Texas

The DFW industrial market has enjoyed unprecedented growth over this seven-year development cycle.  The market has added approximately 118 million square feet of industrial inventory over that period and absorbed 143 million square feet. Population growth in the Dallas-Fort Worth (DFW) metroplex, the state of Texas and the south-central U.S. region, as well as growth in e-commerce, are the primary tailwinds propelling this extraordinary growth. Ever since Hillwood broke ground on AllianceTexas in the late 1980s, putting north Fort Worth on the radar of industrial users, the expansion in the Fort Worth industrial market has been an ever-increasing part of the overall DFW industrial market’s growth.  However, the Fort Worth industrial market’s growth is really accelerating now based on the lack of available developable industrial sites in Dallas and the Mid-Cities. Further, when users and developers compare Fort Worth and southeast Dallas, the two areas with available industrial spaces and developable industrial land, Fort Worth’s advantages with regard to infrastructure, amenities, and most importantly, labor, stand out. As the area reaches peak employment, and with labor cost being the highest percentage of a user’s overall operational cost, the workforce factor has become the most important site selection criterion for users …

Industrial users in Texas, particularly e-commerce firms operating out of large-format distribution centers, are finding it harder and harder to staff their facilities with experienced, talented workers.  Development of both speculative and build-to-suit warehouses and distribution centers has been on fire in major Texas markets over the last several years, driven by an abundance of land, exceptional infrastructure and climbing populations. According to CoStar Group, Dallas-Fort Worth’s (DFW) industrial supply grew by 3.5 percent, or roughly 30 million square feet, in 2017. That figure represents the highest single-year inventory growth in more than a decade. Approximately 21 million square feet of new space hit the market in 2018, and for 2019, CoStar forecasts that nearly 24 million square feet of product will be delivered. Houston’s supply growth has been tamer, averaging about 12.2 million square feet annually between 2015 and 2018. But the market is projected to add another 13.2 million square feet this year, per CoStar. With a couple exceptions, more than 90 percent of the new product delivered in DFW and Houston in each year between 2015 and 2018 was distribution space. The distribution building booms in Texas’ two biggest markets have occurred in the face of escalating …

Industrial space throughout the Houston continues to be absorbed at an astonishing clip, pushing vacancy levels to some of their lowest points this cycle. According to Stream’s data, the overall industrial vacancy rate in Houston closed the third quarter at 4.9 percent. Vacancy rates in the six major Houston submarkets are all below 7 percent for the first time since Stream entered the Houston market in 2006. The low vacancy rate across the market has triggered waves of new development. Stream estimates that across Houston, there is approximately 14 million square feet of institutional-quality space under construction, with another 25 million square feet already having delivered since 2014. To put that in perspective, Stream tracked the overall market at 260 million square feet in 2014 compared to 285 million square feet today – a 9% market growth over that four-year period. If you layer in the product under construction today, that takes that growth to over 13 percent. Despite a hefty volume of development hitting the Houston market, leasing velocity continues to outpace new deliveries, keeping market fundamentals in check. This strength is attributable to many macro-economic factors but strong population growth, e-commerce, Hurricane Harvey recovery and the boom in …