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Monthly Update: Industrial Market

Q4 '23, Latest Data
Published on 1/11/24

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Estimated Reading Time: 2 minutes.

The demand for industrial/warehouse space in Houston may be leveling off. The vacancy rate ticked up to 7.1% percent in Q4/23 from a recent low of 5.2 percent in Q4/22.

The rate of net absorption has decelerated from the unprecedented pace seen in '21 and '22. In '23, it matched the levels of 2020, significantly surpassing the pre-pandemic years.

This year’s surge in construction delivered a significant amount of new space to the market. That, coupled with a potential pullback in consumer spending, resulted in a slight upturn in available space. At the end of Q4/23, total space being marketed (e.g., vacant, occupied yet available, available for sublease, or available at a future date) was 75.3 million square feet. That compares to 71.2 million square feet in Q4/22 and 66.2 million in Q4/21.

Higher interest rates, tougher lending standards, and concerns over a possible recession in ’23 slowed building activity. As of Q4/23, Houston had 21.5 million square feet underway compared to 37.2 million at the Q4/22 peak.

Rents continue to rise, however. The average industrial rent was $9.32/sq. ft./year at the end of ‘23. That’s up from $8.57 a year ago, $7.82 two years ago, and $7.56 year-end ’20. The rates quoted are triple net (NNN) where the tenant is responsible for all expenses associated with their share of building occupancy, i.e., taxes, maintenance, utilities, security, etc.

Prepared by Greater Houston Partnership Research

Patrick Jankowski, CERP
Chief Economist 
Senior Vice President, Research
pjankowski@houston.org

Leta Wauson
Research Director
lwauson@houston.org

 

 

 

 

 

 

Real Estate Key Economic Indicators
7.1%

Houston industrial vacancy rate ticked up to 7.1% as of Q4 23.

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