In the industrial market, it’s all about perspective

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Luftaufnahme von MonheimThe headlines are all talking about the construction going on in the Dallas-Fort Worth industrial market, currently there is about 16.6 million square feet underway.  That’s not a record breaking number, but it’s a good bit above the historic norm of about 10 million square feet per year.

The thing is, the number seems justified given that since 2010, only 16.3 million square feet has been completed and current absorption trends indicate that there’s pent up demand for space.  In the past quarter, of the 3 million square feet completed, everyone one of those projects was built-to-suit or had significant pre-leasing activity (Fruit of the Earth, Cummins Diesel, Williams-Sonoma, Keystone Automotive, FedEx and Ace Hardware all took down large blocks of brand new space).  As you can see from those notable names, there’s a healthy mix of industries.

DFW is growing rapidly and with the construction pipeline largely being shut down in the 2009 to 2012 time period, our market currently in a bit of a “catch up” mode.  So don’t be too alarmed by the current pipeline.  Yes, the total vacancy rate is likely to go up over the next few quarters, but right now it’s at 5.6 percent, an historic low.  It needs to go up to give the relocating and expanding tenants reasonable options to grow their businesses and keep pace with strong population growth taking place.  Keep in mind that DFW’s population is projected to grow 42.4 percent between 2010 and 2030.  That’s an eye-popping number, but it’s not that dramatically higher than 1970 to 1990 when DFW grew by 39.5 percent or in the 1990 to 2010 period, when growth was 37.3 percent.

All this growth means that warehouses and distribution centers for key household related products (think residential construction related industries), food (freezer/cooler facilities and dry storage), along durable goods (household appliances, furniture and automobiles) are all going to see significant expansions in our area.

The list of recent transactions backup these predictions.  Last year, we saw two large fulfillment centers from Amazon, currently Nebraska Furniture Mart very large showroom/distribution facility underway, Walmart is in the process of expanding its fulfillment footprint, look for more along these lines, along with third party logistics companies, which service as an outsourcing venue for all of the above mentioned industries to some degree.

The key takeaway is DFW is in growth mode.

It’s a mix of a lot of things: central location, low cost of doing business, available land, large labor force.  That combined with organic growth and relocations point to big construction ahead for the next few years, especially for state of the art warehouse and distribution facilities to accommodate the durable and nondurable goods needed fuel that growth.

About the Author

Hoobler, ForsheyVice President Forshey Hoobler specializes in tenant representation for corporate users. His primary responsibilities include developing new business relationships, market research, performing financial analysis, lease negotiations and documentations for corporate users.  View Forshey Hoobler’s bio or connect with him on LinkedIn.

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