Houston Industrial market records record-high asking rental rate

Houston Industrial

The overall vacancy rate in the Houston industrial market as of October 2023 was 6.7%, up 160 basis points from 5.1% year-over-year. Year-to-date, net absorption is at 14.7 million sq. ft.—down 45% from the prior year-to-date tally of 27.1 million sq. ft. Year-to-date net absorption trended close to its 10-year average of 14 million sq. ft. Year-to-date, deliveries registered at 27.9 million sq. ft., up 32% from the previous year-to-date number of 21.1 million sq. ft. Year-to-date, leasing activity is at 36.1 million sq. ft., down 22% from 46.3 million sq. ft. the prior year. Lastly, the average monthly rental rate stands at $0.77 per sq. ft.—a record-high for the metro’s industrial sector—up 7% from $0.72 per sq. ft. Despite increased supply and elevated vacancies, industrial rent growth remains resilient in Houston.

Houston Office

Ten months into 2023, the overall vacancy rate in the Houston office market was 25.0%, up 50 basis points from 24.5% year-over-year. Year-to-date, net absorption—move-ins minus move-outs—is at -428,389 sq. ft., further plummeting from the prior year-to-date figure of -327,443 sq. ft. In recent news, NRG Energy signed a 245,000-sq-ft. office lease at 1301 McKinney Street (3 Houston Center) in October 2023—planning to downsize from their current 431,000-sq.-ft. office space at 910 Louisiana Street. NRG’s anticipated move-in date is January 2026. Downsizing makes up a large portion of leasing activity in 2023. Year-to-date, leasing activity is at 11.1 million sq. ft., decreasing 21% from 14.0 million sq. ft. the prior year. Year-to-date, deliveries are at 1.1 million sq. ft., increasing 41% from 822,538 sq. ft. the prior year. A notable delivery in October was a 250,000-sq.-ft. office building (TMC Collaborative Building) within the South Main/Medical Center submarket. The average asking rent currently stands at $30.43 per sq. ft.—a record-high for the metro’s office sector—up slightly from $30.08 per sq. ft. the previous year.

Houston Multifamily

Year-to-date, 13,329 multifamily units have been absorbed in Houston, surging from 3,463 units this time last year. Overall occupancy in the Houston multifamily market declined to 89.8% in October 2023, down 90 basis points from 90.7% in October 2022. As of October 2023, 31,582 units filled Houston’s multifamily construction pipeline. Over the prior three years, construction averaged around 34,000 units annually. Year-to-date, deliveries have amounted to 21,714 units, increasing 34% from the prior year-to-date number of 16,214 units. The average monthly rate currently stands at $1,301 per unit, up slightly from $1,291 per unit the prior year.

Houston Retail

As of October 2023, the overall vacancy rate in Houston’s retail market was 5.1%, up 10 basis points from 5.0% the previous year. The vacancy rate is projected to hold steady as positive absorption continues over the next several quarters. Year-to-date, net absorption is at 2.8 million sq. ft., down 40% from the previous year-to-date total of 4.7 million sq. ft. Year-to-date, leasing activity tallied 6.2 million sq. ft., down 22% from the prior year-to-date amount of 7.9 million sq. ft. Retail construction is at 3.7 million sq. ft. in October 2023—slightly below the three-year average of 3.9 million sq. ft. Year-to-date, deliveries increased 34% from 3.3 million sq. ft. in October 2022 to 2.4 million sq. ft. in October 2023. The average asking rent increased 5% year-over-year, currently standing at $20.38 per sq. ft.

Alex Babcock
Senior Research Analyst
[email protected]
tel 713 275 9618