While the city’s office market continues to sputter, Houston’s industrial market is healthy setting record levels of demand with 38 MSF of positive absorption the past year. This mark doubled the previous high of 16 MSF set in 2020. Despite this rise in demand vacancy remains elevated thanks mostly to an overly active pipeline which saw nearly 23 MSF brought online over the past 12 months, much which was built on spec. This total was second only to Dallas-Fort Worth nationally, causing some downward pressure on asking rent growth despite healthy demand. Citywide, rents have grown 5.0% over the past year, well below the national average of 10.6%. Much of the demand continues to shift towards online retail and logistics away from the energy sector. Development remains focused around Beltway 8 and the Grand Parkway, primarily to the northwest and southeast. With 18 MSF under construction, Houston’s development pipeline has yet to really slow. But, if it doesn’t begin to wind down, the wave of new product could place added pressure on landlords.
