Dallas - Fort Worth Industrial Summary - 3Q 2022
Dallas-Fort Worth is the fourth-largest metropolitan area in the United States, with a population of 7.9 million. It is also one of the fastest growing, adding 1.2 million new residents over the last decade. The metro surpassed Los Angeles as the second-largest industrial market with an inventory of over 1 billion SF, just behind Chicago's 1.3 billion SF. The industrial sector has thrived over the last decade. The metro has benefited from a diverse set of demand drivers ranging from e-commerce, manufacturing, and third-party logistics firms, all looking to increase their existing presence or enter the market.
Over the past 12 months, developers have added 35.0 million SF. However, vacancies have remained stable at 5.5% due to a combination of impressive demand for speculative projects and several significant build-to-suits delivered. The metroplex currently leads the nation in construction, with 92.0 million SF underway. Of the current construction pipeline, there is 60.5 million SF currently available, with 41 spaces 500,000 SF or greater. The largest is DHL Supply Chain's 1.2 million-SF building in Elizabeth Creek Gateway. The project is expected to deliver in 2023. CoStar forecasts deliveries to outpace demand in the second half of 2022 with 39.1 million SF of new deliveries and 30.5 million SF of net absorption. As a result, the vacancy rate is anticipated to increase to 6.2% in the fourth quarter.
While demand is spread throughout the entire metroplex, three submarkets captured just over 50% of the positive net absorption over the last 12 months, SE Dallas/I-45 (8.1million SF), NE Tarrant/Alliance (6.4 million SF), and S Central Tarrant County (4.4 million SF). For example, JLA Home, a home furnishings company, now occupies 1.1 million SF in the Dalport Trade Center in Wilmer. Panattoni Development built the $37.6 million dollar build-to-suit. In the DalParc Logistics Center, located in the SE Dallas/I-45 Submarket, Amazon moved into its 1 million-SF facility in July 2022. Net absorption is on pace to reach the second-highest level achieved in a decade, with 41 million SF of positive net absorption by the end of the year. 2021 marked the highest level recorded, with 47.8 million SF.
At 14.2%, annual rent is positive and is among one of the strongest among large metros and is expected to remain positive moving forward, with double-digit rent growth until 23Q2. The highest levels of growth are found in the industrial strongholds of the Upper Great Southwest (15.2%), E DFW Air/Las Colinas (15%), and SE Dallas/1-45 (15%). Sales volume has remained strong over the first eight months of the year. There have been 985 transactions totaling 42.3 million SF. The price per SF has increased from $102/SF in early 2021 to $111/SF.
Third-party logistics providers, national retailers, and consumer packaged goods firms continue to look to Dallas-Fort Worth as a critical hub for their distribution networks. These include household names like Target, Nike, and Samsung. From January to mid-September, tenants signed just over 1,700 new leases, totaling 46.8 million SF. Ninety-six leases were 100,000 SF or greater. These large deals account for 58% percent of the total leasing. The SE Dallas/I-45 Submarket reported twelve deals over 100,000 SF, totaling 5.6 million SF. This is largely due to the quality and size of the spec space built in the submarket. For example, home furnishings retailer Crate and Barrel signed a 698,800 SF deal in the Sunridge Business Park before the building was completed. Scannell was the developer of the modern spec building. The property features 40-foot clear heights and cross-dock loading.
The strong population growth has intensified the race among grocers for the $24 billion in annual grocery spending in the metro. For example, San Antonio-based H-E-B has entered the market with several new stores. Sprouts recently opened their first stores as well. In response, several existing grocers, Kroger, Walmart, Target, Trader Joe's, and Albertson's, are updating existing locations or looking to increase their footprints. This activity is also having an impact on the industrial market as companies need more warehouse space and more efficient ways to get products both directly to consumers and their stores. For example, Walmart has invested $800 million in two new facilities in Lancaster. The company has broken ground on a 1.5 million SF e-commerce fulfillment center and a 730,000 SF distribution center. Both projects are expected to deliver in 2023. Kroger is also building a 350,000 SF automated online grocery facility. In addition, H-E-B has recently moved into a 620,000 SF space in the Intermodal Commerce Park.
As companies reevaluate their supply chains following the recent passage of the CHIPS Act grant, the metroplex is well-positioned to take advantage of future opportunities. Several semiconductor manufacturers already have a presence here. These not only include the inventor of the first integrated circuit, Texas Instruments, but other firms, including National Semiconductor, Maxim Integrated Products, and STMicroelectronics. The market has already started to reap the benefits. Texas Instruments is expanding its operations with 102,000 SF under construction in Plano. The company has broken ground on a $30 billion campus north of Dallas in Sherman. TI considered putting the four-factory campus in Singapore before deciding on North Texas. In addition, GlobiTech announced it would also build a $5 billion plant in Sherman. When fully staffed, the facility will create 1,500 new jobs and produce more than 1 million silicon wafers monthly. Construction is expected to begin in 2023.
The information contained herein was obtained from CoStar; however, Bradford Companies makes no guarantees, warranties, or representation as to the completeness or accuracy thereof. The presentation of this property is submitted subject to errors, omissions, change of price or conditions prior to sale or lease or withdrawal without notice.