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HOUSTON-A scrap metal company has won bragging rights over other bidders, walking away with a 265,000-sf industrial building in the southeast submarket. The asset, which ended up trading for just under its $5-million ask, attracted several offers in a market where large industrial space is at a premium and vacancy is in the single digits.

Valley Plaza-Donoho LLC of Houston acquired the 1960s-era building at 6002 Donoho St. a few years ago as an investment. Rob Chandler, principal with NAI Houston says both buyer and seller did well in the transaction because anyone bringing a similar project out of the ground would end up paying $75 per sf. The rail-served building sits on 11.66 acres.

“It’s also a lot harder to develop in Houston than it was five years ago,” Chandler says. “It takes longer for the entitlement process. And when it takes longer, it means more involvement, which ultimately adds to the final cost.” He and NAI senior associate Chris Kugle represented the seller while Stephen Schneidau of Cushman & Wakefield of Texas Inc. negotiated for the local buyer, AAM Partnership LP.

Recent reports peg the region’s industrial vacancy at 6.2%, a 0.3% dip in the past year, in a 419.5-million-sf inventory. The Southeast Near submarket’s 32.44-million-sf inventory is just 3.6% vacant.

Chandler tells GlobeSt.com that the Donoho building had a long-term tenant, but the lease expired just as the deal was closing, allowing the buyer to immediately move in and operate its scrap metal business from there. “The buyer did a rent-versus-own analysis and determined that with this type of pricing, owning would be advantageous,” he adds. “The outlook for the industrial market in Houston is strong.” He says the buyer plans to upgrade the 7,500 sf of office area.

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