Home Depot plans northwest distribution hub
Driven by an ever-increasing need to quickly respond to consumer demand, Home Depot recently signed a 20-year lease for a 770,640-square-foot distribution center in a sprawling business park Hines is building next to Sam Houston Race Park in northwest Houston.
The deal, a Home Depot representative said in an email, is a component of the company’s nationwide push to “speed up delivery to customers and stores.” The company announced at the end of 2017 that it was embarking on a $1.2 billion upgrade to its supply chain that would enable customers to receive deliveries within a day, if not hours.
“We’re benefiting from this lack of patience on the consumers’ part, and e-commerce,” said Patrick Jankowski, senior vice president of research at the Greater Houston Partnership. “It goes along with short attention spans, and Snapchat and everything else. They want it now.”
The Houston region’s nearly 7 million consumers are driving demand for distribution centers, he said. That drive is particularly acute on Houston’s northwest and west sides, where distribution centers can also serve Austin and San Antonio.
As a result, the region’s industrial vacancy rate has hovered around 5 percent since 2011. The overall Houston industrial market closed 2018 at an even 5 percent, according to CBRE, slightly tighter than the 5.4 percent posted in the year-earlier period. In northwest Houston, things were a little looser, as vacancy hit 6.1 percent at the end of 2018, according to CBRE’s calculations, up from 5.8 percent at the end of 2017. Some of that increase can be attributed to the delivery of 4.1 million square feet of new inventory in the submarket, a spike from the 1.6 million delivered the year earlier.
That 4.1 million additional square feet in northwest Houston was the second-largest inventory increase in the region, trailing southeast Houston, where 4.8 million square feet came online to feed growth in the petrochemical industry and at Port Houston.
In all, developers have put 53 million square feet of industrial space into the Houston market since the oil downturn in 2013, a 10 percent increase that has brought the overall market to 573 million square feet, according to commercial real estate services firm NAI Partners.
About 35 percent of that growth, or 18.8 million square feet, took place in the northwest submarket.
The Home Depot deal will kick off construction at Hines’ Grand National Business Park, a 106-acre complex planned to hold 1.3 million square feet of industrial space in addition to retail strips along North Sam Houston Parkway West and Gessner Road.
Home Depot declined to discuss the lease terms, but at an average asking rent of 64 cents a month per square foot, the lease could be worth as much as $118 million.
Hines preleased its space; Transwestern Development Co. plans to break ground on an industrial project that will add 833,720 square feet of speculative distribution space not far from the racetrack.
The Houston-based company, in partnership with institutional investors advised by J.P. Morgan Asset Management, acquired a 60-acre site for the development of the Sam Houston Distribution Center. The seller was not disclosed.
The site, south of Sam Houston Race Park, is off Fairbanks North Houston Road between Fallbrook Drive and Taub Road.
“The project is designed to appeal to a wide range of tenants including local and regional distribution for consumer goods, office supply companies, construction materials, tile/granite suppliers, household appliances and light manufacturing,” said Ben Newell, senior vice president in Transwestern Development’s logistics group.
The project will be made up of three buildings, with additional land for added trailer storage or a build-to-suit opportunity. The buildings in the first phase consist of a 200,200-square-foot, frontload building with a 32-foot clear height; a 494,800-square-foot, cross-dock facility with a 36-foot clear height; and a 138,720square-foot, front-load facility with a 32-foot clear height.
“Northwest Houston is a core national industrial market as well as Houston’s most dynamic and strongest submarket,” Newell said. “The massive infrastructure improvement to Highway 290 ensures the long-term continual growth of the northwest submarket and serves as a catalyst for exponential commercial and residential development along the corridor.”
Completion is planned to coincide with the end of the $1.8 billion expansion of U.S. 290 in 2020.