Why is Houston executing bigger deals than it has in the past?

Written by C.E. “Trey” Erwin III, Senior Director at Lee & Associates – Houston

In recent years, Houston has become known to many as the major distribution hub of the south. Companies such as Amazon, Best Buy, Ikea, Wal-Mart, Home Depot and Ford have looked to Houston for large distribution center locations due to its vast land area and its ability to house larger square footage facilities. While there are many factors that attribute to Houston being the south’s largest hub, one of the largest factors is the city’s location to The Port of Houston, the nation’s largest petrochemical complex.

Since its authorization in 1911, the Port of Houston has economically impacted the state of Texas in upwards of $265 billion and over $615 billion nationwide. The widening of the Panama Canal has given Houston the opportunity to become one of the major cargo entry points in the United States. The widening of the canal also means larger freight ships will be able to carry greater amounts of goods into the U.S. and with Houston as a cargo entry point, companies with distribution centers in Houston will have an advantage in distributing goods nationwide.

Along with this emerging influx of e-commerce distribution centers, Houston has experienced growth with the Port of Houston container imports, as well as exports, which places Houston-The Woodlands-Sugar Land (MSA) as the major player in the overall commerce of Texas and the surrounding states. With more institutional money flooding Houston on the distribution and industrial front, Houston continues to execute larger deals.

With other major metropolitan cities such as Chicago, Dallas and Los Angeles lacking a larger energy sector to lean on, online retailers are focusing their sites on Houston. These larger distribution companies understand the consumer demand for products and sales in the Houston market due to its strong economic growth and with Houston’s growing MSA population and proximity to major cities such as San Antonio, Austin and Corpus Christi, the logistic cost savings of Houston as a major distribution hub has become more obvious over the years.

METRO Next reports that Houston’s population could reach 10 million people by the year 2040. In addition, MSA continues to have an annual growth rate of approximately 2.6 percent, well above the national average of 1.6 percent. With Houston’s population continuing to expand, so does its e-commerce distribution requirements, which helps to continuously grow Houston’s available industrial square foot inventory. A great example of this is Grocer Supply’s leasing of 727,000-square-feet in North Houston in the second quarter of 2018. To add to this, there are currently over 13 million-square-feet of industrial space under construction in Houston, with nearly 40 percent of this space already pre-leased. The majority of this construction is in the form of distribution and logistics facilities.

About Lee & Associates – Houston
Lee & Associates – Houston is a fully-integrated commercial real estate company with unrivaled capabilities and an unwavering dedication to integrity. Our business-minded brokers specialize in office, industrial and land real estate investments. As the fastest-growing broker-owned firm in the nation, with more than 57 office locations in North America, we are uniquely qualified to support our clients’ real estate needs in the local, national and international markets. For more information, visit www.lee-associates.com/houston/.