Thank you for sharing!

Your article was successfully shared with the contacts you provided.

DALLAS-Texas industrial developers are on a weight-loss diet as big box spec construction tightens its belt, particularly in the state’s northern tier.

“Things will come back,” Al Sorrels, industrial partner in Dallas for Sacramento-based Panattoni Development, tells GlobeSt.com. But for now, less is better when it comes to building and leasing in what is historically a premier US distribution hub.

A five-year trend for mega-box construction has subsided, with buildings now hovering in the 250,000-sf to 600,000-sf range. Several projects of that size are under way in the region. What once was considered large, “today, nobody really thinks about it,” says Sorrels.

Granted, building costs are considerably less with the industrial giants, but it’s a “double-edged sword,” says the Panattoni executive. “You’ve got more exposure because you’ve got more space up.” Risk building has been replaced by build-to-suits for the most part while everyone waits for a nationwide economic recovery.

It’s a true Catch-22 since the fast comes at a time when construction costs are hovering between $15 per sf and $18 per sf for a 250,000-sf plus distribution center shell. Still, a vacant or near vacant building is a cross to bear so more and more developers are downsizing until there’s a market correction. Sorrels says the one million sf-plus buildings will come back with time simply because it’s the best way to maximize coverage and reap benefits of lower construction costs.

Houston doesn’t have the same problems as Dallas-Ft. Worth, says Stephen H. Jaggard, president and CEO of Dallas-based Vantage Cos.’ Houston team. The state’s southern metropolis is more local and regional distribution than national. The average per tenant distribution demand is 50,000 sf in comparison to the DFW average of 100,000 sf. One of the city’s largest facilities in some time has just come to market, a 650,000-sf project by Dillard whereas that’s a pretty commonplace size to be found in the DFW region.

With Houston’s predilection for smaller buildings comes higher construction costs, explains Jaggard. Hard costs for shell construction, excluding land, right now is riding at $20 per sf to $22 per sf. Still, developers remain stalwart players in the unusually brisk Houston economy. “There are projects being completed now,” Jaggard says. But, a breathing period is right around the corner as those projects deliver. “I don’t think you’re going to see many new starts,” Jaggard predicts as he talks about the economy in general.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

GlobeSt. NET LEASE Fall 2021Event

This conference brings together the industry's most influential & knowledgeable real estate executives from the net lease sector.

Get More Information


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.