Houston’s strategic location, growing labor pool and role as a key logistics and distribution hub continue to help fuel hearty demand. Even still, leasing activity lags the historic highs seen in 2021-2022 with the 8.2 MSF taken down this quarter representing a nearly 35% decline from the quarterly average of 12.6 MSF during those two years.
The vacancy rate inflated by a recent wave of speculative development is trending downward but remains elevated above pre-pandemic norms. These market dynamics have caused year-over-year rent growth to slow to 2.5% from the high of 5.2% set in Q2 2022.
With construction starts at a 12-year low, Houston’s industrial market could see vacancies tighten and stronger rent growth return later in 2025 or 2026 as supply contracts. In the meantime, Houston should continue to rank among the more tenant favorable markets in the nation as landlords compete to fill the glut of available space.
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