Houston is increasingly recognized as a major distribution hub. Large new industrial facilities are rising across the region as e-commerce reshapes retail and drives demand for warehouse and logistics space. To understand how these forces are affecting Houston’s industrial market, Realty News Report spoke with Mike Spears, managing principal of Lee & Associates’ Houston office. Spears oversees daily operations and manages a team of 35 brokers and 12 support staff. Before joining Lee & Associates, he spent 15 years with TNRG, including seven years as company president prior to the merger with Lee & Associates.
Outlook on Houston’s Economy
Realty News Report: As managing principal of Lee & Associates, you see companies buying land and planning moves for 2018 and beyond. How do you view Houston’s economy as we near midyear 2017?
Mike Spears: From an economic standpoint, Houston is relatively healthy and resilient. While oil and gas prices fell sharply over the previous 18 months, the impact on Houston was more nuanced than headlines suggested. Upstream energy companies were hit hard, but the downstream sectors—petrochemicals and plastics concentrated on the east side—performed well. Although unemployment rose during the energy downturn, population growth continued as workers and new residents kept moving to the city. That steady migration helped Houston weather the downturn and emerge stronger. I believe we’ve moved past the worst of that period.
Is the Industrial Sector Overbuilt?
There are concerns around overbuilding, but I don’t think Houston’s industrial market is currently overbuilt. The market was trending that way at one point, but most developers noticed the shift and slowed or stopped speculative construction. Over the last 18 months, speculative projects in the north and northwest largely halted. Unlike the office market, industrial construction slowed earlier, and while developers are beginning to re-enter the market and look for land, significant new activity is unlikely to accelerate immediately—expect a gradual uptick over the next 12 to 18 months.
E-Commerce and Its Impact
Realty News Report: Amazon is planning a 1 million square foot facility in Katy. What effect is e-commerce having on commercial real estate?
Mike Spears: Amazon has been a major catalyst for e-commerce and is expanding in the greater Houston area—already operating large facilities across the region, including an 800,000 SF site in northwest Houston and a 500,000 SF facility in Sugar Land, with the planned 1 million SF center in Katy. These projects boost the CRE market by absorbing available space and creating jobs for construction, operations, and nearby services. Amazon’s focus on “the last mile” means strategically placing distribution centers close to population centers, which in turn drives demand for well-located industrial land.
E-commerce has both positive and negative effects. It reduces demand for some brick-and-mortar retail space, but it increases demand for industrial and logistics facilities. Additionally, older or underused properties can sometimes be repurposed to meet e-commerce needs, offering adaptive reuse opportunities for the industrial sector.
The Health of the Industrial Market
Realty News Report: Is Houston’s industrial real estate market still healthy?
Mike Spears: Yes, the industrial market remains healthy, though it’s not always easy to measure. Unlike the office market—where vacancy is a straightforward ratio of vacant space to total inventory—industrial space serves different uses. Manufacturing and distribution are not interchangeable. A company seeking a 100,000 or 200,000 SF manufacturing facility cannot use 2 million SF of available distribution space, so headline vacancy figures can be misleading. The oil glut affected manufacturing more than distribution, and over time vacancy patterns shifted accordingly.
Houston is increasingly positioning itself as a distribution hub. It doesn’t match Dallas-Fort Worth yet, but it’s moving in that direction. Compared with markets like Dallas and parts of California where land constraints make new development difficult, Houston still has available land. That advantage, combined with population growth and long-term infrastructure improvements, should attract domestic and international investors. Overall, industrial fundamentals look solid and are likely to strengthen over the next few years and decades.
Risk of Overbuilding
Realty News Report: Is there a significant risk of the industrial market becoming overbuilt?
Mike Spears: Not at present. Developers remember Houston’s overbuilding in the 1980s and have been cautious. When construction started to outpace demand, many developers paused or canceled projects—particularly in the north, northwest, and southwest submarkets—allowing existing inventory to absorb. Continued population growth will support demand for industrial space, so as long as growth persists, the market should remain balanced.
Activity Around the Port of Houston
Realty News Report: What’s happening in the Port of Houston area?
Mike Spears: The Port of Houston remains a critical and active gateway for U.S. trade. Downstream industries are expanding and new LNG and petrochemical projects are under way. Improvements such as the infrastructure upgrades at Cedar Port Industrial Park in Baytown—across the Houston Ship Channel from container terminals like Barbours Cut and Bayport—could open nearly 11,000 acres of industrial land. Activity around the port is robust and a key driver for regional industrial growth.
Panama Canal Expansion
Realty News Report: Some expected the Panama Canal expansion to immediately boost business at the Port of Houston. Has that happened?
Mike Spears: The Panama Canal expansion should create more opportunities, but its full impact is a long-term story. It will take time—and additional improvements to shipping and port capacity—before we see major, sustained benefits. I expect the effects to become clearer over the next decade or two as global shipping patterns adjust and port infrastructure adapts.
About Lee & Associates Houston
Realty News Report: Tell us about Lee & Associates Houston.
Mike Spears: About 18 months ago, TNRG—a long-standing local industrial brokerage—merged with Lee & Associates, combining local industrial expertise with Lee & Associates’ national footprint. The merger created one of the largest broker-owned firms in Houston, strengthening our local presence and broadening our national and international reach. The combined platform gives us more capacity and resources as we grow. We’re optimistic about the company’s future and the opportunities ahead.
Final Thoughts
Realty News Report: Anything else you’d like to add?
Mike Spears: I grew up in Jacksboro, Texas, and I’ve always admired Houston’s entrepreneurial spirit. The city is business-friendly: hard work and initiative are rewarded, and people support one another. That culture attracts talent and fosters mentorship—success stories and experienced professionals often give time to help newcomers. Events like the Super Bowl showcased Houston’s capabilities and civic pride. Overall, Houston is a great place to live, work, and build a business.
June 7, 2017 Realty News Report Copyright 2017