Page 6 - UPG Industrial Piece

Northwest Industrial Submarket Overview

Houston | Q1 2018

Quarter in review
• The Northwest submarket rebounded quickly from a weak close to 2017
with declining vacancy and strong net absorption in the first quarter.
• Vacancy dipped slightly to 5.1 percent, while availability rose 40 basis points
quarter-over-quarter to 9.7 percent.
• With the delivery of Amazon’s 1,016,000-square-foot distribution center in
Brookshire, the quarter’s 962,265 square feet of net absorption was well
above the submarket’s historical average of 695,904 square feet.
• Leasing activity was below average for the first quarter, but this was also
true for the metro as a whole, and the 838,680 square feet of deals
transacted in the Northwest accounted for almost 25% of the market-wide
total. This is a product of sustained low vacancy and limited existing space Fundamentals Forecast
options for tenants in the market. QTD net absorption 962,265 s.f. ▼
• The submarket did not land any of the top leases of the quarter, as activity YTD net absorption 962,265 s.f.▼
was characterized largely by deals in the 20,000-square-foot to 50,000- Under construction 1,899,744 ▶
square-foot range. s.f.
• Asking rents declined in the first quarter to $0.54 per square foot, NNN, from Total vacancy 5.1% ▶
$0.55 per square foot, NNN, at the end of 2017. Average asking rent (NNN) $0.54 p.s.f. ▶
12-month rent growth -2.9%▲
Under construction Supply and demand (s.f.) Net absorption
• The Northwest has the second-highest construction total of any submarket 6,000,000 Deliveries
with seven projects currently underway totaling 1,899,744 square feet.
• The submarket is unique in that the entirety of its development pipeline is 4,000,000
speculative, led by Oakmont’s 673,785-square-foot project in Katy, which is
the largest industrial building under construction in Houston. 2,000,000

Outlook 0
• Developers remain confident in the submarket’s long-term strength, but it 2014 2015 2016 2017 Q1 2018
will be crucial to secure preleasing commitments for the large spec pipeline
to ensure balance in the market as projects deliver.
• Continued strong performance is expected for the Northwest as demand Total vacancy
generators like consumer goods drive leasing activity and net absorption. 6.2%
Landlord conditions are likely to remain in place for 2018. 5.1% 5.2% 5.1%
3.5%

2014 2015 2016 2017 Q1 2018

Average asking rents ($/s.f.)
$8.00 W&D Manufacturing
$7.00

$6.00
$5.00
$4.00
2014 2015 2016 2017 Q1 2018