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The North Texas industrial real estate market is hot, both in terms of development and leasing. The Dallas/Fort Worth Metroplex has seen a reduction in vacancy rates to just under 8 percent (which is an historic low), approximately 3.55 million square feet of positive net absorption and 6.4 million square feet of industrial space under construction as of the end of the second quarter of 2013.
Add to these encouraging numbers the Bureau of Economic Analysis’ estimates of annualized U.S. GDP growth of approximately 2.4 percent for 2013, and the outlook is even sunnier.
According to the Census Bureau, Dallas/Fort Worth is the largest metropolitan statistical area in Texas and fourth largest in the U.S. Demographics remain strong regarding a skilled labor pool and explosive population growth in the coming years, and at an unemployment rate of 6 percent, the Dallas/Fort Worth Metroplex is below both the U.S. and Texas average unemployment rate. Such statistics have Dallas/Fort Worth poised to continue to be an attractive location for industrial users and tenants.
E-tailing is Here to Stay
One key macroeconomic trend affecting industrial real estate in the Dallas/Fort Worth market — as well as that of the nation — is the shift from traditional brick-and-mortar dominating the retail sector to modern internet and online retailing.
Along with resolving the state sales tax issue with the State of Texas, this trend has proved beneficial to the bulk distribution sector and fulfillment center space. Moreover, leasing and investment volume have increased from the Dallas/Fort Worth Metroplex being designated as an “inland port” in the national economy.
Of interest are Majestic Realty Co.’s plans to break ground this quarter on a 1 million-square-foot, state-of-the-art Class A cross dock facility in the 160-acre master planned Majestic Airport Center in Lewisville, Texas. Currently, the park boasts 1.4 million square feet of Class A industrial space.
Other noteworthy projects include Hillwood’s two 1 million-square-foot build-to-suits for Amazon.com in Coppell and Fort Worth; Pepsi Co.’s 1.2 million-square-foot building in Prologis Park 20/35; Ridge Property Trust’s 514,000-square-foot build-to-suit for L’Oreal; and Restoration Hardware’s 850,000-square-foot facility.
Among Metroplex submarkets, the Southern Dallas sector specifically has benefitted greatly from the recent influx of activity. Tenants and users view transportation feasibility as a top priority when selecting a site, and with unparalleled access to I-20, I-35 and I-45, this destination is ideal.
Tenants and users that require rail service or utilize rail transportation can take advantage of the Union Pacific’s Intermodal Facility (Dallas Intermodal Terminal) in Wilmer and potential future use of the proposed BNSF Intermodal Facility near Hutchins.
Growth Across the Board
Dallas/Fort Worth to date has seen sales transactions in excess of $600 million. That number is up 55 percent from the previous year’s figure, and cap rates continue to be under the national average. Recently, the largest portion of buyers of industrial property were private, with other buyers, institutional investors and users making up the rest of the sales volume in the Dallas/Fort Worth area.
Active investors in the market include LNR Partners, EastGroup Properties, Amstar Advisors LLC and Quality Technology Services, while sellers include Prologis, Clarion Partners LLC, TA Associates Realty, Verde Realty and Diversified Realty, to name a few.
With historically low interests rates (which we are hoping don’t rise too much), pressures to place capital in the current market and a friendlier lending environment, transactional sales volume has been strong.
The Dallas/Fort Worth Metroplex has enjoyed slow but sure rental rate appreciation during the last several quarters. The slight upward trend is an aberration in this market because rental rates have traditionally remained flat over time, but we hope to see this positive trend continue to defy the Metroplex’s historic growth rates.
— Al Sorrels, vice president and director of development for the Dallis office of Majestic Realty Co.