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The demand for industrial/warehouse space in Houston continues to decline. In Q4/22, the vacancy rate was at a low of 5.1 percent but has since increased to 7.7 percent in Q2/24.
Demand for space peaked at 18.4 million square feet in Q3/21. In Q2/24, absorption stood at 3.2 million square feet, reminiscent of pre-pandemic levels.
Houston had 71.7 million square feet of industrial/warehouse space (direct and sublet) available at the end of Q2/24. This includes vacant, occupied yet available, available for sublease, or available at a future date.
Higher interest rates, tougher lending standards, and weaker net absorption have hampered building activity. As of Q2/24, Houston had 12.1 million square feet underway compared to 36.8 million at the Q4/22 peak.
Rents continue to rise, however. The average industrial rent was $9.32/sq. ft./year in Q2/24. That’s up from $8.99 in Q2/23 and $8.35 in Q2/22. 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. Despite the record amount of new supply delivered in ‘23, Houston continues to see a rise in rents year over year, climbing 3.7%.
Prepared by Greater Houston Partnership Research
Leta Wauson
Research Director
lwauson@houston.org
Patrick Jankowski, CERP
Chief Economist
Senior Vice President, Research
pjankowski@houston.org
Houston industrial vacancy rate ticked up to 7.7% as of Q2 24.
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