Fall 2009:  Houston Industrial Market Update.  The Houston Industrial Market is hanging in there.  Occupancy rates for industrial real estate have not collapsed.

Tenants are seeking deals and as a result 2nd generation distribution space leasing activity is solid in spaces smaller than 30,000 SF. 

New space, despite a deal or two here and there, continues to struggle to find takers.   Rents 20% higher than 2nd generation space is a strong factor behind tenant’s gravitating to existing product. 

Service center rates are falling.  While there seems to be little change in year-over-year quoted rates, deals are being done anywhere from 10% - 30% less than the quoted rate depending on the project, location, etc.

Transaction volume for purchases is off significantly.  Unrealistic asking prices coupled with tougher lender requirements have translated into less deal flow.  Sellers who bought or built buildings in the last several years are finding it difficult to stomach the new reality of lower demand and therefore price when it comes time to sell.   The question now is whether demand will recover before sellers accept that prices must fall.