2023 North America Industrial Big Box Review & Outlook: Houston

According to CBRE Labor Analytics, Houston’s warehouse labor force of 100,392 is expected to grow 11% by 2032, providing ample available labor for the burgeoning big-box market. The average wage for a non-supervisory employee is $17.33 per hour, 2.5% above the national average.

Figure 2: Houston Warehouse & Storage Labor Fundamentals

Source: CBRE Labor Analytics, Q4 2022.
*Median wage (1 year experience); non-supervisory warehouse material handlers.

Location Incentives

Over the past five years, there have been 50 publicly known economic incentives deals totaling over $350 million for an average of $78,244 per new job in metro Houston, according to Wavteq.

CBRE’s Location Incentives Group reports that top incentive programs offered in Houston include the Texas Enterprise Fund (TEF), commonly referred to as a “deal-closing” grant. TEF awards discretionary cash grants to incentivize construction in Texas. Awards are determined based on an analytical model that factors in the average new employee wage, hiring timeline and a company’s total capital investment.

Another Houston incentive program is the Skills Development Fund, offering job training grants to community and technical colleges for customized training programs supporting Texas businesses. This program is designed to upskill new or existing employees and increase wages.

Figure 3: Houston Top Incentive Programs

Source: CBRE Location Incentives Group, Q4 2022.
Note: The extent, if any, of state and local incentive offerings depends on location and scope of the operation.

Logistics Driver

Houston offers an impressive array of distribution channels. Its central location makes it easy to reach both coasts within hours. The Port of Houston is the Gulf Coast’s largest container port and is instrumental in the city’s development of international trade. This market is home to the nation’s largest and world’s second-largest petrochemical complex. Carrier services on all major trade lanes link Houston to all international markets. The shipping channel also intersects a very busy barge traffic lane, the Gulf Intracoastal Waterway.

The region's extensive highway system is well-integrated with the Houston Airport System, four deep-water seaports and the mainline railroads serving the city. Houston is at the crossroads of Interstate Highways 10, 45 and 69. I-69 is known as the "NAFTA superhighway," which links Canada, the U.S. industrial Midwest, Texas and Mexico.

The region's extensive highway system is well-integrated with the Houston Airport System, four deep-water seaports and the mainline railroads serving the city.

Supply & Demand

Houston was one of North America’s fastest-growing and active big-box markets for the second consecutive year. Lease transaction volume increased 37% year-over-year, to 19.1 million sq. ft, the sixth-highest in North America. Houston was North America’s third growth market (net absorption/existing inventory) with 19.6 million sq. ft. occupied. Demand outpaced supply as only 14.6 million sq. ft. completed construction, dropping the vacancy rate to 3.7%. Many 3PLs moved into the market, accounting for 42.2% of transaction volume. General retailers & wholesalers accounted for 36.6% of transaction volume.

27.9 million sq. ft. of space was under construction in 2022, over double 2021. CBRE projects 2023 transaction volume to remain strong and vacancy rates to remain low, despite record development and rent growth in upcoming quarters. Factors stimulating occupier demand include major port proximity, top population growth, a strong labor base, available first-generation space and economical rental rates.

Figure 4: Share of 2022 Leasing by Occupier Type

Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research, 2022.

Figure 5: Lease Transaction Volume by Size Range

Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research, 2022.

Figure 6: 2022 Construction Completions vs. Overall Net Absorption by Size Range

Source: CBRE Research, 2022.

Figure 7: Direct Vacancy Rate by Size Range

Source: CBRE Research, 2022.

Figure 8: Under Construction & Percentage Preleased

Source: CBRE Research, 2022.

Figure 9: First Year Taking Rents (psf/yr)

Note: Includes first year taking rents for leases 200,000 sq. ft. and above.
Source: CBRE Research, 2022.