By Ward Richmond
Dallas-Ft. Worth continues on a record breaking industrial real estate warpath in 2021. As we approach the end of the year, the DFW industrial real estate market has already shattered every record on the record books. Absorption busted through the 30 Mil SF mark in Q3 and will likely break through 40 Mil SF by the end of the year (previous annual record was 23 Mil SF) and product under construction sat at 47 Mil SF at the end of Q3 and according to my sources, we are approaching 55 Mil SF UC as we come into the New Year (previous record was 35 Mil) with a remarkable vacancy rate of 5.7% at the end of Q3.
Investors are foaming at the mouth while trying to acquire as much industrial real estate as possible in the Metro area driving cap rates to all-time lows in the low 3% range ($200 +/- PSF) for Class A Core Product. Mind blown. Truck terminals and maintenance facilities are also commanding record pricing (20 psf to the dirt for Truck Parking) and rampant bidding wars from investors looking to take advantage of these unique facilities to accommodate massive shortage of truck parking occurring throughout the US (and beyond).
Construction costs are continue to creep upwards, primarily due to raw materials pricing. Buildings are also taking longer than ever to build due to longer lead times, labor constraints (related to everyone from construction workers to architects to civil engineers to real estate attorneys) due to the overwhelming amount of activity.
DFW is arguably the most active logistics real estate market in the world in 2021. Wow! Let’s pat ourselves on the back for the amazing logistics infrastructure, low cost of living, central location, strong labor pool, fast growing population and business friendly government.
In DFW alone, we currently have +/- 14 different 1 Mil SF buildings being built on a speculative basis. According to my sources, market activity is stronger than it’s ever been with 8 active tenants seeking 1 Mil SF buildings and undoubtedly more on the horizon.
This drastic uptick in demand is due to the global supply chain being flipped upside down thanks to the most popular virus of the Roaring 20’s, COVID-19. Being locked inside our homes for all of 2020 forced consumer buying habits to shift heavily from traditional Retail to eCommerce creating a dramatic spike in eComm growth.
We have also seen hoarding of all things ranging from consumer products to raw materials which have put demand expectations totally out of whack, spiking costs and lead times while being complimented by an already low labor supply for port workers and truck drivers which has only been compounded due to The ‘Rona.
While I am always an optimist, and I’m hopeful that we are not at risk of overbuilding with a whopping +/- 50 Mil SF under construction, we are closely watching market dynamics to see how demand will be impacted in 2022 and beyond as shippers, carriers, ports and government officials work together to fix the Covid ravaged supply chain.
We hope you have a wonderful holiday season all stay safe out there and please reach out direct if we can help you with your Supply Chain Real Estate needs.
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DFW’s year-to-date absorption has surpassed a record 33.9 million square feet
Construction is at an all-time high with over 47 million square feet currently in development. This is the 17th quarter in a row of construction levels surpassing 25 million square feet.
Vacancy levels are at 5.7%, marking only the 5th time in the past 20 years being under 6%.
Ward Richmond has over fifteen 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.
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