Connect Houston: Houston’s Industrial Time has Come

Panelists at the recent Connect Houston conference had fun dissecting Amazon’s building requirements, lauding the Port of Houston Authority and generally reveling in the fact that Houston’s industrial sector is a strong point in a starting-to-recover market. The “At the Intersection of Retail & Industrial” presentation followed on the heels of “The Devil in the Details,” during which Partner Engineering & Science’s Jane Powell spoke about small issues that could damage property portfolios. The “intersection” in the meantime, focused on last-mile delivery, incentives, plastic resin . . . and Amazon.

“Amazon finally came to Houston,” commented IMS Worldwide Inc.’s Curtis Spencer, who moderated the panel. “Buda (TX) got Amazon before we did.” Spencer was talking about an Amazon warehouse that was announced for Katy, TX, west of Houston, the first for the region. Meanwhile, Charlie Meyer with Hines pointed out why Amazon might have been shying away from the metro.

“They prefer to lease a speculative building,” he said. “We don’t have that in Houston.” Houston, he went on to say, was more a build-to-suit for larger industrial users. Basically, Meyer said, Amazon needs to get into a building fast and set up systems immediately. Added Justin Tunnell with Lee & Associates: “It’s all based on how fast they can get into the building, and labor is a huge deal for them. Not just the amount, but the quality of labor. It’s all about speed and accuracy.”

But, Houston has the port. And that port is benefitting from many things, not the least of which was successfully signing, two years ago, liner services with three different shipping companies from China. That shipping, said JLL’s John Talhelm, is approximately 24% of the port’s revenue, as what is going back to China is resins.

The good news with that type of shipping, explained Shane Williams with the Port of Houston Authority, is that “the shipping lines send Chinese retail products to Houston at a cheap rate, and then we fill those containers with resins going back.” The cheaper imports, he went on to say, like Red Bull, are doing all of their importing to Houston.

Talhelm also noted that much of Texas’ population is in an arc, stretching from San Antonio on the west to Beaumont on the east, with Houston in-between. Because truck drivers are limited to 11-hour driving times by law, they can leave the Port of Houston, deliver within that southern arc, and be back in plenty of time.

Still, last mile remains a challenge when it comes to industrial development. Meyer from Hines pointed out that last-mile users want drive-through capacity, as well as satellite parking for Uber and Lyft drivers that are taking delivery jobs that once belonged to truckers. “It’s a nightmare of congestion, and we have to solve this in a way in which businesses can still function,” he said.

Other industrial development issues remain, the panelists said. These range from lack of incentives from Harris County, to the rising cost of regulations being put into place following Hurricane Harvey. Another issue is competition from North Texas, which is a huge distribution market. “Dallas takes a lot of distribution business away from us,” Tunnell said.

Despite the challenges, Houston industrial is growing in many areas, even if the metro might not be Amazon-friendly. Talhelm, returning to the discussion about resins, said that China’s burgeoning middle class means the country is forecast to consume 50% of the resin Houston produces. “Ships come in fully laden, and can leave for China, fully laden,” Talhelm added. “That is a very unique situation in the United States.”

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