By Ward Richmond
As I sit here at the home office on this hot August day, I can confirm that this summer was the strangest one in the history of my life thus far. Stranger than fiction.
In general, COVID-19 seems to still be spinning out of control and I’m not sure if I’m more concerned about the disease itself or the fact that the entertainment, retail and hospitality sectors have been blindsided by COVID like Jim Kelly getting smashed by Charles Haley back in 1993 when we could attend NFL games and high five strangers.
The only good news I have to report is that our team is currently COVID free and at this point in our journey through Apocalypse Land, it appears the Big Box industrial real estate market is certifiably pandemic proof.
I know that some of my competitors have questioned if Prologis covertly developed a COVID vaccine back in 2019 to save distribution centers from coronavirus but I’m here to tell you that what actually happened is a monumental rise in eCommerce due to government enforced home shopping.
The DFW Industrial Market stayed strong overall in Q2 2020 putting up some big numbers and closing some huge deals. Developers have delivered 18.3 Mil SF of space YTD and have another 28 Mil SF under construction. The 28 Mil under construction is a steep decline from the 35 Mil SF +/- we have seen in recent quarters so it is obvious that the global economic crisis has caused many developers to be a little more conservative than they were being a year ago.
The Big Box Market (200K SF + facilities) hit a huge net absorption number with 6 Mil SF of deals getting done. Frankly, that is where the good news stops.
The overall DFW Industrial absorption was actually only 5.5 Mil SF due to the NON Big-Box warehouse market actually seeing NEGATIVE 400K SF in net absorption for the first time in a long time while the Flex market also saw 200K SF in negative absorption. These are important metrics to understand that should not be overlooked with your rose-colored supply chain real estate glasses. The true winners of this pandemic are the large modern, bulk industrial facilities being built to support eCommerce distribution – not necessarily industrial real estate as a whole.
The fact that the Big Box market is now performing differently when compared to the rest of the industrial market makes me think that the Big Box market is essentially becoming its very own asset class in this new eComm exploding, COVID world that we are living in.
In closing, I’m excited to announce that real estate brokers, tenants and landlords everywhere set the new Guinness Book record for closing more deals from their living rooms and back porches than ever recorded in history of real estate. Congratulations!
Our team is continuing to work hard and adjust to the new COVID workstyle as we continue to innovate and drive value for our customers.
We can’t help but be extremely grateful during times like this, when the world gets flipped upside down with vast uncertainty, that we are fortunate enough to have such incredible customers who we consider to be our great friends by our side as we navigate the COVID jungle together to generate massive value for occupiers of supply chain real estate.
Leasing activity through the first half 2020 is the hottest it has ever been. Tenants signed deals totaling over a record 15.5 million square feet in these first two quarters, Absorption also set a record with more space being absorbed, over 14.5 million square feet, in the first and second quarters of this year than in any other comparative time period. The previous record was in 2019 with 8.8 million square feet absorbed.
Record absorbed and vacancy levels of 10.2%, keeping construction levels high.
Construction levels high with 19.3 million square feet of space set to deliver over the next 12 months. There were 4 new buildings totaling over 2 million square feet that began construction in the second quarter.
Rental rates shot up to $4.31 per square foot NNN, which is the first time overall asking rates were over $4.00 per square foot.
Ward Richmond has over twelve 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.
Executive Vice President
Client Services Specialist
ON THE ROAD AGAIN
Aug 19, 2020: IWLA Virtual Convention
The Gladiator Group is supported by Colliers International Research Team
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