Absorption Tops 15M SF, Nudges Record Year

DALLAS-The Dallas/Fort Worth industrial market has marked a near-record year. The submarket leader is the Great Southwest-CentrePort, the region's largest concentration of industrial space and one of the nation's oldest districts of its type.

Because data collection differs, Cushman & Wakefield of Texas Inc. pegs the last year's overall absorption at 15.26 million sf while CB Richard Ellis calculates it at 13.5 million sf. C&W's thermometer puts vacancy at 10.3%; CBRE's at 8.9%. Nonetheless, pros on both sides of the fence agree that the numbers still translate to the best year since 2000.

"In some respects, it's a record," Craig Hughes, a C&W director in Dallas, tells GlobeSt.com. "It certainly rivals 2000." The Great Southwest-CentrePort submarket hit 3.4 million sf of absorption last year, shaving several points from its vacancy. When the calendar flipped, the 65.45-million-sf submarket was 12% empty.

"The last couple of years it really got hammered," Hughes says. "Now, they have Triple Freeport and they're starting to backfill that space. It's coming back in line with the rest of the market."

C&W puts the Great Southwest-CentrePort into the Dallas column. As a result, Dallas' 373.38-million-sf inventory is 11.3% vacant. Fort Worth's 90.28 million sf is 4.4% vacant, with its 17.7-million-sf anchor AllianceTexas with just 2.1% empty. "Those are California numbers," Hughes says. With Fort Worth so close to full, he says at least two million sf of spec development is on the planning boards.

"The interesting thing is that construction, while a lot is being built, has not exceeded absorption," CBRE's vice president Steven Berger points out. The firm estimates construction at 8.5 million sf or five million sf less than its absorption tally.

In the Great Southwest-CentrePort, developers are building 654,800 sf, at the last count. The lion's share is coming from Atlanta-based Seefried Properties Inc. and Dallas-based Granite Properties in the 320-acre RiverPark, situated two miles south of the Dallas/Fort Worth International Airport.

Granite's 145,400-sf RiverPark Business Center at 15600 Trinity Blvd. has just landed its first two tenants. Eriks Southwest Inc., a Netherlands-based technical services' firm, preleased 14,760 sf and Garden Fresh Restaurant Corp. of San Diego took 14,811 sf. Eriks moves in next week; Garden Fresh in mid-May.

"There's a very thick list of real prospects out there searching for new homes for consolidations, local expansions or simply new distribution locations in the Dallas/Fort Worth area," Berger says. "It's a very stable, controlled market. 2007 looks to be a year that will be very similar to 2006."

C&W calculates last year's leasing activity at 32.77 million sf. "There is a trend in this market that deals are getting bigger," says Kurt Griffin, C&W senior director, "and there are more of them. The distinguishing thing for 2006 was the number of large lease deals that happened." Not only are there more 100,000-sf and larger deals, but he says tenants are once again competing for the same space as a further sign of the market's strength.

Rents are continuing to tick up slightly, vacancy is declining and high absorption is clearly in the cards for 2007. C&W shows rent averages $3.62 per sf for warehouse and distribution and $8.06 per sf for office flex. CBRE says rent, on average, climbed 10 cents per sf in the past year.

"The beginning of the year is really starting off strong," Hughes says. "If that's an indicator, we should have a really good year. Commercial real estate has not slumped as the numbers are showing."

The Great Southwest-CentrePort isn't the only shining star although its absorption was roughly double the second-place submarket to the east, the 16.3-million-sf Pinnacle/Turnpike, which absorbed 1.55 million sf last year. Of C&W's 18 submarkets, only one--Walnut Hill-Stemmons--fell into the red for absorption, down 193,974 sf in a pocket with 4.6% vacancy in a 21.5-million-sf inventory.

The industry pros say the spot to watch in 2007 is South Dallas, where developers invested most of last year jockeying for space as Union Pacific Railway Co. brought an intermodal facility on line in the Dallas Logistics Hub and Fort Worth's BNSF inked an option to develop one too. "2007 will be the continuation of the emergence of South Dallas as a meaningful market," Berger says. CBRE's fourth-quarter analysis showed 792,600 sf under construction in addition to a 624,000-sf delivery--just the tip of the iceberg for the hotspot.

In fact, Hughes says the Wilmer-Hutchins pocket will warrant its own submarket before too long. For now, C&W considers it part of the 14.6-million-sf Redbird Industrial District. "I am looking for the critical mass to pull Wilmer-Hutchins out on its own in 12 to 24 months," he predicts.