Houston Moving Onto

Top Rung of Warehousing Ladder

By Fred Baca

Colliers International/ Houston Association of Realtors

         Wal-Mart's massive new 4-million-square-foot distribution center near Baytown is going to make a much bigger impact on our economy than just another warehouse.

          It has placed Houston in the big leagues of distribution points among the nation’s retailers.

          As one of the most successful retail firms in the world, other retailers notice when Wal-Mart makes such a move.

          A number of retail firms are quietly scouting around the Baytown area for land that can be used for these major warehouses, according to my colleague Walker Barnett, an industrial broker in Colliers International Texas office. Barnett noted Home Depot was an early pacesetter in this arena when it opened a 750,000-square-foot distribution facility near Baytown about three years ago.

         Before Wal-Mart and Home Depot a lot of Houston ’s major shipping activity was concentrated in petrochemicals and raw plastic.

         Wal-Mart and Home Depot are importing large quantities of consumer goods into the Port of Houston , then bringing the items over to the huge Baytown warehouses. The goods are then sorted at the warehouses and loaded onto trucks that will carry the goods to stores.

         The retailers’ new warehouses have created hundreds of new jobs, a very positive benefit for our housing market and the Houston area economy.

Wal-Mart’s presence has encouraged new shipping firms to consider doing business at our port.

         But there’s been a major evolution in the shipping industry. In recent years almost everything, with the exception of grains and liquids, is transported in large metal boxes. The metal containers can be stacked in ships or railcars or on 18-wheeler trucks. Metal containers have swept through the shipping industry, replacing the old way of shipping goods that relied on wooden pallets and forklifts.

        The Port of Houston , which already handles some two-thirds of the shipping containers that move through the Gulf of Mexico annually, is preparing to handle even more. A major new container shipping terminal is under construction at Bayport and Wal-Mart will begin using it as soon as the first phase is completed in the spring or summer of 2006.

      The existing Barbour’s Cut container terminal is operating at near capacity, partly because of the huge amount of goods Wal-Mart is bringing in there from Asia .

Houston ’s outstanding port was chosen by Wal-Mart after difficulties developed in ports on the West Coast a few years ago. Labor problems triggered a backup that had ships anchored off the coast without being able to unload. As a result, there were critical delays in getting goods into stores throughout the U.S. , which hurt the retailers.
         Retailers, such as Wal-Mart, wasted no time in making sure they don't experience those unloading delays again. Thankfully, Wal-Mart’s alternative to the West Coast was its decision to locate near Baytown and bring goods in through the Port of Houston .

       This is going to provide a sustained boost to our economy and give a charge to our industrial real estate market. Expect to see steady and impressive growth near the Port as more industrial land is purchased and more distribution buildings are constructed. Houston is destined to become a major force in the distribution and warehousing industry.

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Industrial Market Showing

Strength and Promise in 2005

By Fred Baca

Colliers International/ Houston Association of Realtors

         Warehouses can be boxy and boring. But if positive economic news can put some extra bounce in your step, you should consider what's been happening to Houston's industrial real estate market.
        Rents are rising, vacancy rates are falling and Houston's industrial realty market is at its healthiest point in years. A total of 7 million square feet of empty industrial space was filled in Houston last year -- an impressive absorption rate that should be noticed around the nation. The citywide vacancy rate has dropped to nearly 8 percent, according to researchers at my firm, Colliers International. Just a few years ago, the industrial vacancy rate was over 10 percent and some were declaring the warehouse market to be vastly overbuilt.
        The industrial market has come back into equlibrium as speculative development has been more restrained. In addition, Houston's churning economy has caused a lot of the backlog of vacant space to be filled.
      Recent warehouse leasing activity has included Igloo Products Corporation’s lease of 892,000 square feet; Katoen Natie taking 297,000 square feet and Home Depot leasing 342,000 square feet. The rising oil prices have also been a contributor to the positive turn.
     The average rental rate for industrial space is now 52 cents per square foot per year -- and that may be the highest that rental rates have ever been in Houston.
     The Houston Association of Realtors is closely tracking the industrial real estate market through its Commercial Gateway division. (www.commgate.com).
     HAR's Patsy Fretwell, a senior market analyst with Commercial Gateway, has just completed an exhaustive survey of the city's industrial market. The survey includes more than 6,430 industrial properties -- from small warehouses to large manufacturing buildings with powerful overhead cranes.
      The Commercial Gateway team surveys all of the significant buildings -- those over 10,000 square feet -- every 90 days. Just keeping a list of the current building owners and leasing agents for these buildings is a daunting task. Ms. Fretwell is an experienced researcher, though, and she is doing a great job assembling a massive amount of data.
     Har's Commercial Gateway recently published an Industrial Leasing Guide in the Houston Business Journal. The guide tells a lot about each industrial building, such as the date it was built, how much space is available there and how to contact the leasing agent. Some 400 buildings were included in the Industrial Leasing Guide, but there is a lot more information available online.
     HAR has been very active in reaching out to the commercial real estate brokers. We've been pleased that the commercial brokerage community has been receptive to HAR's efforts. Over 1,200 brokers with more than 450 realty firms use HAR's Commercial Gateway information services.
     And when Houston's industrial market is as hot as it has been, keeping close tabs on what's happening is important work.

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