The Dallas-Fort Worth industrial real estate market
is one of the healthiest in the country and dodged the recession unscathed.
The cold hard facts are the leading indicators that underpin our high-performance industrial marketplace.
Texas leads the nation in job growth and has now enjoyed six years of economic growth. Some 548,000 jobs have been added to the state of Texas since 2008 and Dallas-Fort Worth ranks 3rd
in the state for job growth, according to the U.S. Bureau of Labor Statistics.
Approximately 1.2 million new residents were added to the Dallas-Fort Worth area from 2000-2010. Business Facilities Magazine ranks Dallas as the #3 center in the U.S. for logistics and distribution while Fort Worth is ranked #5 for aerospace and manufacturing.
We know about Houston’s oil and gas-fueled economy, San Antonio’s growing entertainment and defense sector, and Austin’s phenomenal growth backed by tech companies and anchored by state government, but what’s up with North Texas and the Dallas-Fort Worth (DFW) economic drivers?
For readers in the developer camp, they will be pleased to know that DFW is on track to have a record year (2013) of absorption.
Warehouse is in high demand, and Dallas/Fort Worth is the leading logistics market centrally located between the West Coast, the Southeast Altanta/Memphis region, Chicago to the north and the Mexican border to the south. Labeled a “Gateway Market” with an emphasis on DFW Airport as the hub, the Dallas-Fort Worth region is consistently a top five market and distribution location of choice for most international, national and regional companies looking to serve consumers and businesses in the southwest region.
The Texas Comptroller’s office reports that job growth, sales tax collections and building permits all outpace the national economy with the financial and professional service sector, transportation, hospitality, education and health services along with the mining, and O&G industry leading the charge.
Dallas-Fort Worth commercial real estate
has had 12-consecutive quarters of positive industrial absorption, and the development community will deliver approximately 10-million square feet of new product to meet the annual absorption demand of 15-million square feet, as there is a dwindling supply of available existing warehouse space and even less Class A logistics space on the market.
INFRASTRUCTURE IS KEY
While all submarkets are experiencing robust leasing activity, there is no question that DFW International Airport remains the centric submarket of choice. In addition, the Fort Worth Alliance Airport to the west has the propensity to deliver intermodal, air and ground operations that are second-to-none.
The intermodal rail yard at Alliance has been successful — moving about 700,000 containers a year between trucks and trains, according to Hillwood Properties, which developed the land and area around the city-owned airport.
And the airport is building for the future. In 2000, airport managers started planning to extend the runways to 11,000 feet and over the past decade, have won federal and state money to help fund the $240 million project.
The expanded runway is expected to be completed by 2016 and will have the ability – as DFW International Airport already does, to accommodate fully loaded Boeing 747s headed to other continents.
In addition, the UP Intermodal (360-acre Dallas Intermodal Terminal, or DIT) in the burgeoning Southern Sector is the rising star. Just 12 miles from downtown Dallas, the railport is located adjacent to Interstate 45 at Fulghum Road – approximately six miles south of UP’s Miller Intermodal facility and approximately three miles south of Interstate 20.
Trucks can gain access to the railport via a high-tech, biometric secured AGS (automated gate system) entrance. This technology allows a trucker to process a container through the gate in 30-90 seconds, as compared to a national average of four minutes.
In other words, regional players continue to reinvest in the infrastructure that will allow Dallas to remain a highly competitive logistics capital in the lower-half of the United States.
By the numbers, the Dallas-Fort Worth industrial market ended the third quarter with a vacancy rate of 8.1 percent – a full percentage point below the 9.1 percent vacancy rate from the third quarter 2012. Through the first three quarters of 2013, absorption was net positive nearly 6.5 million square feet, which is more-or-less on par with 2012, when absorption was net positive by more than 8.2 million square feet, according to CoStar Group.
During the third quarter 2013, nine buildings totaling 529,589 square feet were completed in the Dallas-Ft. Worth market area. This compares to five buildings totaling 741,459 square feet that were completed in the second quarter 2013, 14 buildings totaling 818,745 square feet completed in the first quarter 2013, and 1,695,282 square feet in 14 buildings completed in the fourth quarter 2012. There were 7,285,211 square feet of Industrial space under construction
at the end of the third quarter 2013, CoStar reported.
One of the largest developments of the year is Building 5 in ProLogis Park 2035, a 653,582-square-foot facility that was delivered in the second quarter 2012 and was fully occupied shortly afterward. The biggest move-in during the third quarter was by Walmart.com, which occupied 788,142 square feet at Alliance Gateway 11.
Average asking rents are approximately $3.85 per-square-foot for bulk space on an annual basis and north of $5 a foot for shallow bay industrial facilities. Rents have increased approximately 10-15 percent each quarter, on average, since early 2012.
Partly driven by the housing industry, the Dallas-Fort Worth industrial market is very likely to continue its expansion in 2014 and beyond.
The inventory of unsold homes in Texas has plummeted to just 3.8 months of supply, the lowest level since records began in 1990, with existing-home sales increasing 12 percent year-to-date through September 2013.
Growth in home sales has outstripped increases in housing construction, according to the November 2013 ‘beige book” by the Federal Reserve Bank of Dallas. Residential home building has consistently driven demand for industrial space and accounts for upward of 20 percent of industrial development and leasing activity.
As long as housing supply remains constrained, the Dallas-Fort Worth industrial market should remain robust.
Kevin J. Santaularia
is President and CEO of Bradford Companies