2023 News Archive

The Houston Industrial market is beginning to see a reasonable slowdown in new construction due to the amount that was delivered to the market in the past couple of years. As of 2Q23, 3.7% of Houstons current inventory is under construction. In comparison to the national benchmark of 3.2%, Houston has seen record growth. New inventory to the market, totaling 786 million SF as of 2Q23, remains 70% available for lease. Starting in 2024, the number of new construction projects will decrease notably because of higher interest rates and increased labor and material costs.

The Houston office market is experiencing a surplus in inventory across all submarkets, especially in the Central Business District where space availability has grown by more than 2.5 million SF since 2020. Therefore, the Houston market continues to have the highest vacancy rate out of all the U.S. metros with 18.9% in Houston vs 13.2% nationwide, as of 2Q23. The majority of the single digit vacancies are occurring with office buildings built in the last five years. Office buildings built before 2010 (which make up 75% of the inventory) are having a difficult time leasing because newer office buildings offer more amenities and the price differential has dramatically decreased.

The land market in the Houston region is slowing down following the last decade of incredible growth. Single-family home sales fell 18.3% in March 2023 over last year; down 7,907 in 2023 from 9,693 in 2022. Even though home prices have started to level off in some areas, interest rates are still high making it difficult for many homebuyers. As a result, days on the market in 1Q23 have stretched out and is now taking twice as long to sell a home than it did a year ago. As these pressures have increased, it has slowed homebuilder and developer land sales while starting to close the gap between the bid vs. ask spread. Once inflation slows down and interest rates start dropping, then homebuyer consumer confidence will improve land tract sales and home sales will pick back up.