houstonchronicle (source) :
Local industrial brokers have been surprised by the ballooning size of speculative industrial projects under construction.
“For the first time in Houston’s history, developers are starting to build buildings over 500,000 square feet,” John Talhelm, an industrial broker with commercial real estate firm JLL, said during a media luncheon Monday. “Houston is getting its share of large buildings.”
Historically, a spec Houston industrial project averaged somewhere between 50,000 and 100,000 square feet. With the rise of e-commerce promising online shoppers near-instant gratification, developers are building spec projects topping 500,000 square feet.
Oakmont Industrial Group, an Atlanta-based developer, broke ground in September on a nearly 700,000-square-foot spec warehouse in Katy. Liberty Property Trust, a Pennsylvania-based real estate investment trust, is under construction on a 600,000-square-foot spec warehouse near the Port of Houston.
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More massive spec buildings will likely come, Talhelm said.
Amazon is building its second Houston-area fulfillment center, a nearly 1 million-square-foot facility in Katy. FedEx Ground recently opened a nearly 800,000-square-foot distribution center in Cypress.
These bigger warehouses will accommodate taller racks that can hold a wide range of goods required by online retailers. The latest warehouses are being built with ceiling heights of 36 feet, as opposed to the typical 24 and 28 feet.
E-commerce companies are also pushing for more environmentally friendly buildings, said Rachel Alexander, a JLL researcher. Houston’s newest trophy office towers boast LEED certification. Industrial may soon follow as e-commerce companies like Amazon rush to meet renewable energy targets.
“There’s a global movement toward cleaner energy,” Alexander said. “More and more industrial projects are putting solar panels on their roofs.”
Houston doesn’t yet have a solar-powered distribution center, but developers like DCT Industrial are starting to think about installing solar panels and batteries into their projects. The Denver-based developer is building 470,000 square feet of industrial space in Houston.
“We are evaluating the cost effectiveness of them,” Justin Bennett with DCT Industrial.
Despite the rise of bigger, taller and energy-efficient industrial projects, brokers and developers aren’t yet concerned about overbuilding.
Over the past decade, Houston developers delivered 45 million square feet of new industrial space, but the vacancy rate has hovered at a low 5 percent for years, according to JLL research. Several new petrochemical plants also are expected to come online next year, fueling demand for warehouses to store, package and distribute plastic resins around the world, Talhelm added.
“The development community has done a good job of policing themselves and not overbuilding,” Talhelm said. “We don’t see anything but growth ahead of us.”