May 10, 2017
Market Reports



By Ward Richmond


DFW Market Overview

Dallas–Fort Worth is the nation’s fourth-largest metro area, behind New York City, Los Angeles, and Chicago, and conveniently positioned in the middle of the United States

The region’s central location allows it to function as a logistics and distribution hub, giving businesses an edge by putting key markets within easy reach of both truck and rail shipping

The DFW region’s attractive quality of life, strong regional and state economy, low cost of living, young and skilled labor force, business friendly taxation and regulatory environment, and absence of corporate and personal income taxes all contribute to the thriving DFW location

For business travelers, the region’s mid-continent location is less than four hours away from any major U.S. city.

DFW’s central location attracts companies seeking a location at the midpoint between the coasts with additional global access through DFW Airport. In August 2016, over 71,000 tons of cargo went through the airport, a 21.7% increase over the prior year. Jobs grew 3.4% from August 2015-2016, and in its Beige Book the Dallas Federal Reserve noted increasing output and a more positive outlook for manufacturing.

The region excels in passenger air travel and air cargo operations with the nation’s third busiest airport, DFW International Airport; Dallas Love Field Airport, home to the largest domestic airline in the country; and the world’s first fully industrial airport, Fort Worth Alliance Airport

In the past 5 years, 70 fortune 1000 companies have moved to DFW, 35 of which are from California. With the amount of job being created, consumer demand continues to grow strengthening our position as a leading distribution hub in North America.

Site Location Trends

Back office, headquarters of all sizes, and distribution centers make up a large portion of new project activity with a significant uptick in food and consumer products manufacturing activity, given in large part to the region’s population growth.

Prospects cite ease of recruiting top-notch talent at a relatively low cost as one of their main site-selection drivers. Both commercial and residential real estate costs and availability are other critical drivers for site selection decisions.

Q1 2017 Market Highlights

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.

In the first quester 2017, the overall DFW Industrial comprised of 786 million SF and saw almost 5.9 million square feet of absorption with a vacancy rate of 6.1%.New supply year to date over 6.6 million SF and currently over 18.3 million SF Under construction.

Q1 2017 Key Takeaways

Dallas’ Big Box market continues to show strong activity, with almost 5 million square feet of absorption in Q1 2017. The South Dallas submarket led the market with 1.35 million square feet of absorption, trailed only slightly by Alliance with 1.21 million square feet.

Big Box vacancy was flat from Q4 2016, decreasing only 0.1%, but up 0.6% year-over-year. Vacancy has been highly volitile due to the prevalence of spec construction of 750,000+ square foot warehouses.

Net absorption kept pace with deliveries for the past several quarters. In Q1 2017, net absorption outpaced supply by 1.6 million square feet. For all of 2016, net absorption only lagged behind supply by 446,000 square feet. Developers will continue to build speculative product in response to this trend.

Asking rental rates increased from an average of $3.61 in Q4 2016 to $3.75 in Q1 2017. Expect rates to continue to increase, as developers cover rising construction costs for new product.

Development and Construction Trends

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.

Most Active Developers UC

  • Hillwood – 1.5 mil at Alliance
  • Hillwood – 950K SF in Desoto
  • Invesco/Ridge Development – 1.2 mil SF@ NWC I-20 & 360
  • Port Logistics Realty – 400K SF South Dallas
  • Core5 Industrial – 750K SF South Dallas

Notable Q1 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.
  • GLP purchased Amazon’s 1.05 million SF facility in Coppell for $64 PSF at a 5.1% cap from Hillwood in March

Deals in the Market

  • Wayfair – 1 mil SF
  • Pure Renewables – 1 mil SF
  • Kirkland – 750K-1 mil SF
  • Kohler – 1 – 1.5 mil SF
  • OLAM Cotton – 600-700K SF
  • XPO – 500-700K SF
  • KidKraft – 500K SF
  • RSI – 400-500K SF
  • Loloi Rugs – 500K SD

Active Sellers and Buyers – Q1 2017

  • TA Realty Sold 3 buildings (total portfolio of 45 bldgs.) totaling 961,137 SF to Brookfield AM  – March 2017
  • LBA Realty sold 3 buildings (total portfolio of 24 bldgs) totaling 551,272 SF to Rosewood Private Invmts
  • Anderson Management Services INC sold 2 buildings totaling 548,361 SF to Exeter
  • Cabot sold 24 buildings (total portfolio of 125 buildings) totaling 3.8 million SF to DRA Advisors
  • GLP purchased Amazon’s 1.05 million SF facility in Coppell for $64 PSF at a 5.1% cap from Hillwood in March

2016 DFW Most Active Buyers

  • Canada Pension Plan Investment Board – 44 properties
  • DRA Advisors – 28 properties
  • Sealy & Co – 13 properties
  • Cabot Properties – 13 properties

2016 DFW Most Active Sellers

  • GLP – 44 properties
  • Cabot – 27 properties
  • Holt Lunsford – 15 properties
  • Prologis – 13 properties
  • Exeter – 12 properties
  • TA Realty – 11 properties

Q1 2017 DFW Most Active Buyers

  • Brookfield AM
  • SAFE, Rosewood Private Invmts
  • Exeter
  • DRA Advisors
  • GLP

Q1 2017 Most Active Sellers

  • TA Realty
  • Hillwood
  • LBA Realty
  • Cabot Properties