A common baseball analogy that explains where we are in the real estate cycle is “What inning are we in?” Regardless of the inning, in North Texas we’re just hoping it’s the first game of a doubleheader!
The first quarter of 2017 was another respectable one for leasing activity in the Dallas-Fort Worth (DFW) industrial market. Total absorption for all properties was 5.5 million square feet, with 6 percent vacancy across 786.5 million square feet of industrial space. New supply totaled 6.6 million square feet for the first quarter.
Just over 8 million square feet of new construction is underway in DFW, with 15 million square feet designated “big box,” or more than 200,000 square feet. Big box experienced absorption of 4.6 million square feet in the first quarter, despite having only 3.8 million square feet of new supply.
The metroplex has been the beneficiary of some very large lease signings. Amazon alone is responsible for multiple leases totaling several million square feet. UPS recently leased a 1 million-square-foot property in Arlington, and Ashley Furniture announced the purchase of 358 acres in Mesquite for an 850,000-square-foot design/build distribution facility.
Allen Gump, Colliers International
In addition, a 1.4 million–square-foot, build-to-suit lease by a well-known real estate company is expected to finalize during the second quarter.
The Alliance, DFW Airport, Great Southwest and Southern Dallas submarkets have seen the most activity during the recent cycle of big box industrial growth. Multiple projects are slated for creative, adaptive reuse. At 5 percent, DFW Airport has one of the lowest vacancy rates, which should remain low given the limited supply of buildable land in that submarket.
The Great Southwest (GSW), which includes Grand Prairie and Arlington, is still the largest submarket at about 108 million square feet. New developments in GSW include properties that previously had other uses, such as the 163 acres along Johnson Creek, previously known as the Great Southwest Golf Club in North Grand Prairie. Traditionally overlooked infill sites such as this one are now seen as viable options for building, as strong rental rates and property values support the increased acquisition and development costs.
In South Arlington, the former Texas Instruments complex south of Interstate 20 has been redeveloped into two 420,000-square-foot buildings. In addition, Ridge has broken ground on a four-building, 1.2 million-square-foot development at the northwest corner of State Highway 360 and I-20 — former Johnson & Johnson buildings that for a time had been repurposed as a church. Finally, Kansas City-based Northpoint is tearing down Six Flags Mall to build a 1.4 million-square-foot industrial complex. General Motors will occupy 1 million square feet as the anchor tenant.
Alliance developers have traditionally maintained a very controlled supply of industrial inventory in the North Fort Worth submarket, and continue to do so in 2017. Alliance absorbed almost one million square feet more than what was delivered during the first quarter, led by the 756,000-square-foot American Tire Distributors lease. Some 2.9 million square feet of industrial inventory is under construction in the area.
South Dallas is the land of opportunity! The first quarter produced several big box industrial leases, with Chewy (663,000 square feet), Pratt Industries (300,000 square feet) and Carbonlite (230,000 square feet) all contributing to the 1.3 million square feet of first-quarter absorption. Another 5 million square feet of warehouses are currently under construction in the area.
Available intermodal rail and extra-large land sites have also attracted developers and larger users to the South Dallas/ I-20 corridor. The current 16.6 percent vacancy rate for those buildings over 200,000 square feet is facilitating great value.
The DFW metroplex as a whole is the envy of many markets that only wish they had the industrial inventory to attract new businesses and to allow continued growth for existing ones. Some 34 million square feet of new industrial properties are on the drawing board, with more than a dozen proposed or under-construction buildings to exceed one million square feet. This market has a lot of runway.
— By Allen Gump, SIOR, Colliers International. This article first appeared in the June 2017 issue of Texas Real Estate Business Magazine.