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.
To get further inside my supply chain brain,
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AVG Qoated Rate:$3.83 SF
200,000-499,999 SF: 358/73
500,000-749,999 Sf: 91/22
750,000+ SF: 62/11
Q4 2017 was a record quarter for Big-Box net absorption with over 7.1 million square feet. After a slow first three quarters, absorption more than caught up in Q4, posting a record year with 17.9 million square feet. Major Q4 move-ins included Amazon moving into 2.5 million square feet in three properties, UPS moving into 1 million square feet, and TTI occupying its 600k build-to-suit.
Due to strong absorption, vacancy decreased 0.5% from Q3 to 9.9%. South Dallas is still the market with the highest vacancy, but it saw a significant drop to 19.2% after absorbing two million square feet. Infill markets such as DFW Airport and the West I-30 corridor are in demand and posted 2.6% and 3.9% vacancy rates, respectively.
For all of 2017, the market added 22 million square feet in 43 properties, the most in our statistical history. In Q4, 13 properties delivered and were 51% leased on completion. The construction pipeline still holds 33 properties totaling 16 million square feet, of which two-thirds are speculative.
Asking rental rates were flat from Q3 to Q4 at $3.79. Rates are up 1.9% year-over-year showing that supply and demand are reaching a balance.
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.
Executive Vice President
ON THE ROAD AGAIN
Aug 20-22, 2018:3PL Value Creation North America Summit, Chicago, IL
October 4-5, 2018: : Colliers National Industrial Conference, Chicago, IL
Client Services Coordinator
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.
CONTACT WARD RICHMOND AT: