As we enter another promising season, I’m excited to share Harbor Capital’s continued positive trajectory with you. 2023 was a year of significant growth and achievements, and we’re eager to build on this momentum as we start out the new year.
Despite 11 interest rate hikes since March of 2022, this past year was a landmark for Harbor Capital. We successfully acquired $82M of quality Texas industrial real estate and signed dozens of new high-quality tenant leases across our properties. Perhaps more importantly, as we look across our portfolio of assets, we are thankful to see no signs of distress, which allows us to sleep peacefully each night. At a time when many corners of the commercial real estate market are going through a reset, our choice of markets, combined with our conservative deal structuring and adherence to the belief that fixed-rate, low-leverage debt is king in all market cycles, has allowed us the rare privilege of being able to focus our attention on optimizing our portfolio. The past year’s successes are a testament to our team’s strategic vision and commitment to safe and timeless investment principles, regardless of the cyclical winds of the market.
We always like to say that we know one market and product type, and we know it exceptionally well. As of late, the Texas industrial market has been delivering continued lease rate growth across its major metros despite a glut of construction boom-driven supply coming online and increasing available supply. In the coming year, we anticipate a steady increase in vacancy rates (Houston and San Antonio are up approximately 3.4% year-over-year) as the last of the supply glut is exhausted. Towards the end of the year, we expect to see a dramatic decrease in vacancies back down to the low-single-digit range. Despite this initial increase in vacancy rates, the overall Texas industrial market is poised for a strong year. Notably, industrial deliveries in Houston, San Antonio, and across the broader Texas markets are anticipated to decrease roughly 48% year-over-year. This indicates a temporary surge in vacancies that is expected to correct itself, leading to swiftly increased absorption and continued robust rental rate growth. Moreover, the Texas industrial market benefits from a substantial growth in the value of goods imported from Mexico to the US, which has surged by 70% between 2016 and 2022. The year 2022 alone witnessed a 64% increase from 2012 and an 18.9% rise from 2021, amounting to $454.8 billion in imports and a dramatically increased need for warehousing space. This trend highlights an ongoing shift towards reshoring manufacturing back to the US, reinforcing our confidence in the long-term viability of Texas industrial as an investment destination. As we evaluate the landscape of the Texas industrial sector, it is evident that 2024 will likely present many compelling opportunities for strategic acquisitions. Our team is on standby with capital to deploy and a robust operating foundation in place, ready to take on an increase in our assets under management.
Looking ahead to 2024, we’ve set an ambitious goal to acquire $200 million of new assets. Yet, in keeping with our conservative approach to investing, we are structured so that even if we buy no new properties this year, we are still able to operate as normal, allowing us only to acquire the best-of-the-best investment opportunities if and when they materialize. Our focus remains on identifying cash flow-positive industrial assets that provide excellent risk-adjusted returns for our investors. Stay tuned for our upcoming investment offerings, the first of which should hit your inbox later this month.
Engaging with our investors is a priority for our team. In addition to our monthly deal updates, we are planning a series of dinners and events designed to bring us closer together and provide a way for our LPs to learn about upcoming opportunities and how our team is approaching the market. Look for an invitation to a dinner in your area — we’d be thrilled to have you join us.
Additionally, for more personalized discussions or inquiries, we invite you to schedule calls or meetings with our team at your convenience. Please use this link if you’d like to get something on the calendar. I’d love to connect!
As we look to the future, our confidence in the prospects of Harbor Capital has never been stronger. We thank you for your continued trust and partnership. Here’s to a year of growth, opportunities, and shared success.
Here’s to getting after it in 2024!