Granite Sells 1.2 MSF Industrial Portfolio

Commercial real estate services firm Holliday Fenoglio Fowler L.P., charged with orchestrating the disposition of Granite Properties Inc.'s industrial assets, had marketed the properties as part of a larger 16-property portfolio with locations in Houston and Dallas.

March 23, 2011
By Barbra Murray, Contributing Editor

In its ongoing bid to free itself of industrial holdings and focus on the office sector, Granite Properties Inc. has just sold off a group of 11 industrial properties totaling 1.2 million square feet in Houston to Cabot Properties Inc.

Commercial real estate services firm Holliday Fenoglio Fowler L.P., charged with orchestrating the disposition of Granite’s industrial assets, had marketed the properties as part of a larger 16-property portfolio with locations in Houston and Dallas. HFF closed the sale of five of the properties in two separate transactions in January. The group of 11 assets Cabot just picked up consists of 24 buildings with an average age of 26 years and an average occupancy level–excluding a vacant two-building, 84,000-square-foot complex–of approximately 88 percent.

There was no shortage of interest in the portfolio; HFF received 15 offers. “There hasn’t been an industrial portfolio of this size on the market in Houston in many, many years,” Rusty Tamlyn, senior managing director with HFF, told CPE. “People want to buy industrial but there’s not a lot of product that ever comes up for sale. I’m telling people you’re going to have to build it if you want to have a presence here.”

Houston is high on investors’ lists and for good reason. “We were one the last to slow down in the downturn and one of the first to come out of it,” Tamlyn said. “Gas is half of our economy. We’ve got population growth, job growth–we’re supposed to add 30,000 jobs this year. We didn’t have sub-prime problems and we didn’t have overbuilding in any of the product types. And I think people remember the downturn of the 80s and they don’t want to repeat it.”

As recent statistics indicate, Houston’s industrial sector is only going to get better. The market closed the year with its fifth consecutive quarter of positive absorption, according to a fourth quarter report by commercial real estate services firm Grubb & Ellis Co. Additionally, the current vacancy rate is a respectable 6.4 percent and, as noted in the report, “With market-wide construction starts at an all-time low, vacancy will steadily decline as user demand picks up steam from an improving local economy.”