The Cy-Fair area continues to stand out as a magnet for industrial expansion with nearly 150 million square feet of industrial development and 5 million additional square feet under construction.


The largest project in the area comes from a Japanese producer of air conditioning units, Daikin Industries Ltd. Daikin’s manufacturing facility, which will open this fall, accounts for over 40 percent of the industrial projects under construction in the Greater Houston area.


In addition, other large projects in the region include DCT Northwest Crossroads on Windfern Road, Fallbrook Pines Business Park and Sam Houston Business Park, each completed within the past five years and housing more than 200,000 square feet of industrial space.


Within the first 90 days of 2016, the Northwest Houston submarket—which encompasses Northwest Harris County between Hwy. 249 and I-10 West—had the highest leasing rate of industrial space in any Houston submarket, according to a market report from commercial real estate firm CBRE. More than 1.1 million square feet were leased in the area.


The Northwest submarket also has one of the lowest vacancy rates in the Greater Houston area—5 percent—and one of the highest amounts of square footage under construction at just over 5 million square feet.


“The Northwest submarket is the largest, most diverse submarket in regards to tenants,” said Jeremy Garner, principal with commercial real estate firm Trammell Crow Company. “It is a very attractive location for industrial tenants due to Houston’s historic growth to the north and the west coupled with the beltways, which give access to all parts of the city. It drives tenants to relocate here.”



Cy-Fair area proves attractive to industrial developers, tenantsIndustrial influx


Daikin relocated to the northwest region when it chose a site near Hwy. 290 and the Grand Parkway in Hockley as the location for its new 4.1-million-square-foot air conditioning plant. The Japanese company plans to have 5,000 employees manning the plant’s operations, Daikin spokesperson Rex Anderson said.


Four thousand of these employees have been asked to relocate to Houston from their previous posts at now-closed Daikin facilities in Texas and Tennessee. The plant is set to open in 2016.


“[The area] offers an outstanding combination that includes the ability to provide an educated workforce, economic growth and a favorable year-long climate necessary for manufacturing and operational excellence,” said Takeshi Ebisu, president and CEO of Goodman Manufacturing Company LP, a subsidiary of Daikin, in a statement.


The appeal of the Northwest submarket also brought several new industrial parks to the area, many of which leased their facilities upon completing construction.


National real estate company DCT Industrial, for example, began construction in 2014 on the 362,000-square-foot DCT Northwest Crossroads. Construction was completed in early 2015. Upon completion, the building was fully leased by heating, ventilation and air conditioning manufacturer Lennox International, Rittal Corp. and Hesselbein Tire, according to press releases from DCT Industrial Trust.


Phase 2 of DCT’s Cy-Fair development was completed in June 2015 with more than half of the 320,000-square-foot space leased by Sunny Sky Products, officials said.



Cy-Fair appeal


Land availability and size has been a contributing factor to the rapid nature of industrial growth in Northwest Houston, said Patrick Jankowski, vice president of research with the Greater Houston Partnership.


“When you think of large land plays, there are none inside the 610 loop, and it is getting harder within Beltway 8,” Jankowski said. “If you think of Houston as a giant pie, the slice of Cy-Fair is one of the biggest ones out there. Once it gets gobbled up, it’ll be hard to find room for more development.”


Robert Kramp, CBRE’s director of research and analysis in Houston, said the land is naturally suited for construction because of its topography. Northwest Houston land tends to be low and flat lying, an important factor when constructing tilt-walls, which are commonly used in industrial development for manufacturing and distribution plants.


Cy-Fair area proves attractive to industrial developers, tenantsTrammell Crow completed construction on Fallbrook Pines Business Park in October. To do so, the firm assembled four land tracts to make a complex of 117 acres. Garner said a project of this magnitude presented a challenge when locating four available pieces of land at the exact right time and in the right size specifications.


“There is gradually becoming more land available in other areas of Houston simply because there has been such a focus on Northwest Houston for so long,” Garner said. “A lot of developers have been unable to find good sites in Northwest Houston, which has triggered a flurry of development in the I-45 corridor.”


Kramp said the Cy-Fair area’s position relative to the city and major thoroughfares makes it an appealing area for industrial developers as well.


“If you are leaving the city, you go right through the Northwest, and yet all incoming thoroughfares are handled through [the Northwest] as well, into [the] Greater Houston [area],” Kramp said. “You have to go through the area to get in or out.”


Large projects have taken advantage of this by choosing locations close to major thoroughfares. Daikin is by Hwy. 290, DCT Northwest Crossroads and Sam Houston Business Park are close to Beltway 8 and Fallbrook Pines Business Park and Beltway Crossing Northwest are near Hwy. 249.


“The network of roads is out there whether they are as wide as they need to be or whether the road surfaces are as best as they could possibly be,” Jankowski said. “You can easily get on Hwy. 290 or I-45 or I-10, and that will take you north, northwest or west. By having those out there in Cypress, you don’t have to deal with the traffic that you would have to deal with closer into the city.”


Leslie Martone, president of the Cy-Fair Houston Chamber of Commerce, said one of the area’s bigger challenges is staying ahead of the growth when building upon the existing infrastructure.


“We are trying to be in front of all the growth, and I think right now we are in the middle of it,” Martone said. “We are working on making our roads accessible and making sure that any kind of infrastructure necessary is matching that growth curve.”


In addition to roadway access, the Cy-Fair area offers  access to the Port of Houston, making it an international distribution hub, Jankowski said.


“With Houston’s close proximity to the port, and, more importantly, the nine-year expansion of the Panama Canal opening in June, the Port of Houston is optimistic that it will see traffic increase even more,” he said.


This expansion will allow larger ships to travel through the Panama Canal, and in turn, larger ships to come through the Port of Houston, bolstering distribution and manufacturing in the Greater Houston area, Jankowski said.



Cy-Fair area proves attractive to industrial developers, tenantsFreeport Tax exemption


Stephen Schneidau, director of Beltway Crossing Northwest, a 600,000-square-foot industrial business park that opened in 2014, said one of the determining factors to bring his industrial facility to Cy-Fair was the double Freeport Tax exemptions offered by the city of Houston and Cy-Fair ISD.


“Not every school district offers the exemption, so it is an advantageous location,” Schneidau said.


A Freeport Tax exemption allows local taxing authorities to exempt inventory from taxes if the products spend 175 days or less in Texas. Products made from oil, natural gas or petroleum are not included in this exemption, according to the Texas Tax Code.


The most attractive situation for businesses would be a triple Freeport exemption wherein the county, city and school district all offer the incentive, Jankowski said.


“With triple Freeport exemptions, you pay zero taxes on any of your stock,” Jankowski said.


Each taxing authority can choose whether to offer the exemption. In Cy-Fair, businesses can take advantage of a double Freeport exemption from the city and CFISD, but Harris County does not offer the exemption.


A Freeport exemption of any kind is only available in half of the Greater Houston area and offered by 11 area school districts, officials said.



Growth to steady


Industrial development growth may not be maintainable at the current rate, but Kramp said northwest Houston is moving toward a more consistent speed of expansion.


“In many respects, companies are taking their feet off the gas pedal, and we are now going to be moving at a more sustainable pace,” Kramp said.


Population will still drive growth going forward, however, officials said.


Over the past decade, the Greater Houston area has added roughly 125,000 new residents on average per year, including newborns and transplants, Jankowski said.


Population growth projections indicate that, even if industrial expansion slows down, it will not likely stop anytime soon, Kramp said,


“When it comes to industrial, it literally goes back to the fact that the consumer is in the driver’s seat and the developer is in the back seat of the car,” he said. “The fact that we have an increasing population shows that growth will continue.”