Houston’s industrial market charges ahead as office lags

August 24, 2018

Houston’s office market continues to struggle, while the super-charged industrial sector barrels forward with bigger deals in the pipeline.

“The major oil and gas companies have not started expanding,” Dan Boyles, office tenant representation group partner for NAI Partners, said at a quarterly press update. “We hope they’re done giving space back.”

Companies that are signing deals frequently take less space than they had before, brokers said during the Tuesday event.

“Go back to 2000. We’ve not had this volume of negative absorption even through ’08, ’09 or the Enron mess,” NAI managing partner Jon Silberman said. “It’s a pretty rough stretch.”

Houston posted a net occupancy loss of almost 500,000 square feet in the second quarter, an improvement from 1.4 million square feet of negative absorption in the first quarter, according to NAI Partners.

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Trouble could be ahead when landlords take back space that’s been on the sublease market and no longer collect rent checks in the next 24 months, Silberman said.

Well-capitalized landlords have upgraded their buildings with conference centers and fitness facilities to stay competitive, Boyles said.

Meanwhile industrial activity, which typically slows during the summer, is heating up. Liberty Property Trust landed huge distribution centers in two of its north Houston projects, including a 727,600-square-foot project for Grocers Supply, and a 656,700 square-foot distribution center for Conn’s.

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“We’ll see another one, two or three deals of that size announced before the end of the year,” said Nick Peterson, senior vice president of the industrial group.

Also, crane-served manufacturing buildings that once sat empty have started to fill as oil has surpassed $67 a barrel.

“I think 2019 going to be good year for manufacturing side of the business,” Peterson said.



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