When you look at the industrial market in Dallas-Fort Worth in 2021 and ahead to 2022, you could sum it up as more, more, more.
Yes, more construction, more leasing, and more jobs. Experts believe that 2022 will continue the momentum of 2021, which was a “banner year,” says Cushman & Wakefield analyst Christopher Grubbs. He says that the DFW industrial market is a “vital, sought-after logistics hub” that has been resilient throughout the pandemic.
Recent reports from real estate firm Transwestern also say Dallas-Fort Worth should continue its robust performance in 2022. “Tailwinds for the sector will likely continue as logistics managers expect little relief for warehouse utilization over the next 12 months. Combined with a bullish economic outlook and population growth, demand should continue absorbing space and driving rent growth in 2022 and beyond,” Transwestern says in the report.
DFW smashed records in the fourth quarter, with demand reaching an all-time high of 41.7 million square feet and driving vacancy rates to historic lows, according to the report. It adds that rents are reaching new highs as industrial properties achieve double-digit growth and flex properties rebound. Notably, speculative development reached an all-time high of 43.9 million square feet, and the leasing of new spaces reached above-average rates. The report goes on to say that industrial rents are up 10.5% over 2021.
C&W’s Grubbs says industrial demand has proved to be resilient throughout the pandemic so far. He points to five factors that define the industrial market in DFW:
- Vacancy fell to 5.6% in Q4 2021, well below the 15-year historical average of 8.2%, with lower vacancy mainly driven by demand outpacing the supply.
- The market has 54.1 million square feet of space under construction, led by Southern Dallas with 15.4 million square feet, AllianceTexas with 8.9 million square feet, and South Fort Worth at 6.1 million square feet.
- E-commerce is an “industrial bell cow” that also shows how customers are buying goods. In Q4, Amazon took occupancy on a new 1.1-million-square-foot build-to-suit.
- Leasing activity shows no sign of slowing down, with notable activity in the Dallas Fort Worth International Airport (2.5 million square feet), Alliance (1.8 million square feet), and Great Southwest and Far North/I-35 areas at 1.2 million square feet.
- Net absorption in Q4 totaled 10.4 million square feet, mirroring the positive momentum from the previous three quarters. That absorption far exceeds new supply by nearly 6.4 million square feet.
Cushman & Wakefield‘s Nathan Orbin, who is executive managing director for the U.S. with the firm, says 2021 saw the creation of many jobs in the industrial sector, particularly in trade, transportation, and utilities. He cites Moody’s Analytics, which reported the DFW industrial sector grew by 1% (10,833 jobs) in the third quarter of 2021 alone.
Orbin says a leading indicator of industrial demand is jobs in trade, transportation, and utilities, which accounted for most of the industrial growth, at 75%, or 831,952 jobs.
Industrial employment in DFW totaled 1.1 million jobs at the end of September. As a whole, the market is experiencing positive, elevated demand and supply. Cushman & Wakefield is tracking more than 36.2 million square feet of active tenant requirements, which includes the organic growth and expansion of companies already operating in the region as well as new businesses entering the market.
Orbin says at the end of the Q3, the overall vacancy rate in DFW was 6.6%, a 20-basis-point reduction over the prior quarter.
“We believe leasing activity will continue to be extremely robust, keeping vacancy below historical levels,” Orbin concludes.
A version of this story first appeared in the print edition of DALLAS® Commercial Real Estate 2022, published by Dallas Next for TREC and the Dallas Regional Chamber. Read more in the digital edition of the magazine below, and request the next print edition here.
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