DFW Industrial Market Report Highlights
Economy: Dallas-Fort Worth’s affordability, location, and quality of labor continue to draw major employers to the metro. The cost of business is an obvious consideration for any company looking to expand or relocate, and for companies weighing the metroplex against major coastal cities like Boston or San Francisco, the price differential can be substantial. Business costs in Dallas-Fort Worth are roughly even with the national average, while costs in many coastal cities are more than 20% above that. Plus, policies at both the state and local level tend to be business-friendly DFW cities often dole out generous tax incentives to entice big new office and retail tenants.
Construction: The supply pipeline has yet to slow down, making this market one of the most active in the country. Historically, DFW has delivered more than 15 million SF annually. However, about 21 million SF came to market in 2016 and nearly 30 million SF delivered in 2017. Most projects are still breaking ground on a speculative basis, but some major build-to-suits for companies like Kohler, Ashley Furniture, Shippers Warehouse, and Wayfair began construction in recent months. Of the total square feet under construction as of the end of 2017, about 60% was available for lease, which is lower compared to a few months prior.
Rents: Though a significant amount of spec construction has delivered in recent quarters, vacancies are still below the market’s historical average. Correspondingly, rent growth is still much stronger than the historical average, following the national trend. While construction has yet to slow down, most groundbreakings in the second half of 2017 were build-to-suits for large industrial users.
Sales: Investment activity has ballooned this cycle, with national portfolio deals containing DFW assets driving volume. After a big year in terms of turnover in 2015, when more than 8% if the metro’s inventory sold, slightly more than 6% of stock changed hands in both 2016 and 2017, which is more in line with the annual average for this cycle. Average pricing on observed deals has leveled off in recent years at just above $60/SF, and after years of compression coming out of the downturn, cap rates have flattened out.
FULL REPORT: DFW Industrial Market Report