Applied Optoelectronics has signed multiple industrial leases in greater Houston, signaling how aggressively suppliers are scaling to meet the voracious demand for data center support systems.
The company disclosed its latest deal in a securities filing, agreeing to take 736,216 square feet with landlord Crow Holdings.
Long defined by oil, gas and petrochemicals, Houston is now adding a new role as a manufacturing and logistics center for the artificial intelligence boom. A surge of large industrial leases by AI hardware suppliers reflects how quickly the region is being pulled into the data center supply chain as operators scramble to add capacity for power‑hungry computing.
Throw in other deals Applied Optoelectronics has executed this year, and the networking component manufacturer has added roughly 1.5 million square feet to its Houston-area footprint in 2026 alone.
The company makes optical transceivers — high‑speed components that carry data across hyperscale data centers, underpinning AI workloads.
Last summer, Foxconn, the world’s largest electronics manufacturer, announced plans to invest $450 million to expand AI server production in Houston. In addition, Apple, a major Foxconn client, intends to open an advanced manufacturing facility in the region as part of a $600 billion national investment.
"What we’re really seeing is demand layering, not substitution," said Itziar Aguirre, CoStar's senior director of market analytics for Houston.
Energy‑related activity is still the foundational source of industrial demand in the market, she said, but added: "What’s changing is that AI and data center growth are adding a new, highly intensive layer of demand on top of that."
Manufacturers and suppliers are leasing facilities for assembly, testing and integration of increasingly complex hardware, putting pressure on the same scarce inputs, power, land, labor and build‑ready space.
"Rather than displacing energy‑related leasing, this AI‑driven wave is amplifying overall industrial tightness by stacking overlapping capital cycles at the same time," Aguirre said.
Applied Optoelectronics’ latest lease ranks as the third-largest industrial deal in the Houston market this year, trailing two large signings with unidentified tenants, according to CoStar data.
The company leased three buildings in what is known as Hightower Business Park. Each agreement runs a little more than 10 years and includes a purchase option at a combined option price of $102.25 million, according to the filing.
The buildings break down as follows:
- 6000 McHard Road, 163,930 square feet.
- 6100 McHard Road, 343,332 square feet.
- 17255 Chimney Rock Road, 228,954 square feet.
Applied Optoelectronics has designated all three properties for manufacturing, warehouse and office use. Monthly base rent across the three buildings starts at roughly $457,445 in month four — after an initial three-month abatement — and escalates to about $637,136 by the final year, the filing said. "With the new leases, we are furthering our expansion plans in the Houston area to accommodate manufacturing buildouts," a spokesperson for Applied Optoelectronics said in an email to CoStar News. Crow Holdings declined to comment.
A year of aggressive growth
The Hightower Business Park leases cap Applied Optoelectronics' rapid-fire expansion blitz in Texas this year. In April, the company purchased two adjacent buildings at 14621 Kirby Drive and 11555 N. Spectrum Blvd. in Pearland, totaling about 388,133 square feet, for $58.43 million from SRPF D/Kirby Industrial, according to other securities filings.
In February, it broke ground on a 210,000-square-foot manufacturing facility at 1111 Gillingham Lane in Sugar Land, part of a $300 million investment in the region. The company expects the plant to come on line by summer and create more than 500 jobs over five years. The city of Sugar Land and Fort Bend County backed the project with a $2 million incentive package.
Also in February, the company leased roughly 153,928 square feet at 16851 Blue Ridge Commerce Drive in Houston for office, warehouse and light manufacturing use. The 130-month lease includes a purchase option priced at $30.26 million.
All facilities sit within a 15-mile radius of Applied Optoelectronics' 135,000-square-foot headquarters in Sugar Land.
Demand outstrips capacity
Customer demand far exceeds what Applied Optoelectronics can currently produce, company executives said.
"The demand for optical connectivity in data centers has exceeded our expectations," Applied Optoelectronics CEO Thompson Lin said in an April statement announcing the Pearland acquisition. "With the acquisition of these properties, we will have the footprint to expand our capacity."
Applied Optoelectronics reported record first-quarter revenue of $151.1 million, up 51% year over year. Data center revenue hit $81.4 million, a 154% annual jump. The company projected second-quarter revenue of $180 million to $198 million and forecast full-year operating income exceeding $140 million.
At the Sugar Land groundbreaking ceremony in February, Lin signaled the scale of Applied Optoelectronics' ambitions: "We plan to increase our investment in this facility and our headquarters from $150 million to potentially $300 million by the end of next year. We believe this expansion project ... will position us as one of the largest domestic suppliers of optical transceivers for the AI and data center industry."