Houston Industrial Investment Forecast
Houston Metro Area, 2018 Outlook
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Rising Container Traffic Bodes Well For Houston Warehouse Sector

Logistics firms supporting demand in northern suburbs. The Houston industrial market is bifurcated, though the strength of the sector is founded within the much larger warehouse sector, keeping overall conditions healthy. Flex space has struggled in recent quarters as leases by oil-related companies expire and those firms reconsider their long-term space needs. As a result, flex vacancy has drifted close to the 10 percent neighborhood, though conditions have stabilized over the past few quarters, including a downtick in the fourth quarter. The warehouse sector, which is 10 times the size of the flex market, is benefiting from the resumption of growth in Houston. As energy prices settle in a predictable range, hiring forecasts from both upstream and downstream oil companies have stabilized. Overall job growth, meanwhile, is gaining momentum as population growth stays healthy. Amazon, for example, is hiring 1,000 workers at its recently completed distribution center in Katy. Home Depot is also hiring thousands of local workers, serving as a barometer for the health of the housing market. After setting a record in home sales in early 2018, housing-related industrial space appears poised for improvement.

Demand for warehouse properties to stay elevated.Houston is one of the nation’s largest manufacturing metros, largely focused on products that support oil extraction and refining. As the pace of shale oil production has slowed, so too has the need for expanding output. This could keep most investors shy when considering local assets. The other two major sectors, distribution and warehousing, however, should keep investors busy this year. More than a year has passed since the widening of the Panama Canal and container traffic soared by 11 percent last year. As a result, investors who purchase assets near the port will drive bidding for properties brought to the market in this area.