August is here and the grass in my front yard is brown from the scorcher that swung through Texas this past July.
It’s a Scorcher Out There
By Ward Richmond
August is here and the grass in my front yard is brown from the scorcher that swung through Texas this past July. In case you did not know, a scorcher is several consecutive days of walking through warehouses when it’s 107° outside.
You know what else is scorching? The DFW industrial real estate market once again, is certifiably, on fire! We dipped down to sub 6 vacancy at an aggressive 5.9%. I will continue to say this every quarter so you don’t forget – 10% used to be the norm! According to our expert research team at Colliers International, the DFW industrial market experienced 5 Mil SF of Net Absorption this summer totaling up to almost 8 Mil SF YTD. I like to see it hit the 20 Mil SF mark every year so we need to pick up the pace but nobody can really complain. Seriously. This is semi-ridiculous, y’all! According to my leasing broker friends, they have never had so many leases out for signature in DFW in their careers. The time is now. Developers are doing their best to keep up delivering 7.6 Mil SF YTD falling just short of the 8 Mil in Net Absorption. Furthermore, these industrial real estate wildcats have another 25 Mil SF +/- under construction.
As previously mentioned, the beauty of this DFW industrial landscape is that construction and absorption are extremely well aligned during the longest and strongest bull market in commercial real estate history. This occurrence allows landlords to keep cashin’ checks and snappin’ necks but also provides tenants with some pretty decent options and competitive economics. I’ve found that comparatively working deals in markets like Miami, Seattle, San Francisco, Toronto, New Jersey, and LA (I can keep going, but I’ll stop) prove to be an absolute nightmare due to lack of new supply and extremely low vacancy.
Why is this happening? In my opinion, it is fairly simple: The rise of e-commerce and the Amazon effect. Today, I get my Casper mattress delivered – and installed – and then I get my old mattress removed and disposed of – by XPO logistics (I am a shareholder). My IKEA furniture is delivered by TForce Final Mile (I am a shareholder). My groceries are delivered using my SHIPT app. I do my shopping on Instagram and get my coffee (and coffee maker) and Halloween costume and pretty much everything else I can ever think of via Amazon (I am a shareholder).
When do I want it? Basically, I want it as fast as my customers want their market surveys. Yesterday! The only way to make that happen is to build some serious distribution infrastructure and that’s what we are doing! There is no doubt in my mind that 2018 will go down in the history books as one of the most fruitful years in the history of the logistics and industrial real estate business – in DFW and across the globe.
Q2 2018 TOP DFW DEALS
- Mars Petco leased 1.5 Mil SF from Bandera Ventures landing just South of DFW Airport.
- Black & Deckerleased 1.2 Mil SF at Alliance Airport from the mighty, helicopter ying, Hillwood. Once you step foot in their helicopter, it’s hard to say No!
- Living Spaces subleased 858,000 SF in Grand Prairie from Restoration Hardware.
- VM Innovations My buddy Matt Elliott slammed down a 416K SF repping Core 5 with VM Innovations adjacent to the UP Intermodal in Hutchins, TX.
- Amazon keeps crushing DFW by allegedly renewing 920K SF with GLP (in the old Van Trust building) in South Dallas while simultaneously securing 395K SF with Port Logistics Realty just across I-45 in Wilmer, TX. Rumor has it, they have another 1 Mil SF working in South Dallas and another 1 Mil SF working on the tarmac at DFW Airport. Jeff Bezos, this is ridiculous. Please hire me.
Q2 2018 TOP RICHMOND TEAM PROJECTS
- USA Shade – DFW Airport, TX – 173,110 SF – New Lease
- Palmer Logistics – Dallas, TX – 157,467 SF – New Lease
- TForce Final Mile – Irving, TX – 101,900 SF – New Lease
- TForce Final Mile – Fullerton, CA – 100,000 SF – Renewal and Expansion
- Indel Food – 601 National Drive – Ennis TX – 315,000 SF – FOR LEASE
Big-Box deliveries picked up in Q2, after an unusually slow Q1. Seven properties totaling 3.5 million square feet were delivered, almost double last quarter’s total. Deliveries YTD are 5 million square feet behind the half-year mark in 2017. Pre-leasing activity is still healthy; delivered properties were 60% leased as of quarter end.
Vacancy declined 0.6% from the previous quarter and is down 1%from the prior year. Sublet space on the market continues to be high at 1.5 million square feet. Expect vacancy to continue its downward trend for the rest of the year, as e-commerce demand is strong and deliveries this year are expected to total 15 million square feet, almost 6 million square feet less than 2017.
After a very slow Q1, net absorption returned to levels normal for this real estate cycle in Q2. Absorption totaled 4.5 million square feet, bringing the YTD total to 6.3 million square feet, just 8% slower than half-year 2017. Expect Big-Box absorption to hover around the 3-5 million mark for the next few quarters.
Average asking rates for Big-Box product were flat quarter-to-quarter and year-over-year at $3.83.
MEET THE TEAM MEMBERS
Ward Richmond has over eleven years of experience specializing in industrial real estate, and has negotiated over 500 transactions while working in over 100 cities across the USA, Canada, and Mexico. Several publications have featured Ward for his expertise in this field including the Wall Street Journal, Dallas Morning News, and Dallas Business Journal. He also serves on Colliers International Industrial Advisory Board, and is a member of the Logistics & Transportation Solutions Group.
The Richmond team also includes Liam Logan, Cole Hooper, Brad Balke, Zack Rutland, Renèe Castillo and Rachel Hendrix. They assist with market analysis, financial analysis, strategic real estate and facilities planning, site selection, and acquisition and disposition services.
WARD RICHMOND, SIOR
Executive Vice President
ON THE ROAD AGAIN
August 20-22, 2018: 3PL Value Creation North America Summit, Chicago, IL
October 4-5, 2018: Colliers National Industrial Conference, Chicago, IL
Client Services Coordinator
Business Development & Content Strategist
The Richmond team is supported by Colliers International Research Team
This is a new map that we created with our superb Colliers DFW marketing team in an effort to show DFW’s 8 key industrial submarkets. This map gives you a snapshot of the DFW metro highlighting landmarks, airports, intermodals, distribution hubs and manufacturing facilities for notable tenants and of course the Best BBQ joint each submarket has to offer. We will keep evolving this map and if you would like to discuss the DFW marketplace, please contact our team to dig in further.