While cities like Dallas and Austin are settling into a steadier rhythm,
Houston’s industrial real estate sector leads the way with a recalibrated yet
confident market outlook that reflects the region’s diversified economy,
port-driven logistics power and investor interest in strategic flexibility.
Houston moves toward ‘more sustainable pace’
After years of explosive growth driven by e-commerce surges and pandemicera supply chain reshuffling, Houston’s industrial market is entering a new
chapter.
“We’re not in a downturn; we’re in a recalibration,” said Mary Doetterl,
research manager at Lee & Associates. “Houston’s industrial market is
adjusting to a more sustainable pace, but demand fundamentals remain rock solid, especially in port-adjacent and infill locations.”
Doetterl noted that while vacancy has increased slightly, it reflects market normalization rather than distress, especially given the 130 million square feet of inventory added over the past five years. Leasing velocity has slowed from its peak, but absorption remains positive and rent growth continues in strong submarkets like the Northwest and Southeast.
“I believe the current industrial market is healthy and balanced from a supply and demand standpoint,” echoed Travis Land, partner at Partners. “Unless there is a major reduction in interest rates or a significant negative long-term policy enacted on trade, I think this balance will remain throughout 2025 and 2026.”
A diverse tenant mix continues to drive absorption across the Houston metro. Key sectors include energy services, construction materials, food logistics and especially third-party logistics operations. For manufacturers, oil and gas remains the dominant force.
“Oil & Gas is driving most of the demand as always for the manufacturing buildings,” Land said. “This product type has seen tremendous rent growth in the last year.”
At the same time, tenants seeking distribution space are showing a clear preference for mid-sized footprints.
“The activity in the last six months has been the slowest on distribution spaces above 500,000 SF,” Land said. “The most active is on spaces 150,000 SF and under.”
Developers are responding to this demand shift by investing in speculative projects that prioritize flexibility, infill access and quality. With timelines for build-to-suit facilities extending beyond tenant preferences, spec development has become the faster, more attractive option for many.
“Tenants today are moving fast and making smarter decisions,” said Doetterl. “They want flexibility, efficiency and speed-to-market, and that’s exactly what modern spec buildings in Houston are offering.”
Land added that spec buildings are increasingly accommodating a wide range of needs.
“The time frame to complete a build-to-suit has increased, so if a company does not need an overly specialized facility, making retrofits to existing spec facilities is often more economical,” Land said. “The variety of speculative building size options has also expanded so the demand from historical build-to-suit candidates is more easily met with broader size availability.”
Despite higher vacancy in some segments, Houston’s speculative market remains stable and selectively strong. Infill projects, especially those under 300,000 square feet or located near Beltway 8, are attracting tenants quickly. Meanwhile, big-box facilities in more remote areas are taking longer to lease and offering concessions to stay competitive.
Port Houston remains one of the region’s most consistent and strategic demand drivers, influencing everything from site selection to lease structure.
“Our port is a tremendous asset and differentiator for the Houston industrial market now and in the future,” Land said. “The port continuing to implement projects that increase capacity is great for Houston.”
“Port Houston is one of the strongest industrial demand drivers in the country right now. As the channel expansion progresses, we expect even more activity in the Southeast submarket and beyond,” added Justin Tunnell, principal at Lee & Associates.
The port’s growth is especially significant as global trade patterns evolve. As shippers diversify away from West Coast congestion and nearshoring to Mexico accelerates, Houston’s proximity to those supply routes and its deepwater port access offer a long-term competitive edge.
As expansion at the Houston Ship Channel moves forward and highway and rail upgrades take shape, industrial stakeholders expect even greater efficiencies and leasing momentum in 2025 and beyond.
‘A solid year’ in Dallas
Dallas-Fort Worth’s industrial market remains one of the most powerful logistics hubs in the country. Even as vacancy rates remain elevated compared to historical norms, experts say this is not a red flag, but a result of timing.
“While absorption pulled back from its recent highs, 2024 was a solid year, with 2025 getting a fast start as this key demand indicator remains well above its pre-boom 14.4 msf average,” according to Avison Young’s Q1 2025 report.
The region’s strategic location, affordability and access to multimodal infrastructure continue to attract distribution tenants and investors alike.
“DFW continues as a premier U.S. logistics hub due to its affordability, central U.S. location and access to roads, rail and air that easily serves a large part of the U.S., as well as its proximity to Mexico for international trade,” Avison Young reported.
With 22.7 million square feet under construction and pre-leasing in motion for many of those properties, the market is expected to regain balance gradually through 2025 and into 2026.
Austin boasts ‘healthy occupier demand’
Austin’s industrial market remains on firm footing, supported by steady population growth, active housing construction and a vibrant retail base. But unlike prior years, developers are taking a more measured approach to new deliveries.
“Construction activity has slowed as the market works through existing supply, reducing the risk of oversaturation. Absorption remains positive and continues to outperform pre-pandemic averages, signaling healthy occupier demand,” according to Avison Young’s Q1 2025 market snapshot.
Leasing volume held steady at 1.5 million square feet in the first quarter, with net absorption of 1.9 million square feet. Most tenant demand is concentrated in the mid-size range, between 20,000 and 49,000 square feet.
“Leasing activity remained strong throughout Q1, signaling continued tenant engagement,” Avison Young reported.
With vacancy holding steady, developers are closely monitoring pipeline risk. With 5.2 million square feet under construction, much of it concentrated in Georgetown and the East submarket, developers are watching tenant demand closely before greenlighting further expansion.
From Houston’s spec-driven shift to Dallas’ lease-up lag and Austin’s balanced recovery, Texas’ industrial sector is proving once again that regional context matters. As 2025 unfolds, flexibility, location and logistics efficiency remain the currency of success.