Houston's Big Box Leasing Walking 2002 Tightrope

The bad news is that big box leasing will have to exceed 700,000 sf to maintain the current 60% occupancy as a result of 1.8 million sf coming online this quarter. Everist tells GlobeSt.com that it's highly unlikely that big box leasing can exceed 700,000 sf. But, he's quick to add, activity has picked up and a brisk 350,000 sf to 400,000 sf is likely. An independent source at CB Richard Ellis has confided to GlobeSt.com that a major tenant is close to signing on the dotted line for a 644,000-sf building, the largest standing at Alamo Crossing.

Gold and Everist concur that Houston has enough internal velocity without relying upon outsiders coming in to fill the space. But, they add, it could take up to two years to fill.Gold believes risk analyses will likely keep 2.1 million sf of proposed space from getting off the ground without significant pre-leasing unless there is a major windfall of leasing activity at the existing product.

The duo predicts that most of the "20-something-year-old" freestanding, single-tenant distribution buildings in Houston's northwest submarket will change hands this year. "They have appeared to have peaked in value over the past five years," according to the report. The team predicts building owners will lean toward state-of-the-art speculative distribution projects to gain warehousing efficiencies in the way of larger truck aprons, clear heights and fire suppression systems.