DALLAS—The current climate for industrial activity in the US is a matter of the haves and the have-nots, and the Dallas/Ft. Worth market is among the haves. That’s the conclusion of a new study (Q2 Industrial Report) from Lee & Associates that looks at ten key large markets spanning the country.
Currently, Dallas has more than more than 14 million square feet of bulk distribution facilities under development, more than any other metro area in the US.
Conditions driving the boom in Dallas include a healthy local economy and a business- friendly environment. Perhaps the key consideration however, for all markets, is room for growth, and Dallas—more so than places like Baltimore and Central Los Angeles—has ample land available for development, according to Lee’s report.
The Dallas/Fort Worth Metroplex (DFW) has been and continues to be heading in the right direction. Job and population growth, key indicators of economic health, are increasing at a steady pace. The area’s central US location, business-friendly environment and affordable cost structure continues to attract businesses from around the country that are contributing to record-breaking net absorption. Demand for warehouse, manufacturing, assembly and flex product is also on the rise, which speaks to the increasing diversity of the local economy and the improving job picture.
Construction activity in Dallas’ industrial sector has been strong, Lee says, with build-to-suit activity leading the way. The report notes that in 2014 there have been several major move-ins pushing occupancy upward, including Proctor & Gamble’s 1.6 million square foot distribution center.
The unemployment rate has fallen to 5.1%, well below the national rate of 6.1%. Rents, too, are trending upward, as the increase in demand for space has lowered the industrial vacancy rate overall to 7.3%, which has encouraged landlords to push rates higher and developers to move forward with speculative development.
As for the future, as absorption continues, available product will give way to new development the report says.
Fortunately, land is still available for development to keep up with demand over time, but competition for existing product could become more intense in the short run. Lease rates and sales prices should continue moving up, as will the construction of new inventory, which should keep supply and demand in relative balance for the next several quarters.