Industrial real estate investors buy 46-building portfolio, doubling down on Northwest Houston

 

By Marissa Luck, Houston Chronicle

Demand for industrial space is down from a pandemic peak, but that hasn’t stopped some real estate firms from betting on future growth in certain pockets of Houston.

Houston real estate firm Pagewood recently partnered with Philadelphia real estate company CenterSquare to purchase a group of 46-buildings across northwest Houston. The seller, Houston real estate firm HRES Group, sold the Gateway Industrial Commons cluster, — totaling 621,000 square feet — for an undisclosed price.

The new owners plan to modernize the buildings, which were constructed between 1985 to 2008 and are 90% occupied. Phased renovations will include upgrading building mechanical equipment, exterior facades, common areas, and enhancing landscape and lighting.

“Given the scarcity of new developments and rising costs of construction, this portfolio is well positioned for success,” said Victoria Madrid, vice president of private real estate at CenterSquare.

Houston’s industrial construction activity fell by 50% at the end of last year as higher interest rates and construction prices made it harder to launch new projects, according to research from real estate firm Transwestern.

While industrial tenant demand has softened, the Northwest Far submarket, where a large portion of Gateway Industrial Commons is located, is still among one of the stronger performing areas as measured by net absorption, or the difference between tenant move outs and move ins. The Northwest Far submarket saw 2.8 million square feet of positive net absorption in the fourth quarter, ranking among the top three submarkets in Houston, according to Transwestern.

To be fair, a portion of the Gateway Industrial Commons is within the Northwest Near submarket, which saw negative net absorption of 294,000 square feet in the fourth quarter, according to Transwestern. However, Northwest Near still has relatively tight vacancies of about 4.1%, compared to the overall Houston industrial vacancy rate of 6.1%.

Elsewhere in northwest Houston, Pagewood recently developed and sold a 500,800-square-foot building that is fully leased to Japanese air conditioning manufacturer Daikin Industries. That success made Pagewood more confident in investing further in northwest Houston, said Paul Coonrad, Pagewood’s founder.

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