Quarterly Update: Industrial Market

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The demand for industrial/warehouse space in Houston has been fluctuating over the past few years. The vacancy rate hit a 5-year low of 5.0 percent in Q4/22, reflecting strong demand at that time. Since then, the rate has gradually risen, reaching 7.0 percent in Q3/24. This marks a slight improvement from the previous quarter's rate of 7.4 percent, though overall vacancy remains elevated compared to the lows of ‘22.

Absorption peaked at 18.4 million square feet in Q3/21 and has trended down since. In Q3/24, absorption reached 5.8 million square feet, a slight improvement over the 4.6 million square feet absorbed in the previous quarter.

Houston had 74.4 million square feet of industrial/warehouse space (direct and sublet) available at the end of Q3/24. This includes vacant, occupied yet available, available for sublease, or available at a future date. 

Higher interest rates, tougher lending standards, and weaker net absorption have hampered building activity. As of Q3/24, Houston had 15.3 million square feet under construction, down from the peak of 36.7 million in Q4/22, but up from 11.7 million in the previous quarter.

Despite weaker absorption, rents continue to rise. The average industrial rent was $9.45 per square foot per year in Q3/24, up from $9.05 in Q3/23 and $8.55 in Q3/22. The rates quoted are triple net (NNN), meaning the tenant is responsible for all expenses associated with their share of building occupancy, including taxes, maintenance, utilities, and security. Houston continues to see a year-over-year rise in rents, climbing 30 percent over the past five years.

Prepared by Greater Houston Partnership Research

Leta Wauson
Research Director
lwauson@thelinktrack.com