Q2 2023 Dallas-Fort Worth Industrial Market Report
Market Overview
While there has been a slowdown in industrial construction nationwide, the Dallas-Fort Worth metro stands as an outlier. Dallas-Fort Worth boasts the largest ongoing industrial development in the nation, with a staggering 63.9 million square feet of space currently under construction. The region’s industrial market is experiencing significant growth due to its strategic central location, well-connected highway and railway systems, and major air transportation hubs. These factors contribute to the region’s appeal for tenants seeking regional or global market access, making it an attractive destination with excellent value propositions. Investors are increasingly focusing their attention on industrial properties in the Dallas-Fort Worth market due to consistent demand and substantial growth in rental rates.
Highlights
- Rent growth in the market is primarily driven by logistics hubs and is influenced by factors such as location and supply availability.
- The market witnessed a significant increase in deliveries, with a total of 30 million SF year-to-date.
- In the last 12 months, international investors acquired 167 industrial properties, amounting to 20.7 million SF.
- Leases of 50,000 SF or less make up 19% of the market’s total lease volume, and 200,000 SF or more leases account for 50%.
Rents | Vacancy | Construction
The market has experienced rent growth of 9.6 percent over the last year, resulting in market rents reaching $9.10 per square foot. However, the rent growth rate has reached a turning point in the previous two quarters. The increasing number of property deliveries, rising vacancy rates, and higher availability rates could soon exert downward pressure on rents. Since the end of 2022, the market’s vacancy rate has experienced a significant increase of 130 basis points, currently at 7.2 percent. As the projects currently underway, totaling 63.9 million square feet, are projected to be completed within the next year or so, vacancy rates are expected to expand further.
Construction activities are taking place throughout the metro; however, approximately 50 percent of the construction pipeline is concentrated in three specific submarkets: SE Dallas/I-45, NE Tarrant/Alliance, and Forney/Terrell/Kaufman County. These areas provide distinct advantages in terms of multimodal transportation, which is highly sought after by tenants.
The Dallas-Fort Worth metro currently represents 16% of total deliveries nationally.
Sales
Dallas-Fort Worth, by the numbers in the past 12 months
- Vacancy Change: 1.6%
- Net Absorption SF: 38.1M
- Deliveries SF: 61.4M
- Rent Growth: 9.6%
- Sales Volume: $2.9B
Ongoing demand and double-digit rent growth have attracted increased investor interest toward industrial properties. This increase in interest has resulted in higher asset prices over the last two years. However, the rising interest rates are leading to an increase in the cost of debt. Consequently, asset prices are experiencing a decline, and cap rates are expanding.
