DALLAS-Once upon a time, the South Dallas submarket – that area south of the central business district — was a commercial real estate’s no-man’s land, one that never met the expectations or predictions of commercial real estate or political experts. But these days, much like the overnight sensation that was years in the making, South Dallas is receiving a lot of interest – and a lot of action – from industrial developers and corporations. As such, experts tell GlobeSt.com that the South Dallas sector could become to this region what the Inland Empire is to Southern California.
There is some reason for these comparisons. L’Oreal Group has plans to build a 513,000-square-foot regional distribution hub in the area. Prologis is underway on more development of its Prologis 20/35 business park. In the meantime, Kohl’s Department Stores has completed its 951,000-square-foot e-commerce distribution center, as has Home Depot, which completed a 1.2-million-square-foot distribution center.
Certainly incentives from the International Inland Port of Dallas, a city-oriented project geared to attract business to the area, has helped. There are two additional reasons why South Dallas these days is being considered the next hot spot target for industrial development: infrastructure and land. This is a rail-served submarket, not to mention Interstates 20, 35 and 45 run through it, as does US 67. “We’re seeing a shift from major corporations recognizing the pro-business environment of Texas,” observes Josh McArtor, CBRE Senior Vice President. “When they’re outsiders, and don’t have a North Dallas bias, they see it’s so much better to be down there and do lock-and-loads, where you bring in the majority of your product from trains, coming from California.” It can be a hassle for truck traffic from the West Coast to make it through the northern part of the DFW area, McArtor goes on to say. On the other hand, companies operating south of Interstate 20 “can bring those trains from California straight into South Dallas,” he notes. Both Union Pacific and Burlington Northern Santa Fe serve that area.
Even for those companies that aren’t using railroad, carting products around south Dallas County is less strenuous. Blake Kendrick, managing director-industrial with Stream Realty Partners LP, says distribution centers in that area certainly serve the Dallas-Fort Worth area. But they also serve the southern region of the United States. As such, “they can use the I-20 corridor to get product into or out of the area without having to drive into the interior of the Metroplex,” Kendrick says. “That saves trucking costs.”
Jones Lang LaSalle managing director Terry Darrow says the infrastructure is one part of the equation. The other is the massive amount of land. “The price of land,” he points out, “and the existing inventory.”
Companies requiring a lot of space may not find it further north in the region, Darrow adds; there are only so many areas that can support a 1-million-square-foot distribution center. But South Dallas is, more or less, uninhabited. Furthermore, “the cost of money is low these days,” says Allen Gump, executive vice president of Colliers International’s industrial division. “What I’m being told by brokers is that, when you look at the cost of a build-to-suit in that area, it wasn’t too far from what existing product is asking in other areas; the pricing was competitive. So why go into a spec building, when you can get what you want with a competitive price?”
Colliers vice president Ward Richmond delves into the situation somewhat further, pointing out that the companies already in South Dallas are showing they can build huge centers and large blocks of space. “What you see is the supply chain guys for distributors seeing this trend, seeing it in South Dallas, and that everyone consolidating distribution operations will seriously consider the area.
But why did it take so long for actions in South Dallas to walk the talk? Darrow says that, even with all the land, it took years for utility extensions to move onto that area, meaning development wasn’t really feasible, not without a lot of cost. Furthermore, Richmond notes, with a lot of CEOs and their employees living north of Interstate 30, the idea of South Dallas for a distribution center or warehouse was somewhat inefficient. ”Now, the savings when it comes to warehouse consolidation in South Dallas is going to trump where employees are based,” he says. “I think that’s what these supply chain experts are finding out.”