Q4 2015 Houston Industrial Market Research & Forecast Report
Houston’s industrial market slows in 2015, but ends the year on a positive note
During the fourth quarter, 0.7M SF of Houston’s Industrial inventory was absorbed, substantially less than the 1.7M SF absorbed in the previous quarter. Although Houston’s industrial market showed signs of slowing due to the downturn in the local economy caused by
falling oil prices, 2015 still ended on a positive note, with year-end net absorption totaling a positive 9.5M SF. Industrial leasing activity increased to 4.2M SF from 3.9M SF in the third quarter. The vacancy
rate did, however, increase by 20 basis points over the quarter to 5.0% from 4.8% in Q3 2015. Only 15.0% of the 1.8M SF of new inventory delivered in the fourth quarter is leased, but fortunately the 8.8M SF under construction is 64.0% pre-leased.
The average citywide quoted industrial rental rate increased 1.3% between quarters from $6.96 to $7.05 per SF NNN. The average rental rate has increased 10.2% on a year-over-year basis from $6.40 per SF NNN. Rental rates are not expected to change much, if any, in the near-term.
According to the U.S Bureau of Labor Statistics, the Houston metropolitan area created only 23,700 jobs between November 2014 and November 2015. This is an annual increase of just 0.8%, well below the 2014 annual growth rate of 3.4% (97,500 jobs). Local economists have predicted 2015 annual job growth will be around 20,000 jobs, however, we believe that number will be lower.
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