TEXAS SNAPSHOT, JANUARY 2008

Dallas Industrial Market

Wesson

Dallas industrial development is moving into the southern sector aptly named Dallas Logistics Center, which is fueled by global trade and is benefiting from the inland port. Because of this, Dallas currently has a bull’s eye around it as it continues to be the beneficiary of this increased global trade. The concept of the Dallas Logistics Center, coupled with the inland port, makes the southern sector extremely attractive for goods coming from China via the port of Los Angeles/Long Beach, which are then shipped by rail to Dallas. There are approximately 6,000 acres available for development, thus expect that this submarket, which currently is being created, will contain more than 30 million square feet in the next 5 years. As of December 2007, there is approximately 14 million square feet of product either planned or under construction. Furthermore, the Dallas/Fort Worth International Airport submarket continues to be the beneficiary of strong absorption as companies continue to locate close by the airport in an attempt to reduce delivery times in their logistics cycles.

While the Dallas/Fort Worth Metroplex always has been considered fifth or sixth in terms of national industrial markets, during the next few years, the Metroplex will elevate itself to the top three industrial market in the country. Therefore, development will take place in the southern Dallas, Dallas/Fort Worth International Airport and Fort Worth markets.

Currently, the majority of the net absorption we have seen from companies has been of those involved in the global trade logistics industry. Since the Metroplex has approximately 650 million square feet of industrial inventory, it is difficult for one tenant to make a noticeable impact; however, logistics-related activities have been significant. In terms of major leases being signed this year, Whirlpool has leased 852,000 square feet in South Fort Worth (1101 Everman Parkway); APL has leased 642,000 square feet in the Great Southwest industrial submarket (GSW Distribution Center 46 and 47); and Cadbury Schweppes has leased 594,000 square feet in the South Stemmons market (Turnpike Distribution Center 29).

According to CoStar, the average quoted asking rental rate for industrial space is $4.73 per square foot at the end of the third quarter 2007. This represents a .04 percent increase from the previous quarter. As of third quarter 2007, the overall vacancy rate is 9.4 percent as compared to a 2006 year-end vacancy rate of 9.8 percent.

The southern sector, with the explosive growth of the Dallas Logistics Center, will be a major driver for industrial development during the next several years. We also will continue seeing large rooftops built in the Dallas/Fort Worth International Airport submarket as well as continued strong development in both North and South Fort Worth, which will benefit from the trade with Mexico.

— Ken Wesson is managing principal in Lee & Associates’ Dallas office.

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