TEXAS SNAPSHOT , MARCH 2005

Dallas Industrial Market

The Dallas/Fort Worth industrial market is beginning to experience an up tick in activity. The area is seeing expansion by its existing tenant base, and, for the first time in 15 years, land prices in and around the Dallas/Fort Worth area are beginning to increase. Prices are rising 20 to 25 percent, and the abundance of inexpensive land available for development — which was one of the region’s prominent selling points for so many years — has begun to dwindle.

Currently, bulk warehouse rates range from $2.65 net to $3.25 net and warehouse/distribution rates range from $4.25 net to $5.50 net. However, with land and construction costs on the rise, rental rates will increase for the first time in 15 years.

The areas in and around Dallas/Fort Worth International Airport are experiencing a large amount of development activity. The majority of industrial development is in the areas north of Dallas/Fort Worth International Airport, including Coppell, Flower Mound, and along the Highway 121 corridor, which includes Lewisville, Grapevine and The Colony. The other hot area in Dallas is the Interstate 30 corridor, which is home to Pinnacle Park. North Fort Worth, including Railhead and Alliance, is still a hot area for industrial development. These areas have experienced significant increases in the residential population, and they offer a good workforce in addition to good infrastructure and access to the region’s north/south and east/west arteries.

Industrial developers new to the area include Lennar Properties, Opus, USAA and Cabot Properties. Majestic is not currently developing any projects but is actively looking for sites.

In Flower Mound, Lennar Properties recently purchased a 200-acre site zoned for industrial development. Boston-based Cabot Properties recently purchased 77 acres in the East Dallas/Fort Worth Airport submarket with the intent to build 1.2 million square feet of speculative and build-to-suit bulk warehouse space. Duke Weeks has two buildings under construction in the submarket and may build two more. Holt has a site that could house up to 500,000 square feet of new development.

Dallas/Fort Worth International Airport is currently seeking someone to head its development department as it  signs ground leases on land located on the north side of the airport. Bandera and Kennedy are currently developing two buildings on airport land.

Developers in the Dallas/Fort Worth region are very focused on attracting big box tenants and logistics-related companies. In fact, logistics companies are absorbing the majority of industrial space in the area.

The largest recent project in the area is Del Monte Foods’ 600,000-square-foot build-to-suit in Railhead. This project is an example of one of the most prominent industrial development trends today — speculative and build-to-suit box developments are getting larger. At one time, projects ranged from 300,000 to 500,000 square feet; today they are anywhere from 500,000 to 1 million square feet. Several developers are also bringing new multi-tenant product to the market that serves users in the 7,500-square-foot to 25,000-square-foot range. The Dallas/Fort Worth area hasn’t seen this type of development for several years, and the success of these projects is still undetermined.

In addition to the popularity of larger industrial facilities, rail-served facilities are also more popular than in the past because trucking costs are getting so high.

At year-end 2004, the average vacancy rate in Dallas/Fort Worth was 12.1 percent, and 4.48 million square feet of industrial space was absorbed during the year. Richardson and Plano, home to many tech and telecom companies, had the highest vacancy rates in the region at 26.7 and 25.8 percent, respectively.

— Henry Knapek is senior vice president of Development & Industrial Services; Todd Jones is vice president of Industrial Services; and Greg Cannon is vice president of Industrial Services with the Dallas office of Transwestern Commercial Services.

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