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DALLAS-The overall vacancy rate in the Dallas-Ft. Worth industrial sector is on the rise, coming in at 11% for bulk warehouse at the fourth-quarter close and 12.9% for flex. The rates have been steadily climbing in both arenas in the past three quarters.

Still, the DFW’s industrial market remains “in the Top 10 for all the major institutional investors,” Thomas O. Pearson of Cushman & Wakefield of Texas Inc.’s Dallas office tells GlobeSt.com. Institutional investors are still buying and developers are still building, although the pace has slowed somewhat. And industrial brokers like Pearson are still cutting deals.

The 2002 pipeline isn’t as full as it was at this time last year, but the industrial market has picked up some steam in the past 30 days, Pearson says. “I’m encouraged by the number of companies that tell me they have plans to expand or relocate next year,” he confides.

Pearson’s optimistic about the coming year, perhaps more so than others in his specialty. That optimism is strong despite Q4 numbers that show the lowest net absorption of the past three quarters. C&W research shows warehouse net absorption at just below 1.7 million sf in the final quarter of the year. In comparison, a bit over two million sf was absorbed in the third quarter and more than 3.5 million sf in the second quarter. For office-showroom space, it looks pretty grim with the region posting in the negative for three consecutive quarters: about 1.2 million sf for Q4; 930,471 for Q3; and about one million sf in Q2.

The fourth quarter’s 11% overall bulk warehouse vacancy rate is up from 9.3% in the third quarter and 7.4% at the close of the second. Office-showroom’s 12.9% vacancy was 11.7% overall at the Q3 end and 11.8% at the end of the second accounting period.

As vacancy climbs, rent drops for office-showroom space. The fourth quarter is ending with the average rent coming in at $9.84 per sf in comparison to $10.02 per sf in the third quarter and $10.74 per sf in the second quarter. Bulk warehouse space could be making a turn-around, with rent rising four cents to $3.90 per sf from the third quarter to the fourth. In the second quarter, rent stood at $4.04 per sf.

Citywide in all product types, the Q4 overall vacancy is 11.3% and net absorption was 494,745 sf. Those same categories for the third quarter were 9.7% vacant and a little more than 1.1 million sf absorbed. Those are dramatic changes from the second quarter’s overall 8.2% vacancy and more than 2.5 million sf absorption.

What will 2002 bring? Pearson says to watch for a lot of corporate dispositions evolving from mergers and acquisitions of competitors. On the development side, he expects many will buy land in 2002 at good prices to position themselves for spec construction in 2003. “I don’t think we’re going to see a lot of new development in 2002,” he forecasts.

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