Quarterly Update: Industrial Market
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The demand for industrial and warehouse space in Houston has fluctuated over the past few years. The vacancy rate reached a five-year low of 5.0 percent in Q4/22, driven by strong absorption and record construction activity. Since then, vacancy has gradually increased, peaking at 7.4 percent in Q2/24 as new supply continued to outpace demand. As of Q1/25, the vacancy rate stands at 6.8 percent, still elevated compared to the ‘22 low, but below last year's peak.
Net absorption in Houston’s industrial market peaked at 18.5 million square feet in Q3/21, marking a period of increased demand. Since then, absorption has generally trended downward. In Q1/25, net absorption fell to just 863,142 square feet, down significantly from 3.9 million square feet in Q4/24, reflecting a slowdown in leasing activity amid persistent new supply.
At the end of Q1/25, Houston had 77.2 million square feet of industrial and warehouse space listed as available. This includes direct and sublet space that is vacant, occupied but on the market, available for sublease, or expected to become available at a future date.
Higher interest rates, tighter lending standards, and softer absorption have slowed building activity in Houston’s industrial market. As of Q1/25, 16.7 million square feet were under construction—less than half the market’s recent peak of 36.2 million square feet in Q4/22.
Despite weaker absorption, industrial rents in Houston continue to rise. The average triple net (NNN) rent reached $9.69 per square foot per year in Q1/25, up from $9.11 in Q1/24 and $8.05 in Q1/23. Under NNN lease terms, tenants are responsible for expenses such as property taxes, maintenance, utilities, and security. On a five-year basis, rents have climbed nearly 33 percent, reflecting continued demand for quality space even amid a more cautious leasing environment.
Prepared by Greater Houston Partnership Research
Leta Wauson
Research Director
lwauson@houston.org
