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First-quarter fundamentals in the Houston industrial market continued to exhibit some resiliency even as economic uncertainty brought on by COVID-19 and oil market volatility spread through the region.
The first quarter saw a handful of large leases, including Amazon's 806,000-square-foot (sf) build-to-suit lease on Clay Road in the Northwest submarket and Palmer Distribution’s 297,000-sf build-to-suit in the Ameriport Industrial Park. Net absorption totaled 3.3 million square feet (msf), up from 2.3 msf in Q1 2019, as Coca-Cola Southwest’s 1.0-msf distribution facility, and Home Depot’s 770,000-sf facility, were delivered. The market saw 9.8 msf of both new deliveries and construction starts in the quarter, however activity is likely to taper off in the near- to medium-term as developers begin take a more bearish approach toward speculative builds. The market is showing signs of an oversupply via high vacancy rates, at 8.0% in Q1 2020, and rent stagnation as rates dropped $0.02 year over year to $0.57 per square foot (psf).