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HOUSTON-The Port of Houston’s expansion has compelled developers to get off the sidelines and start building industrial space.

Grubb & Ellis Co.’s third quarter industrial report indicates the East Southeast Far submarket, where the port is located, accounts for nearly 90% of all industrial development in the metropolitan area. Across the region, more than 2.5 million sf is under development, mostly build-to-suit and owner-occupied development. Only 494,960 sf of speculative product is under construction. The East Southeast Far submarket has 2.2 million sf of space under construction, says Ariel Guerrero, research services manager with Grubb & Ellis Co. who co-authored the report.

“There’s a lot of demand…mostly due to the location and the Port of Houston,” Guerrero says. “The east side has the lowest occupancy rate throughout the city at 3%.”

The under-construction first phase of the Port of Houston Authority’s Bayport Container and Cruise Terminal will create 1,660 feet of extra wharf space and a 65-acre port facility. The $1.2-billion terminal will be built over 20 years, eventually featuring a 7,000-foot wharf and 1,043 acres of port facilities, which is projected to create 39,000 jobs.

Guerrero tells GlobeSt.com that developers are positioning themselves for the demand. For example, Granite Properties is developing the second phase to Morgan’s Point Business Park, a 178,000-sf warehouse and distribution facility across from Barbours Cut Container Terminal. The project is expected to deliver by February 2005.

Moreover, many users also are developing industrial facilities. Wal-Mart, for example, is building a two-million-sf distribution center in Cedar Crossing Business Park. The project broke ground during the summer and is expected to be completed by summer 2005.

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