While other sectors slowed to a crawl in 2020, one thing’s been positively booming: Industrial, and the real estate required for it. That’s led to big trends, and a jump in the push toward autonomous trucking. At Hillwood, Bill Burton has seen an “astounding volume of products” moving in and out as more and more people migrate into our region. More people means more demand, which means the need for even more warehouse space.

The biggest game-changer, according to Burton? The rapid onrush of autonomous movement—on highways, around warehouses, and throughout the industrial supply chain. Since North Texas is a leader in autonomous R&D, it’s already happening here—and fast.

In late October, Hillwood announced that driverless tech startup TuSimple has teamed up with the firm on a new trucking hub in AllianceTexas’ Mobility Innovation Zone, known as “MIZ.” With the deal, the autonomous trucking company became the first to put down roots in the MIZ, and its new facility is TuSimple’s first urban logistics center in Texas, 

Business has continued apace at Hillwood during the pandemic, according to Burton. The firm leased 3.5 million square feet of space during that time, including many renewals: “We signed renewals for SC Johnson, General Mills, and FedEx Logistics,” he says. “We’ve also started construction on a manufacturing facility for Craftsman Tools, now owned by Stanley Black & Decker. We did a 1.2 million-square-foot warehouse for Craftsman last year, and now we’re building a 425,000 million-square-foot manufacturing facility.”

The executive vice president of Hillwood Development Co., one of the commercial real estate experts featured in “21 on 2021,” shares his take on what’s next in our Q&A.

What’s the outlook for the DFW industrial market into 2021?

You’re going to have ebbs in certain markets. Food, as far as grocery, has been really hot. Is it going to stay at that high level? I suspect it will stay elevated, but as restaurants become more popular again, that will mitigate somewhat.

Online is what everybody’s talking about and dealing with as a significant part of the economy that’s here to stay. And it’s having a significant impact on industrial demand, not just in DFW but across the country. I was on a call earlier this week with a forum I’m in—it has developers from Northern and Southern California, Chicago, Virginia, Columbus, New York, and Atlanta—and everybody is basically saying the same thing: They’re experiencing the same sort of activity across the board.

“I think online is what everybody’s talking about and dealing with as a significant part of the economy that is here to stay. And it’s having a significant impact on industrial demand, not just in DFW but across the country.”

The industrial market has been steady. There are some industries that have been heavily impacted on a negative basis, like aerospace and hospitality, but consumer products, e-commerce, and electronics have been very, very strong.

We’re still seeing a lot of in-migration into the region. There’s a direct correlation between internet or e-commerce sales and warehouse demand. It could have negative implications for some retail, but there’s a correlation of population and warehouse demand. At Hillwood, we’re seeing an astounding volume of products moving in and out, but I don’t think that’s unique. It’s going on across the region. As more people come, there are more requirements for products, and that means more warehouse space.

What important trends do you see rising?

If you look at the supply chain, real estate is about 10 percent of the cost; the rest is transportation and labor. So to the extent you can check those numbers, you really put yourself in a better place. We’ve increased our clearance heights, increased truck spaces, and employee parking.

Where the real impact is going to be is in labor and transportation. If you look at the BNSF intermodal, rail is the most cost-effective means of moving goods across the country. You have the flexibility to move containers across the ocean and onto trucks and move them across the country on a train.

Once you get inside the yard, there’s the autonomous movement. It’s coming pretty rapidly. The autonomous movement of goods in the intermodal yard—and from intermodal to warehouse, as long as they’re close—you’re going to see significant movement in that area, and it’ll be a significant advantage. North Texas is already a leader in the research and development of autonomous long-haul trucking. That’s where you see the activity right now, because there’s less interaction with other traffic and humans and other things that can get in the way. You have a lot of trucks moving up and down the highway right now, and somebody’s sitting in the seat, but they’re not driving. It’s being driven autonomously.

North Texas is a leader for a number of different reasons: the large freeway system and a government that’s willing to work with companies to move this kind of technology forward. BNSF is a clear leader in the area with their activity and volumes at the intermodal. A couple of years ago we were the 52nd largest port in the world—today we might be 50th—and we have no water. We’re seeing great volume, and we’re going to increase those volumes with technology. We’re also going to reduce costs and increase reliability with technology. And that’s going to manifest in the autonomous movement of these goods to the warehouses coming in.

Autonomous activity is coming. It’s going to grow rapidly, and it’s going to have an impact on us, and we’re well suited to benefit from it. It’s here.

Talk about the convergence of industrial and retail spaces.

There’s a lot of discussion about retail to industrial. I think that may happen, but only on a limited basis. The interaction of people and trucks is not a good interaction. There’s got to be a clear delineation, and then the use has to be right for the community. You’re going to see that more in densely constrained markets without availability of land, like New York, less so here in DFW. What you will see is retailers utilizing brick and mortar footprints as an asset in their supply chain. You’re already seeing it with Walmart and Target and Costco, with online orders and in-person pickups.

How has the industrial market changed in the pandemic?

I wouldn’t call them way up, but renewals are active. We’ve seen less moving around. If renewals are up, that means they’re getting done. For those entering the market, there’s a lot less tire kicking and more moving on deals at a good pace.

Looking ahead, what’s your biggest message about the industrial market in Dallas-Fort Worth?

Autonomous activity is coming. It’s here, it’s going to grow rapidly, and it’s going to have an impact on us, and we’re well suited to benefit from it.

The interview has been edited for brevity and clarity. A version of this story first published in the Fall 2020 edition of the Dallas-Fort Worth Real Estate Review.

Sandra Engelland contributed to this report.

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