Houston builds impressive rank for construction of industrial space, says new report

Under construction

Houston is the No. 2 market in the Southwest for under-construction warehouse and distribution centers. Photo via Getty Images

Industrial space equivalent to more than 145 Costco stores is being built in the Houston are, making it the No. 2 market in the Southwest for under-construction warehouse and distribution centers.

Data published by Community Property Executive shows Greater Houston had some 21.2 million square feet of industrial space under construction. The figure equates to 3.9 percent of the total stock, which increased to 547.8 million square feet, per the report. Put another way, all that space equates to more than 145 Costco centers.

Specifically, in the first half of 2022, nearly 4.9 million square feet of industrial space came online. While the survey notes that it's hard to predict end-of-year completion, volumes of the previous years have been similar and may end up leading this year’s volume: in 2021, 19.6 million square feet of industrial space, or 3.8 percent of total stock, was delivered, while in 2020, 19.7 million square feet, or 3.9 percent of total stock, was added.

The report calls out two notable industrial developments in the region. The 507,000-square-foot warehouse for Article, a Canada-based online furniture company, and TGS Cedar Port Industrial Park in Baytown. At more than 15,000 acres, Cedar Port is the largest master-planned, rail-and-barge-served industrial park in the U.S.

Elsewhere in Texas, Dallas-Fort Worth tops the list — and the nation — with nearly 60.6 million square feet of industrial space under construction in late June. That represents a little over 7 percent of the existing industrial space (more than 840 million square feet) in the region. By the numbers, that corresponds to 324 average Walmart supercenters.

Other notables include Austin (8.3 million), El Paso (more than 5.7 million), and San Antonio (almost 4 million).

“Although the COVID-19 pandemic brought on new challenges for the industrial market, with port congestion, materials shortages, and commodity pricing skyrocketing, the market has and will continue to excel,” commercial real estate services company Cushman & Wakefield says in a recent report.

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This article originally ran on CultureMap.

For the second decade in a row, Houston could have the second highest number of new residents for any metro area. Photo by DenisTangneyJr/Getty Images

Houston expects to see huge population surge this decade, study says

incoming

Brace yourselves, Houston. Following a decade of eye-popping population growth, Houston is expected in this decade to once again lead the nation's metro areas for the number of new residents.

New data from commercial real estate services company Cushman & Wakefield shows Houston gained 1,284,268 residents from 2010 through 2019. In terms of the number of new residents tallied during the past decade, Houston ranked second among U.S. metro areas, the data indicates.

From 2020 through 2029, Houston is projected to tack on another 1,242,781 residents, Cushman & Wakefield says. For the second decade in a row, that would be the second highest number of new residents for any metro area, the company says. That's around the number of people who live in the Louisville, Kentucky, metro area.

For Houston, the 2020-29 forecast would represent a population growth rate of 17.2 percent, down from 21.6 percent for 2010 through 2019, Cushman & Wakefield says.

As of July 2018, the Census Bureau estimated the Houston area was home to nearly 7 million people, making it the country's fifth largest metro. If the Cushman & Wakefield projection is correct, the metro population would easily exceed 8 million by the end of 2029.

The outlook is based on data from Moody's Analytics and the U.S. Census Bureau. The company published its findings January 7. The outlook takes into account a metro area's birth and death rates, along with the number of people moving into and out of an area.

The forecast indicates Houston won't be alone among Texas metro areas in terms of rolling out the welcome mat for lots of new residents.

Dallas-Fort Worth is expected to once again lead the nation's metro areas for the number of new residents. DFW gained 1,349,378 residents from 2010 through 2019, ranking first among U.S. metro areas for the number of new residents.

From 2020 through 2029, DFW is projected to tack on another 1,393,623 residents. That would be the highest number of new residents for any metro area for the second decade in a row.

The 2020-29 forecast would represent a population growth rate of 17.9 percent, down from 20.9 percent for 2010 through 2019, Cushman & Wakefield says.

As of July 2018, an estimated 7,539,711 people lived in DFW, making it the country's fourth largest metro. Under the Cushman & Wakefield scenario, DFW's population would swell to about 9 million by the time the calendar flips to 2030.

Austin, meanwhile, is projected to retain its No. 9 ranking for headcount growth among U.S. metro areas, according to Cushman & Wakefield. The company says the Austin area added 549,141 residents from 2010 through 2019. From 2020 through 2029, another 602,811 residents are on tap. At that pace, the Austin area is on track to have roughly 2.9 million residents at the outset of the next decade.

Cushman & Wakefield envisions a 26.5 percent population growth rate for the Austin area from 2020 through 2029, down from 31.8 percent in 2010-19.

The Cushman & Wakefield report doesn't include figures for the San Antonio metro area.

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This article originally ran on CultureMap.

Houston's industrial development has grown, and a contributing factor is the rise of e-commerce activity. Getty Images

E-commerce growth is sparking some changes in Houston's industrial real estate market

Making moves

With retail e-commerce sales in the U.S. projected to soar from $501 billion in 2018 to $740 billion in 2023, it's no wonder that Houston's industrial market is expanding faster than Santa's bag of toys.

E-commerce is one of the main drivers of an upturn in industrial construction in the Houston area. Estimates from four commercial real estate services companies show that during the third quarter, anywhere from 13.3 million square feet to 18.5 million square feet of industrial space was under construction in the region. That volume is up considerably from the second quarter of 2019 and from the same period in 2018.

Around the country, the "need for speed and choice" to appease shoppers is driving a lot of the increased demand for industrial space, Hamid Moghadam, chairman and CEO of industrial REIT Prologis, recently told Wall Street analysts. That, he said, is because "the more choices you want and the quicker you want them, the more inventory you need to position near the customers."

Rob Stillwell, executive managing director in the Houston office of commercial real estate services company Newmark Knight Frank, says many of the local industrial facilities geared toward e-commerce are being built in and around pockets of residential growth. This includes a swath from I-10 West in Katy to I-45 North toward The Woodlands. Among the facilities popping up in that corridor are massive projects for Amazon, FedEx, and UPS, according to Stilwell.

"E-commerce is likely a contributing factor to many distribution operations in Houston, but not the sole reason for the strong demand seen in the market," Stilwell says. Many new or expanding industrial tenants in the market do have an e-commerce component, he adds, yet won't be leasing space just for e-commerce purposes.

In Houston, e-commerce-fueled construction of industrial space is especially prevalent near George Bush Intercontinental Airport, according to commercial real estate services company Cushman & Wakefield. However, Houston's northwest submarket is seeing the most industrial construction in the area, with 5.5 million square feet underway in the third quarter.

Commercial real estate services company JLL pegs the southeast submarket as the hottest, with its third-quarter report showing 3.5 million square feet of new industrial projects underway there.

Aside from e-commerce, the Port of Houston and the petrochemical sector are propelling industrial construction in the area, Cushman & Wakefield says.

Around the Houston area, nine of the 89 industrial spaces under construction in the third quarter exceeded 500,000 square feet, Cushman & Wakefield says. Several of those lack a specific e-commerce element. This includes a 1 million-million-square-foot manufacturing facility for Coca-Cola, a more than 770,000-square-foot distribution center for Home Depot, and a nearly 550,000-square-foot distribution center for Costco.

Cushman & Wakefield warns that Houston's industrial market could suffer from an oversupply of space, as well as from a drop in shipping activity prompted by ongoing trade disputes and a decline in oil prices. Although industrial vacancy is expected to rise slightly through 2021, the company says, "demand continues for more modern, state-of-the-art facilities and market fundamentals remain healthy."

During the third quarter, only one-fourth of the space under construction in the Houston area was preleased, according to commercial real estate services company Colliers International. However, another 10 percent to 25 percent of that inventory should be preleased before the facilities are completed, the company says.

The area's industrial vacancy rate rose to 7.7 percent in the third quarter as new projects came online, Cushman & Wakefield says. Once more supply arrives, the vacancy rate is expected to tick up.

"Low interest rates and robust investor demand are expected to continue generating strong interest for Houston industrial assets. On the fundamentals side, the market is closely watching new inventory additions," JLL says.

Houston misses the "all-star" category, but it's still a job-growth overachiever. Getty Images

Houston deemed a job-growth 'overachiever' by new report

Job Engine

In terms of job growth, Houston has consistently outperformed the U.S. average in recent years, a new report finds.

The report from commercial real estate services company Cushman & Wakefield recognizes the Bayou City as one of the top metros for job growth among 35 major areas from 2009 — at the end of the Great Recession — to 2018.

For the report, Cushman & Wakefield analyzed the percentage change in job growth from 2009 to 2018 for the 35 metro areas and the number of jobs those regions added during the same period. The company's researchers then averaged those two figures to compute an overall score for each metro area.

The Bayou City added 512,400 jobs from 2009 to 2018, a growth rate of 19.9 percent, well above the national average (11 percent) — landing in the "overachievers" group of metros. Houston has an overall score of 13. In Cushman & Wakefield's assessment, the lower the number, the better.

Houston just misses the "all-stars" category, the classification the report gives six metros that each added jobs at a "breakneck pace" during the current economic expansion.

Dallas-Fort Worth ranks No. 1 on the "all-star" list, with an overall score of 5. The report shows that from 2009 to 2018, Dallas-Fort Worth added 754,200 jobs for a growth rate of 25.7 percent. Austin ranks No. 5, with an overall score of 8.5. From 2009 to 2018, Austin added 295,000 jobs for a growth rate of 38.1 percent, the largest percent increase of the metros analyzed.

In descending order, the all-star metros cited by Cushman & Wakefield are DFW; New York City and San Francisco, (each with a score of 7.5, tied for second place); Riverside-San Bernardino, California (score of 8, fourth place); Austin (8.5, fifth place); and Orlando, Florida (9, sixth place).

(While Austin registered the largest percentage increase in jobs, the growth in sheer number of jobs places it at No. 16 among the 35 metro areas for total employment growth. Once those two figures were averaged, Austin sat at No. 5 in the metro rankings.)

San Antonio, with an overall score of 18.5, also lands in the "overachievers" class.

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A version of this story originally appeared on CultureMap.

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Elon Musk's SpaceX is about to make its debut on Wall Street

Money Moves

Elon Musk's rocket company SpaceX will make its debut on Wall Street Friday, June 12, and both institutional and retail investors are expected to gobble up the 555.6 million shares going up for sale at $135 apiece. Musk, already the world's richest man, could become its first trillionaire.

SpaceX is likely to become the biggest IPO ever, with proceeds of around $75 billion. SpaceX hopes to become the first company to send people to Mars. In fact, part of Musk’s future compensation depends on SpaceX eventually establishing a colony of at least 1 million people on the red planet.

Why SpaceX is going public now

In a video conference on Musk's social media platform X, he told JPMorgan CEO Jamie Dimon that people have suggested for the last 10 years that he take SpaceX public. He's doing it now because the company plans to put 100,000 next-generation Starlink satellites into orbit. Deploying AI data centers in space is a “massive new growth base and you need capital for that,” he said.

Going public provides access to the capital that SpaceX needs. But it also exposes it to more scrutiny from shareholders and more regulatory oversight. That includes filing quarterly financial reports, which critics say incentivizes short-term thinking over longer-term planning and creates unnecessary costs for a company. Securities regulators are currently soliciting public comment on a proposal to require public companies to file the financial reports only twice every year.

How the IPO impacts the company

Musk will hold the majority of a special class of shares, giving him control over decisions related to company strategy, finances and personnel. On the latter, because of his ownership of most of these Class B shares, the only person who can fire Musk as CEO is Musk.

The company credits Musk with being the “driving force” behind its growth, innovation and success. But what happens if Musk is no longer in the picture? SpaceX warns that the loss of Musk could disrupt its ability to execute its strategy as well as hurt its “reputation and relationships with customers, partners and other stakeholders.”

The company also warns that finding a replacement with the same skills and experience as Musk would be time-consuming, if not nearly impossible. As Wedbush Securities analyst Dan Ives wrote Wednesday, “At the end of the day Musk is SpaceX and SpaceX is Musk.”

What could make or break SpaceX

Currently in the test phase, the gigantic reusable Starship rocket is key to SpaceX realizing Musk's ambitions. Much of the commercial space business hinges on SpaceX developing Starship’s capability to be fully reusable and hearty enough for a quick turnaround between flights. If that doesn't happen, SpaceX warns that putting data centers and satellites in space will take longer and cost more money, meaning it risks customers bailing on the company.

Analysts say that by pioneering reusable rockets, SpaceX has established a clear lead on competitors such as Blue Origin, led by Amazon founder Jeff Bezos. The Starlink satellite business competes with, among others, AST SpaceMobile – which is relying on a SpaceX rocket to send its latest generation of satellites into orbit next week.

The prospectus filed last week says SpaceX’s biggest potential market is the sale of business-oriented artificial intelligence products designed to transform how people get work done. It’s an opportunity SpaceX predicts would be worth $22.7 trillion if it could somehow dominate rivals like Anthropic, OpenAI and Microsoft in a highly competitive industry. But the prospectus shows no clear path to profitability for the xAI business, which merged with SpaceX earlier this year.

Why Wall Street is paying attention

If the SpaceX IPO is as successful, the stock could quickly join the Nasdaq 100, a widely followed index that tracks the 100 largest non-financial companies in the composite. That's important because some popular funds, such as the $460 billion QQQ exchange-traded fund, mimic the index and will automatically buy whatever is listed in the index.

Nasdaq recently changed its rules to allow select companies to enter the Nasdaq 100 after just 15 trading days.

S&P Dow Jones Indices, on the other hand, is sticking to established and more traditional thresholds that will not allow SpaceX or other companies with gargantuan IPOs faster entry into its S&P 500 index. That means even high-profile companies will still need to wait for their stocks to trade a full 12 months before they can enter the index.

Companies want to be in the S&P 500 in particular because it's arguably the most important index on Wall Street, with trillions of dollars either mimicking it exactly or benchmarked against it. Vanguard's VOO fund that tracks the S&P 500 has roughly $950 billion invested in it, for example.

NASA unveils Artemis III astronauts at Johnson Space Center in Houston

To the moon

NASA on Tuesday, June 9, revealed the crew for its Artemis III mission, the next step in the space agency's plan to eventually land astronauts on the moon.

The announcement came two months after Artemis II's record-breaking trip around the moon that surpassed the distance record of Apollo 13.

NASA's Randy Bresnik, Frank Rubio, Andre Douglas and the European Space Agency's Luca Parmitano won't fly to the moon or land on the surface. Instead, they’ll orbit Earth while practicing docking their Orion capsule with two lunar landers.

“To the Artemis III crew, we wish you Godspeed on the journey ahead,” said NASA administrator Jared Isaacman.

Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin are racing to deliver the lunar landers. The two-week demo is targeted for 2027. Blue Origin suffered a recent setback when its massive rocket exploded during an engine-firing test on the launch pad in Florida, shaking nearby homes and illuminating the sky with an orange fireball.

NASA's Jeremy Parsons said the setback is a learning opportunity and that the space agency is confident Blue Origin's rocket will be ready in time.

NASA's Artemis program aims to return astronauts to the moon's surface for the first time since the 1970s. A recent revamp of the program announced by Isaacman aims to fast-track it similarly to the Apollo era, adding the upcoming spaceflight around Earth before eyeing a lunar landing in 2028.

“We are certainly humbled as a crew to be able to be your crew that executes this Artemis III mission in space,” said Bresnik, Artemis III commander.

Added Douglas, mission specialist: “My brain — it is going a mile a minute right now. But my heart, it is so warm. It is so full."

In May, NASA awarded hundreds of millions of dollars in contracts to four companies, including Blue Origin, to build landers, rovers and drones for a future moon base. Isaacman said the goal of the moon base is to lay the foundation for a Mars expedition.

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