Dallas/Fort Worth's Industrial Market Picks Up Speed

C&W's Jean Russo believes activity, which picked up after Labor Day, will rise again after election day. "Just the fact that we're having the election and we'll have that certainty, it will influence some users to make a decision," she tells GlobeSt.com. "I think the fourth quarter is going to be gangbusters."

In the interim, Q3 leasing activity was strong, but the market remained flat. The C&W research team concluded deal-making predominately was done for small to midsize tenants, who moved and sometimes expanded within the same submarkets, creating holes with their exits to higher-grade product and lower effective rents. Nonetheless, year-to-date leasing activity of 16.9 million sf rang up 3.2 million sf more than last year at this time. The quarterly comparison stacks 857,248 sf of gain up against nearly 2.8 million sf of losses in 2003.

Regardless, the quarter was "disappointing," Russo says. "All this activity didn't translate to a big absorption."

Russo says office/showroom/warehouse space is dragging down the numbers for bulk distribution, a sector where she's had back-to-back weeks of 100,000-sf plus in dual deals for Carrollton properties. Only three of 12 submarkets raked in positive absorption: Garland/Mesquite, North Dallas and Irving/Coppell. The C&W report does not include the region's heavyweight, AllianceTexas.

Russo says the third quarter was fairly routine. Occupancy came in at 14.8% versus 14.1% a year ago and 14.7% just three months ago. Third-quarter rents ranged from $3.50 per sf to $8.20 per sf; last year, it was $3.60 per sf to $8.48 per sf. And three months ago, rent was $3.50 per sf to $8.29 per sf.

Whether it's restraint or building material costs, developers aren't overbuilding, according to Russo. "I would venture to say there's not an existing submarket that's overbuilt with spec space," she says, adding the concern is there won't be enough space to meet a significant spike in demand. "Their inventories are getting full."

Third-quarter completions added 669,020 sf to the 362.4-million-sf inventory. By midyear, deliveries hit 4.5 million sf and Russo predicts it will rise to 6.3 million sf by year's end, of which only 25% are build-to-suits.