DFW Market Update Q1 2017 – Cautiously Optimistic

DFW Market Update Q1 2017 – Cautiously Optimistic

By Ward Richmond

DFW MARKET UPDATE Q1 2017

“The Colliers team worked quickly and efficiently to leverage their local market relationships to find KW multiple short term, flexible space solutions in an expedient and professional manner.”

– Deal Dokgo, Vice President, KW International

Cautiously Optimistic

As we kick off 2017, confidence in the Dallas-Fort Worth industrial market is high. Developers claim to be “cautiously optimistic” as they continue to break ground on new projects, and investors are buying and selling at record prices. This optimism is not unfounded – the DFW region’s role in the global cargo network is on the rise, job growth is steady, and real estate fundamentals continue to improve even after reaching their best levels in over a decade.

Most industrial real estate investors and developers (and brokers) that I meet with are coming off one of their best years ever. It is definitely a “landlord’s market.” Vacancy rates and cap rates are low, and rent rates are high. This is a general trend throughout most of the country and especially here in DFW.

In 2016, the overall DFW Big Box market, which consists of warehouse/distribution buildings over 200,000 SF and 28-foot clear height, saw almost 17 million SF of absorption with a vacancy rate of 9.6%. DFW delivered over 17 million SF of new supply in 2016, and at the end of the year, there was 15.1 million under construction.

Q1 2017 started off strong with over 5 million SF of absorption with an overall vacancy rate of 9.7%. So far this year, DFW has delivered 3.8 million SF, and 15.1 million SF is under construction with the most active submarkets being South Dallas, GSW, and North Fort Worth for new construction.

*”Big Box” – Industrial buildings over 200K SF and 28’ clear height minimum.

Everyone is closely watching the construction of industrial buildings coming on line this year coming out of the ground in DFW, but the strength of the region’s distribution and warehouse market has yet to slow down.

To continually track market moving events, general trends in the commercial real estate and logistics industries, I have started a blog: www.supplychainrealestate.com/blog/. Please check it out and email me if you want a trucker hat!

Notable Q1 2017 Transactions in DFW

• Ashley Furniture purchased a 358-acre tract of land in Mesquite, TX to build 850,000-square-foot regional distribution hub.
• United Parcel Service leased 1 million SF from Exeter Property Group in Arlington, TX.
• United Parcel Service reportedly purchased 800,000 SF facility from Hillwood in North Fort Worth.

Big Deals Completed by Team Richmond in Q1 2017

• Represented Dymatize Enterprises on the sale of two building portfolio comprised of 145,000 SF in Farmers Branch, TX.
• Represented TForce Final Mile on 112,000 SF lease in Las Vegas, NV.
• Represented TForce Final Mile on 74,368 SF lease in Teterboro, NJ.

KW International Case Study

Challenge:
KW International, Inc. needed to provide reverse logistics solutions to accommodate top customers in need of emergency space during the peak holiday season.

Strategy:
By understanding the importance of year-end occupancy for investors, Colliers chose to focus their efforts on vacancies in the market owned by top institutional landlords.

Solution:
The Colliers team provided a detailed market survey of all available short-term leases and sublet options that would allow KW the flexibility they required within 48 hours of receiving the initial request.

Result:

• Secured 50K SF within eight business days of initial request
• Due to increasing capacity demands, secured and relocated to 80K SF
• Due to an unexpected surge in inventory, secured and relocated into 250K SF facility and negotiated a 50% reduction in the first month’s rental rate

Dallas / Fort Worth Big Box Market Report (2017)

ABOUT THE AUTHOR

Ward Richmond

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