Stream Realty Partners represented building ownership on a new lease at 2200 Post Oak, a 22-story 326,200-square-foot Class-A office building in Houston’s Galleria submarket. The new tenant, McCarthy Building Companies Inc., signed a 38,230-square-foot lease and is set to move into the space in 2025.

The building owner, Masaveu Real Estate, was represented by Stream Senior Vice President Brad Fricks and Vice President Adam Ross.

McCarthy Building Companies Inc., a renowned national general contractor with a longstanding presence in Houston, will relocate from Greenway Plaza.

2200 Post Oak is a LEED Gold Certified and Energy Star-certified building. The property’s location offers tenants on-site access to two upscale restaurants, a grab-and-go convenience store, and walkable amenities, including various dining and retail offerings. The building is also being renovated to include a state-of-the-art fitness center, which is set to deliver in 2025.   

McCarthy Building Companies Inc. was represented by Scott Wetzel from JLL’s Irvine, California office and Beau Bellow from JLL’s Houston office.

The industrial vacancy rate across the country jumped to 5.2% at the end of March, according to the latest research from CommercialEdge. But in good news for Detroit, this Midwest city saw a 4% increase in its average industrial rent during the first quarter of 2024.

Those were two key trends highlighted in CommercialEdge’s April National Industrial Report.

Other important findings? Industrial rents continued to rise not only in Detroit but across the country, with March in-place rents growing 7.3% on a year-over-year basis to $7.85 a square foot. The average rate for new industrial leases signed in the last 12 months was $10.43 a square foot, $2.58 more than the average for all commercial property types during this same period.

How did Midwest and Texas markets fare when it comes to rent growth? Detroit saw a 4% increase in its average industrial rent, sending it to $6.79 a square foot as of the end of the year’s first quarter.

CommercialEdge reported that in Nashville, the average industrial rent increased 7.5% on a year-over-year basis to $5.90 a square foot, while in Dallas, it jumped 6.7% to an average of $5.91.

Byline Bank’s Commercial Real Estate Group has closed on $14 million in financing for the construction of a 257,000-sq-ft industrial building in San Antonio, Texas.

The speculative development will deliver much-needed Class A industrial space to the northeast submarket of San Antonio. The borrower is a joint venture between TradeLane Properties Fund III and Phelan Development Company.

This loan, the 13th transaction Byline has financed for TradeLane and its affiliates, will assist in the ground-up development of a 32-foot clear, rear-load industrial building in an infill location in the northeast submarket of San Antonio. The thoughtfully designed building lays out for either a single tenant or multiple tenants. Dedicated trailer parking on-site, which can be expanded, provides flexibility for users. The location provides easy access to the airport and the City of San Antonio as well as to the rest of the region via I-35 and I-10.

Byline was represented in this transaction by the law firm Holland & Knight, and TradeLane was represented by Franklin Law Group.

Industrial tenant demand cooled during 2023, particularly in bulk warehouse and distribution space. New industrial occupancies greater than 100,000 square feet totaled 302 million square feet during the year, a 47.6% decrease compared to 2022’s total of 576 million square feet. Tenants took occupancy on a total of 1,042 new leases and user sales in 2023 compared to 1,956 in 2022. The average transaction size for new bulk occupancies was 289,840 square feet, slightly smaller than last year’s average of 294,659 square feet. New supply set a new bar as developers delivered 607 million square feet of new industrial construction, nearly 85% of which was built on a speculative basis. This new product, combined with the drop in demand and new bulk occupancies in 2023, pushed vacancy higher in every region of the country and in nearly every market nationwide. In some emerging markets, vacancy increased by several hundred basis points
during the year, nearing or eclipsing 10%. Following a nearly three-year period of constrained supply and record-low vacancy rates where tenants had few options, this modern product has been welcome, although it will take longer for vacancy to return to historical norms in markets where too much space has been delivered at once and vacancy has climbed into the double digits.
The greatest number of new bulk occupancies during 2023 occurred in the West region, where 288 tenants took occupancy in 100,000 square feet or more during the year, totaling 91.6 million square feet. This was a decrease of 37.3% compared to 2022’s total of 146.2 million square feet. New bulk occupancies dropped by only 20.7% in the Southcentral region (Texas, Oklahoma, Arkansas and Louisiana), where they totaled 51.1 million square feet during the year. The greatest drop in new bulk occupancies took place in the Northeast region, where they totaled 28.9 million square feet during the year, a decrease of 62.6% compared to 2022. Velocity fell off by at least 41% year-over-year in all size segments, with new occupancies between 300,000 and 499,999 square feet seeing the greatest decrease of 51.2%. While new bulk occupancies will decrease again in 2024, the year-over-year drop is forecast to be less dramatic as demand normalizes near prepandemic levels. Similar to the last several years, third-party logistics providers and packaging companies occupied the most space in 2023, representing nearly one-third of the new bulk occupancies during the year. Manufacturing occupancies increased slightly to 16%, and this percentage is expected to increase further in 2024 as some of the large-scale manufacturing construction projects underway in response to the CHIPS act deliver.
A total of 44 manufacturing projects with an investment of $1 billion or greater were under construction at the end of 2023 or about to begin construction, most of which are semiconductor factories or electric vehicle battery facilities for users like TSMC, Texas Instruments, Samsung or Tesla. E-commerce users represented only 7.6% of new bulk occupancies during the year, a drop from 12.3% in 2022, largely due to Amazon significantly scaling back its expansion plans. Despite the drop, Amazon was still the largest new occupier during 2023, taking 16.8 million square feet, although that is well below its total of 58.3 million square feet in 2022 and during each year going back to 2020. Target and Walmart followed as the second- and third-largest new occupiers, each taking at least 5 million square feet. Only five users took occupancy of 4 million square feet or more during
2023, compared to seven in 2022, another sign of the drop in demand.
Although new industrial bulk occupancies decreased by nearly 50% during 2023, this drop was anticipated as the market resets following two years of exceptional and unsustainable demand. A drop in construction starts will limit how high vacancy can climb throughout the country, and moderated but still historically strong demand for industrial space will usher in the next growth cycle for the product type sooner than most expect.