 832,238 108,000 108,000 262,115 262,115 683,000 683,000 COLLIERS INTERNATIONAL | P. 3 RESEARCH & FORECAST REPORT | Q2 2012 | HOUSTON INDUSTRIAL MARKET 2Q 2012 Industrial Under Construction Estimated Submarket Southwest Corridor Ind Northwest Corridor Ind Southeast Corridor Ind Northwest Corridor Ind Northwest Corridor Ind Southwest Corridor Ind North Corridor Ind South Corridor Ind Southwest Corridor Ind North Corridor Ind North Corridor Ind North Corridor Ind North Corridor Ind Southeast Corridor Ind Northwest Corridor Ind Northwest Corridor Ind Southeast Corridor Ind Northwest Corridor Ind Northwest Corridor Ind Northwest Corridor Ind Northwest Corridor Ind North Corridor Ind Northwest Corridor Ind Northwest Corridor Ind Northwest Corridor Ind Northwest Corridor Ind North Corridor Ind North Corridor Ind Northwest Corridor Ind North Corridor Ind Northwest Corridor Ind Building Address 1001 Cravens Rd 10650 Okanella Ln 405 Deerwood Glen Dr 7355 Yorkfield Bldg 1 7355 Yorkfield Bldg 100 13223 S Gessner 14300 Hollister Rd 2725 Park South View 13123 S Gessner Dr 14400 Hollister Rd 12309 Cutten Rd 3375 Pollock Dr 2330 Peyton Rd 310 W Deerwood Glen Dr 12223 FM 529 Windfern Rd 10200 New Decade Dr 12616 N Houston Rosslyn Rd 6410 Langfield Rd - Bldg E 7645 Railhead Ln 12010 FM 529 1517 Richey Rd 6511 West Little York Rd 459 Stonegate Dr - Bldg 1 12626 N Houston Rosslyn Rd 6507 West Little York Rd Vickery & Aldine Bender Bldg A Vickery & Aldine Bender Bldg B 8725 Golden Spike Ln Vickery & Aldine Bender Bldg C 8715 Golden Spike Ln RBA 475,000 267,273 160,000 133,480 131,050 116,480 111,065 108,000 91,520 88,170 80,000 65,000 56,915 40,000 37,875 36,000 32,000 30,145 30,070 30,000 24,500 23,500 22,942 22,500 21,403 18,000 15,680 15,600 15,000 14,560 12,000 % Leased 100.0 0.0 100.0 100.0 0.0 0.0 76.8 100.0 0.0 0.0 0.0 100.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Developer Ben E Keith Proterra Properties, Inc. Clay Development Weeks Robinson Properties Weeks Robinson Properties Stream Realty Partners Liberty Property Trust DiMare Fresh Stream Realty Partners Liberty Property Trust Clay Development KDW Capital Commercial Clay Development Texas Development Co First Industrial Unknown Capital Commercial Clay Development TNRG United Equities, Ltd. National Realty Group Levey Development Clay Development Capital Commercial Levey Development United Equities, Ltd. United Equities, Ltd. TNRG United Equities, Ltd. TNRG Delivery Jan-13 May-12 Jul-12 Nov-12 Oct-12 Jul-12 Jan-13 Aug-12 Jul-12 Jan-13 Jun-12 Sep-12 Nov-12 Jun-12 Jun-12 Sep-12 Oct-12 Jun-12 Dec-12 Jul-12 Sep-12 Dec-12 Jul-12 Sep-12 Jun-12 Jul-12 Aug-12 Aug-12 Jul-12 Aug-12 Jul-12 2Q 2012 Industrial Deliveries Submarket Southeast Corridor Ind Southeast Corridor Ind Southeast Corridor Ind North Corridor Ind Southwest Corridor Ind North Corridor Ind North Corridor Ind Southwest Corridor Ind North Corridor Ind North Corridor Ind North Corridor Ind North Corridor Ind North Corridor Ind South Corridor Ind Building Address 1445 Sens Rd 300 Delta Pky 6702 Gulf Fwy 330 Northpark Central Dr 12682 Cardinal Meadow 7607 Bluff Point Dr 16605 Central Green Blvd - Bldg 1 4230 Greenbriar Dr 14000 Vickery Dr 7603 Bluff Point Dr - Bldg 9 4560 Kendrick Plaza Dr. - 31B 2438 Greens Rd 2442 Greens Rd 9250 Park South View RBA 267,320 168,480 165,000 146,700 96,255 78,556 77,886 45,727 45,380 44,789 35,255 33,538 33,379 20,000 % Leased 71.45 100.00 100.00 0.00 100.00 0.00 100.00 100.00 100.00 0.00 0.00 0.00 0.00 100.00 Developer Carson Companies National Property Holdings, LP Del Papa Distributing Prologis API Realty InSite PSRBB Puffer Sweiven Clay Development InSite InSite Capital Commercial Capital Commercial Tribble & Young LLC Delivered Jul-12 Apr-12 Apr-12 Apr-12 Jun-12 Jun-12 Apr-12 Apr-12 Jul-12 May-12 Jun-12 May-12 Jun-12 Jun-12 COLLIERS INTERNATIONAL | P. 4 RESEARCH & FORECAST REPORT | Q2 2012 | HOUSTON INDUSTRIAL MARKET Colliers International Statistics Revenues: Countries: Offices: Professionals & Staff: Brokers: Square Feet Managed: Lease/Sale Transactions: Total Transaction Value: (Based on 2011 results.) *The combination of Colliers International and FirstService results in 2.5 billion under management (2nd largest in the world). $1.8 billion 62 522 12,300 4,800 1.25 billion* 76,000 $68 billion Lisa R. Bridges Director of Market Research Houston Direct +1 713 830 2125 Fax +1 713 830 2118 [email protected] COLLIERS INTERNATIONAL | HOUSTON 1300 Post Oak Boulevard Suite 200 Houston, Texas 77056 Main +1 713 222 2111 Accelerating success. COLLIERS INTERNATIONAL | P. 5