Big-Footprint Developments Lead the Way in Fort Worth Industrial Market
When Ross Perot Jr. broke ground on the world’s first industrial airport in north Fort Worth in 1988, even he didn’t realize what a big deal it would become. Named “Alliance” in recognition of the collaboration between Perot’s Hillwood, the city of Fort Worth and the Federal Aviation Administration, the project kicked off a development spree that now spans 18,000 acres. With the airport, a major intermodal yard, two Class I rail lines and a number of interconnecting highways, Alliance has had a profound impact on establishing the industrial real estate market in Fort Worth’s northern sector.
The development is still going strong, but other firms such as Trammell Crow Co., IDI and Stream Realty Partners have joined the party with surrounding projects that build on Hillwood’s foundation.
The latter recently completed work on a new 538,000-square-foot Northlake headquarters for Farmer Brothers Coffee, which includes a 125,000-square-foot roasting plant and 258,000-square-foot distribution center.
Industrial development remains brisk in other areas of Fort Worth, too, most notably in Railhead Industrial Park, Mercantile Center and Carter Industrial Park, where Hunt Southwest is underway with a 657,000-square-foot spec project. This project follows a 301,500-square-foot facility the developer opened at the Riverbend West development in east Fort Worthin late 2016.
All told, 1.3 million square feet of industrial space is under construction in the North Fort Worth submarket, with another 1.9 million square feet underway in Alliance, according to Cushman & Wakefield’s statistics.
With a total inventory of 116.5 million square feet, Fort Worth’s six industrial submarkets (Alliance, North Fort Worth, Center City, and East, South, and West Fort Worth) make up about 20 percent of the 587.5 million square feet of industrial space in North Texas. For the first quarter of 2017, Fort Worth saw 1.4 million square feet of absorption, or about 26 percent of the DFW total of 5.4 million square feet.
The Alliance submarket led the region in absorption, picking up 13.7 percent of all new tenants, including Farmer Brothers Coffee and American Tire Distributors, which leased a 756,000-square-foot regional distribution center in Roanoke.
Overall, there is 8.5 million square feet of unoccupied industrial space, which translates to a 7.3 percent vacancy rate— just a tick higher than the market-wide total of 7.2 percent.
In terms of new leasing, the market is seeing strong demand from big-box distribution centers in the 500,000- to 1.5 million-square-foot range. That activity is focused in north Fort Worth, although south Dallas and the Interstate 20 corridor are also seeing significant activity due to the availability of land.
Lease rates are rising and currently average $4.66 per square foot in Fort Worth submarkets, compared to $4.86 per square foot in Dallas. Industrial property values are rising, too, with strong interest from high-credit investors impressed by the region’s strong market fundamentals.
Going forward, several factors will continue to drive demand. The first is population growth. According to Moody’s Analytics, the region welcomed 142,000 new residents in the past year, or roughly 400 new residents per day, bringing the total population to 7.3 million Many are settling in Fort Worth, which is seeing a burst of residential and multifamily development.
Job growth is strong, too, with 125,000 positions added market-wide in the last 12 months. More than 30 percent (39,000) were in the industrial sector — goods production and trade, transportation, and utilities. There’s a distinct correlation between job growth and the absorption of industrial space that occurs about 12 to 18 months later.
Growth in e-commerce is also driving demand. Industry leaders like Amazon and Walmart have massive operations that employ thousands in Fort Worth.
The region’s population boom is attracting smaller users, too, as are mission-critical facilities. Although these types of projects tend to remain low-profile, Fort Worth is home to a significant number of data centers for financial institutions, healthcare companies, and other data-centric users. Even social media giant Facebook gave the region a thumbs-up, with a four-phase, $1 billion data center on State Highway 170 near Interstate 35W.
— By Adam Hammack, Senior Director, Cushman & Wakefield. This article first appeared in the May 2017 issue of Texas Real Estate Business magazine.