Houston’s industrial market is showing signs of cooling after several years of record expansion. Vacancy has climbed for three consecutive quarters, reaching 7.3% as net absorption slows and new supply continues to deliver. Bulk distribution properties, which have grown by nearly 40% since 2020, face the most pressure, with larger boxes now sitting on the market longer.
Even so, tenant demand remains healthy. Logistics and manufacturing users continue to expand, highlighted by Eli Lilly’s announcement of a $6.5 billion manufacturing facility in Generation Park. Over the past year, net absorption has trailed new deliveries, keeping supply/demand out of balance. Newer facilities with taller clear heights and robust power continue to capture the bulk of leasing.
Rent growth is decelerating and concessions have expanded on big-box deals, while small-bay spaces under 25,000 SF remain tight. With 22 MSF under construction— much of which is unleased—supply will continue to weigh on rent growth through 2026.
Despite near-term headwinds, Houston’s long-term industrial fundamentals remain solid. Port Houston container volumes are up 5% year-to-date, population growth remains among the strongest in the country, and manufacturers are committing to large-scale investments. While vacancy may drift higher in the coming quarters, strong demand drivers, limited small-bay construction, and Houston’s strategic location should underpin stability over the longer horizon.