(To read more on the industrial market, click here.)

HOUSTON-First Industrial Realty Trust Inc. and CalSTRS are tapping into two trends in the market by buying 88 acres to develop the 1.3-million-sf InterPort Business Park. The Port of Houston’s tonnage is rising steadily, thanks to the recently opened Bayport Container Terminal, and petrochemical companies are putting pressure on the area for distribution space.

The joint venture, funded by FirstCal 1, will break ground May 1 on the $55-million development. The industrial space is being marketed at 36 cents per sf, triple net.

“There’s a huge pent-up demand from the petrochemical companies plus people wanting warehousing for import and export businesses,” says Billy Gold, first vice president in Houston for CB Richard Ellis Inc. “First Industrial and the other developers out there have a huge potential client base there.”

Troy McMane, First Industrial’s regional director in Houston, tells GlobeSt.com that the two-phase development will target port-related tenants with containers coming from Fentress Bracewell Barbours Cut Container Terminal and Bayport as well as the petrochemical industry. “The petrochemical industry is doing extremely well,” he adds.

First Industrial’s plan is to push the 598,000-sf first phase out of the ground and simultaneously dig into infrastructure work for the second phase. McMane says construction for the second phase will commence in about 18 months. The project has an estimated three-year build-out.

Statistics released from Grubb & Ellis Co. demonstrate that continued positive absorption in the far southeast submarket supports the need for more space, with vacancy in the single digits. Last year, net absorption totaled 534,063 sf. There is 1.9 million sf or 8.8% vacant in the 21.7-million-sf inventory.

What will likely be on the decline, however, is further land plays around the port. “Announcements have slowed on land acquisitions because there’s really no land out there remaining,” says Robert Clay, owner of Houston-based Clay Development & Construction Inc. His 900,000-sf development in Underwood Business Park at 10100 Porter Rd. near the port is ready to come on line, with Clay saying he’s in negotiation with a large tenant for the space.

Clay says the majority of the players in the port area have already bought huge chunks of land. “For the players who are in the port now, they’ll almost be the only players in the port for a long time,” he says, estimating the land inventories could support an additional 12 million sf to 14 million sf.

While that might seem like a lot of space, Gold says port tenants demand huge chunks of space. “The deals we see there are larger in scope than in any other submarket,” he says. “The deals we’re seeing there are over 100,000 sf so we can quickly absorb what seems like a surplus of space.” His day-to-day work includes finding tenants for the four million-sf Port Crossing Commerce Center, which fronts Texas 146, just south of Fairmont Parkway.

First Industrial’s in-house team will lease and manage InterPort Business Park. Powers Brown is the project architect. A general contractor has not yet been selected.

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