Quarterly Update: Industrial Market
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The demand for industrial/warehouse space in Houston has fluctuated in recent years. The vacancy rate hit a five-year low of 5.0 percent in Q4/22, reflecting strong demand at that time. Since then, the rate has risen, peaking at 7.4 percent in Q2/24. Overall vacancy remains elevated at 6.7 percent as of Q4/24.
Absorption peaked at 18.3 million square feet in Q3/21 and has trended down since. In Q4/24, absorption dropped to 3.2 million square feet, down from 7.9 million square feet in the previous quarter.
Houston had 72.9 million square feet of industrial/warehouse space (direct and sublet) available at the end of Q4/24. This includes space that’s vacant, occupied yet available, available for sublease, or available at a future date.
Higher interest rates, tougher lending standards, and weaker absorption have hampered building activity. As of Q4/24, Houston had 13.4 million square feet under construction, down significantly from the peak of 36.0 million in Q4/22.
Despite weaker absorption, rents continue to rise. The average industrial rent was $9.51 per square foot per year in Q4/24, up from $9.24 in Q4/23 and $8.55 in Q4/22. 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@houston.org
