Wes Williams, Vice Chairman, Principal & Director, Colliers

Invest: spoke with Wes Williams, vice chairman, principal, and director of Colliers, about the forces driving Houston’s industrial real estate market, including AI infrastructure, advanced manufacturing, and population growth. “Houston is setting up to be on pace for a potential record year of leasing activity,” Williams said.

How would you describe Houston’s commercial real estate market, and what trends have affected your work over the past year?

I help lead our industrial team, so my perspective is primarily focused on industrial real estate across Houston and the greater Gulf Coast region. I advise investors, developers, and companies on that landscape.

Big box is booming. Buildings of 300,000, 400,000, or 500,000 square feet and above are seeing significant activity, supported by the AI boom. Data centers require advanced manufacturing operations to produce and warehouse switchgear, power panels, control panels, and other equipment. Houston is seeing a substantial share of that activity.

Houston is setting up to be on pace for a potential record year of leasing activity. Our previous strongest years followed the COVID-era boom, when suppliers and distributors were right-sizing their supply chains and e-commerce was expanding. Activity plateaued as interest rates increased and some companies realized they had taken too much space. Those companies are becoming active again. Combined with data center support, population growth, and the consumable goods required by a growing city, Houston is taking the national spotlight in industrial real estate.

The overall industrial vacancy rate is approximately 6% to 7%, depending on the data source. Once a company defines the property and location it needs, the market can become tight extremely quickly.

What makes Houston attractive for industrial investment, advanced manufacturing, and data center-related activity?

Houston has increasingly become a gateway city. It offers a large labor force, and Texas provides a business-friendly environment. There is also a global trade component. Overseas companies that traditionally believed they needed to ship through the West or East Coast are recognizing that they can use the Panama Canal, reach Houston, and distribute products from here. Goods can move by rail to Dallas and continue to other markets.

Companies can also avoid some of the labor disruptions experienced at other ports. Houston has available land, room for expansion, and relatively few geographical barriers. The region continues to push outward while its infrastructure expands. Those conditions encourage companies to continue investing here.

What types of facilities are companies seeking, particularly given the region’s low vacancy rates?

The 6% to 7% citywide vacancy rate includes all industrial property. Institutional industrial space — generally class A, concrete tilt-wall distribution centers — is around 7%. That is a tight market, but manufacturing space is even tighter, with vacancy potentially around 1% to 2%.

Many manufacturing companies do not fit the traditional big-box distribution model. They may employ many engineers and other highly paid workers, require climate-controlled warehouse areas, or need overhead cranes. Because suitable manufacturing space is difficult to find, companies are evaluating whether they can convert existing distribution centers into manufacturing plants.

I expect developers to begin building some manufacturing facilities speculatively because that segment has been extremely active. Reshoring is bringing more manufacturing operations to the market, and Houston is no longer solely an oil and gas city. The economy is much more diverse, with activity related to advanced manufacturing, NASA, and other sectors. If oil prices remain steady, oil-field service companies may also expand.

Which industries are creating the strongest demand for industrial real estate?

Data centers remain a major driver. That activity supports mechanical and electrical companies, control-system manufacturers, HVAC providers, and transformer manufacturers. These facilities require equipment produced and delivered at a tremendous scale.

Population growth also creates demand. Residential construction supports roofing companies, building-material suppliers, and home-improvement distributors. Beverage companies and grocery distributors need large regional operations. It creates a snowball effect extending even to businesses supplying products such as granite slabs.

Houston also offers a business-friendly environment for companies considering relocation. Another important consideration is access to substantial amounts of power. Companies need enormous capacity for the equipment they manufacture or test for data centers, NASA-related work, and other advanced applications.

Where are Houston’s most significant infrastructure gaps, and what should the region prioritize?

For power-intensive projects, the greatest constraint is infrastructure. Every local municipality must consider how much demand its infrastructure can accommodate. On the brokerage side, we are seeing requirements ranging from 20, 30, or 50 megawatts to a gigawatt or even multiple gigawatts.

There is only so much existing infrastructure available to serve those projects. Utilities are likely to face a long list of companies seeking access to the market. The question is how quickly substations can be expanded and infrastructure upgraded to meet those requirements. From a power and manufacturing perspective, that is probably the largest constraint.

How are clients’ needs evolving, and what are they asking Colliers to help them accomplish?

We receive calls from existing clients that operate three or four facilities and need advice on consolidating those operations into a new headquarters. Others want to determine whether they can unlock liquidity through a sale-leaseback and reinvest that capital into their businesses.

We are seeing those conversations across the market, from grocery distributors and data center support companies to pipe yards and equipment rental businesses. Most sectors, with a few exceptions, are in a significant growth mode.

What trends are you monitoring as you advise developers and investors?

The biggest issue I am watching is power infrastructure: how soon could the region run out of available capacity, what that would mean for future requirements, and whether companies would need to consider other markets.

Industrial real estate moves in cycles like every other asset class. We are in a major boom, but a boom can be overbuilt quickly. We have seen that occur in some Houston submarkets. As developers ask us to underwrite projects, identify land opportunities, and assess the strongest submarkets, we will closely track supply and demand.

The list of developers evaluating Houston has grown substantially. What was once perhaps 40 to 50 active developers has become a national list of more than 250 groups trying to enter the market. Their interest is not limited to big-box distribution. Industrial outdoor storage is also expanding. These are lower-coverage properties such as pipe yards and container storage yards, often with pre-engineered metal buildings occupying a relatively small portion of the site. It has been impressive to watch that asset class evolve over the past decade.

What other sectors are contributing to Houston’s industrial momentum?

Medical and life sciences manufacturing is an important part of the market. Houston is becoming a larger hub because of its existing medical presence and supporting infrastructure. The Eli Lilly deal at Generation Park is a prominent example, and we continue to see activity in that segment.

More broadly, demand is coming from data centers and AI infrastructure, reshored manufacturing, petrochemical and chemical expansion, and port-related activity. The Port of Houston supports third-party logistics providers, freight forwarders, importers and exporters, as well as the region’s substantial plastics industry.

E-commerce is also growing again. Companies are taking positions to compete with Amazon, while Walmart and TikTok have been active in the market. Traditional third-party logistics providers continue to support these industries. Food and cold storage, including grocery distribution, frozen foods, and beverages, remain important, as do aerospace and defense.

When a company makes a 500,000-square-foot investment in a submarket, establishes a corporate headquarters, and brings 1,000 employees to that location, the effects extend beyond industrial real estate. That activity generates demand for housing, retail, and consumer services. Looking at Houston’s absorption, requirements are coming from every one of these industries.