Houston is the second largest city of the second largest state in the U.S. and has been booming over the last few years. However, in the last couple of years, there has been a change in the outlook of the industrial real estate buyer Houston. The current pandemic has further exacerbated the situation as new deals are stalled due to the outbreak of Coronavirus.
The first quarter of the current fiscal year saw record industrial real estate construction in Houston city. Overall, 8.5 million square feet of projects were constructed in the first quarter. This is because Houstons industrial real estate was growing at a rapid pace with the vacancy rate being 7.6 percent.
Many manufacturing units and distribution centers were coming up in Houston. With greater demand for more industrial buildings, the new construction work was increasing. It rose to the extent that soon the supply outweighs the demand. The industrial real estate buyer Houston was seeing the market growing modestly due to other profitable neighbors like Austin and Dallas.
As a ramification of this excess supply, the property prices and rents started to decline. Clay Development, a Houston based construction company built a gigantic 524,000 square feet industrial distribution center in North Houston. It can be stretched by another 650,000 square feet but they are still waiting for tenants to occupy this property. The industrial real estate buyer Houston could take note of this and ask for short-term lease contracts.
Newer deals have been stalled ever since the pandemic took center stage. Production plant vacancies in Houston are posing an even bigger challenge and this high vacancy rate could shoot up by 4-5 percent. This is due to the Covid-19 pandemic and decreasing WTI crude oil prices.
Industrial vacancy levels are definitely on the minds of the industrial real estate buyer Houston. Before the onset of COVID-19, many viewed this influx of deliveries as a massive oversupply, with vacancy rates surging due to dozens of large-scale speculative projects. However, due to the surge in ecommerce sales during the pandemic, large retailers and distribution companies are eyeing Houston as a major logistics and distribution hub.