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Houston industrial real estate market shows stability in 1Q

Houston’s industrial real estate market remains one of the strongest in the country, despite a slight negative absorption in the first quarter.

The overall vacancy rate for industrial buildings in the Houston area stood at 6.5 percent in the first quarter, roughly the same as the prior quarter.

The industrial market posted a negative absorption of 27,000 square feet as compared to positive absorption throughout 2010, according to market statistics from CB Richard Ellis Inc.

Nonetheless, Houston probably has the lowest vacancy rate in the nation, said Tom Lynch, senior vice president of industrial services for CBRE.

The northwest Houston submarket is one of the top five submarkets in the country for industrial properties, he said. In fact, the submarket outperformed all others in Houston during the first quarter, posting net absorption of 178,000 square feet.

Rental rates in Houston have been stable, with an overall gross monthly asking rent of 48 cents per square foot. CBRE expects rents to increase in 2011 because of the low vacancy rate and lack of new construction.

During the first quarter, 320,000 square feet of new construction was delivered and 1.2 million square feet was under construction, CBRE reports.

The local market is doing so well that Houston will likely see some speculative development during the next two quarters, Lynch said at a April 7 luncheon at CBRE.

However, inexpensive land close-in is hard to find, he said. Public real estate investment trusts want to pay $2 per square foot on land for developments, Lynch said. But land at Beltway 8 and Highway 290 costs $4.50 to $5 per square foot, he noted.

The largest industrial leases inked during the first quarter include:

• 312,522-square-foot Nestle Waters deal at 10525 Red Bluff Rd., Building I

• 144,421-square-foot Xpedx/International Paper lease at 9601-9649 Wingfoot

• 139,600-square-foot Ram Chemical & Supply Inc. transaction at 13788 West Rd.

Reprint from the Houston Business Journal   written by Jennifer Dawson

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