Port Houston gaining share of total US TEU volume
Port-centric submarkets across U.S. cities have seen robust growth and increasing industrial real estate occupancy levels. None more than Houston.
Examining availability of industrial real estate across 14 major North American port markets, Houston showed the largest decline in year-over-year industrial real estate availability – a drop of 6.3 percent – when comparing year-end numbers from 2015 and 2016.
TEUs (twenty-foot equivalent units) handled by Port Houston have steadily increased in recent years, reaching a record high of 2.2 million in 2016. Moreover, its TEU volume as a percentage of the total U.S. TEU volume increased from 4.6 percent in 2010 to 5.2 percent in early 2017.
As imported container volumes have increased, so to has the demand for the industrial real estate needed to support distribution across Texas, the Gulf Coast and the U.S. Vacancy in the market immediately adjacent to Port Houston has held steady at 4.6 percent and has recorded 1.6 million square feet of positive net absorption so far this year. There is another 1.3 million square feet of space currently under construction.
Much of this activity is driven by the strength of the downstream sector and resulting petrochemical boom. Resins/plastics and chemicals/minerals account for approximately 48 percent of Port Houston’s exported TEUs and are expected to increase as petrochemical projects ramp-up production, creating an additional 250,000 TEUs in new exports by 2019.
Moreover, the expansion of the Panama Canal has created new opportunities for Port Houston. While the full potential of the canal remains to be realized for many U.S. ports, it has increased the capacity of all-water routes from Asia to the Gulf Coast. As the landscape of the global shipping industry evolves with mergers and alliances, more supply chain routes are expected to move to East and Gulf Coast ports. Port Houston has benefitted from increased direct liner service from China in recent years.
While the trans-Pacific trade lane remains the largest in the U.S. by overall volume, East and Gulf Coast ports have been gaining share. The strength of Port Houston has helped increase port volumes and industrial real estate demand along the Gulf Coast.
Locally, robust population growth, expanding distribution networks and sustained downstream demand are propelling a new era for Houston’s industrial market.
For in-depth analysis of industrial space in seaport-centric real estate markets, download our North America Seaport Outlook.
