Houston's October Records 3.4M SF in Industrial Leasing Activity

Houston's industrial leasing activity experienced a remarkable boost in October, setting a new high for the year, according to a recent report from JLL. Despite a decrease in industrial demand during the previous quarter, October witnessed a surge in leasing, with approximately 3.4 million square feet (SF) of activity. This outpaced the city's previous record of 3.3 million SF, which was achieved in June.

October's Standout Deals

The month of October was marked by several significant leasing deals, with four transactions exceeding 300,000 SF. These deals contributed to a year-to-date transaction volume of 27.5 million SF, surpassing the entire annual total for 2020. Notably, the third quarter saw only two leases exceeding 300,000 SF, including Distribution Alternatives' 855,000 SF lease and Technip FMC's 462,000 SF contract.

Diverse Leasing Across Submarkets

In October, diverse leasing activity was observed across various submarkets. The west submarket featured an 840,000 SF lease, while the north submarket recorded a 410,000 SF lease. Additionally, the northwest submarket witnessed a 320,000 SF lease. However, specific details about these leases were not disclosed by JLL.

Strong Start for Q4 and a Positive Outlook

The report describes October's leasing activity as a "grand entrance" for the fourth quarter and notes that 2022 has seen historically high leasing volume in Houston. While 2023's leasing volume trails behind the previous year, each month in 2023 has consistently exceeded the monthly leasing average for the period from 2015 to 2019. The report also predicts that October's momentum will continue, driven by a pipeline of active pursuits expected to transact before the holiday season.

Anticipated Rise in Vacancy

Despite the high leasing volume compared to pre-pandemic years, analysts expect an increase in industrial vacancy in Houston. In the third quarter, Houston's industrial leasing decreased by 25% compared to the previous year, while supply deliveries only decreased by 10%, as reported by Savills. The nationwide industrial market has also experienced a slowdown, including Houston, as an abundance of supply comes online, leading to a rise in vacancies. As of the third quarter, Houston had 23.9 million SF of industrial properties under construction, according to the Savills report.