HOUSTON – (Realty News Report) – Warehouses are in high demand in Houston.
Year-to-date warehouse sales have surged 127 percent compared with 2016 sales volume, according to a November report from NAI Partners.
Houston is on track to surpass the $1 billion mark in industrial sales. So far this year, $984 million in industrial transactions have been recorded.
Institutional investors have accounted for 38 percent of those purchases, while REITs made up 12 percent and foreign investors contributed 10 percent of buyers.
NAI cites the largest deal of the year as Pure Industrial REIT’s $63.5 million acquisition of the 1 million-square-foot IKEA Distribution Center in Baytown. Pure Industrial REIT is based in Vancouver, B.C.
Another Canadian buyer, WPT Industrial REIT of Toronto, paid $40 million for the Apex Distribution Center on Brittmoore Road. Other notable transactions included sales at the Park 288 project, the Mason Creek Business Center and a 331,000-square-foot facility at 1601 Gillingham in Sugar Land.
This surge in activity coincides with Houston’s rise as a major center for industrial development. E-commerce growth, population increases and expanded traffic at the Port of Houston—paired with the Panama Canal’s expansion—have driven more container volumes from Asia. On the retail side, Amazon has opened two large fulfillment centers and plans an Amazon Fresh food warehouse. Major retailers such as Best Buy are also building large “big box” distribution centers, including a planned 550,000-square-foot facility in the Houston area.
Historically, Dallas was regarded as the region’s primary distribution hub as part of a long-standing logistics pattern: goods would arrive at the Port of Houston, be shipped in bulk to Dallas for breakdown, and then be redistributed back toward Houston.
“To be honest, I never totally understood why Dallas is so much more of a distribution hub than Houston,” Houston developer Robert Clay of Clay Development and Construction told Realty News Report in a recent interview. “We have basically the same population and yet Dallas is around twice the size of Houston. My opinion is that instead of five major distribution markets around the U.S., there are now 10 smaller regional markets, and Houston is one of those.”
The Houston industrial market continues to absorb new construction. Approximately 6.4 million square feet have been leased or occupied year-to-date, according to NAI Partners’ November report. The market’s current vacancy rate stands at 5.5 percent.