Since 2000, Houston’s Southeast submarket has added 15.5 million square feet of new industrial space, more than two-thirds of which has been fully leased. With the majority of new development built on a speculative basis, developers are banking on strong user-demand for industrial space continuing in the area. They have not been disappointed with more than ten leases over 100,000 sq. ft. signed in the past 18 months alone. The submarket’s three largest industrial leases – Palmer Logistics’ 468,000 sq. ft. lease at Interport Distribution Center; Wilson Industries’ 450,000 sq. ft. lease at Underwood Business Park; and Packwell’s 423,700 sq. ft. at 10016 Porter Road – together exceed a combined 1.3 million square feet.
Strong growth at the Port of Houston is expected to continue driving new industrial development in the Southeast submarket. The increased demand for containerized, waterborne cargo has been driven by several factors, including new trade agreements with Asia, Europe and Latin America, as well as the overall expansion of global industrialization. The area provides excellent multimodal infrastructure; shippers can more easily move cargo by water, rail or truck. The 2002 West Coast Longshoremen strike, when 29 West Coast ports shut down for ten days at an estimated cost to the U.S. of $19 billion, also contributed to the increased demand at the Port of Houston. Business leaders continue to seek new shipping patterns in order to maximize their logistics operations for transporting goods to markets worldwide.
Looking forward, the transformation of Southeast Houston is already having spillover effects on neighboring areas. With the recent construction frenzy leaving the Houston Ship Channel almost completely developed with few remaining deep-water tracts available, water-served users have begun to explore other options. The nearby Port Arthur area is drawing attention as a key emerging market offering developers and industrial users increased options for deep-water sites and lower land prices. My experience in site selection and transaction activity indicates that there is a dynamic interplay between the Southeast Houston submarket and the Port Arthur area. There are opportunities and challenges presented by a growing industrial sector that is looking beyond its traditional areas for new growth opportunities.
Today, more than ever, professional insight is critical to making decisions about how businesses can benefit from the dynamic market conditions that are transforming Southeast Houston and the surrounding areas.
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