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Market Report

Houston Industrial Market Report

2023 Investment Forecast

Scattered Builds Along the Perimeter Enable Future Tenant
Expansions and Support Institutional Deal Flow

Depleted availability underscores the need for new space. This year’s construction pipeline is characterized by larger-scale projects that are well-dispersed throughout the metro. More than 70 different facilities exceeding 100,000 square feet are scheduled to finalize during 2023. Proximate to Interstate 10, developers are most active on the west side near Katy, as well as on the eastern flank surrounding Baytown. Builders are also adding considerable space adjacent to the Sam Houston Tollway on the northern and southern bands. This outspread nature of construction should diffuse localized supply competition, even as market inventory expands by more than 3 percent for a fifth consecutive year. Net absorption, however, will realign with historic norms after an outstanding stretch spanning 2021 and 2022, due to both softer economic conditions and a lack of suitable facilities available for lease. During the past two years, tenants absorbed a net of over 56 million square feet, a total that exceeds the amount of vacant stock left on the market entering 2023. Despite these dynamics, speculative projects could take longer to secure tenants than in recent years as the national economy slows, nudging up vacancy.
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