TEXAS SNAPSHOT, NOVEMBER 2008

Dallas Industrial Market

Fricke

Industrial development in the Dallas/Fort Worth area is much more abundant than the current tenant demand, according to Trey Fricke, a principal with Lee & Associates in its Dallas/Fort Worth office. “Every major submarket has industrial developments under way with limited tenant demand,” he adds. “The announcements and groundbreakings for new developments have slowed, but they are evident of the developer confidence in the market — despite the limited tenant activity.”

The current tenant demand is primarily from distributors that are in the logistics, manufacturing and household goods industries. “We have seen a slight increase in the demand for manufacturing space, as fuel prices create difficulty in shipping raw and finished products long distances,” Fricke says.

The majority of developments tend to locate in or on the edge of the major industrial parks containing an existing tenant base of at least 60 million square feet. When those markets have enough speculative development under way to accommodate tenant demand, the developments tend to locate themselves based on transportation, specifically access to major interstates and intermodal hubs, Fricke says. “Both South Dallas and North Fort Worth have been the beneficiaries of this type of development,” he notes.

The South Dallas market continues to receive attention for land speculation and building starts, and North Fort Worth has garnered a number of significant speculative projects. The latest announcements in these areas involve projects by USAA Real Estate Company, Courtland Development, IDI, Hillwood and ProLogis.

USAA Real Estate Company is very active in the Dallas/Fort Worth market with multiple industrial projects in various stages of development. In North Fort Worth, the company is nearing completion of a 428,400-square-foot, dual rail-served distribution warehouse. The facility, called Railhead IV, is located in 633-acre Railhead Industrial Park, which is bisected by North Loop 820. In Wilmer, USAA is building two cross-docked industrial distribution warehouse buildings totaling approximately 1.33 million square feet in Sunridge Business Park. Tradeport I was completed last April, and Tradeport II is being marketed to BTS users and will commence construction once Tradeport I is leased.

Mountain Creek, a 441,000-square-foot spec building in Dallas, is one of Courtland Development’s many industrial projects in the region.

Courtland Development also is in the South Dallas market with a 120-acre, rail-served industrial project on Interstate 45, just south of Wilmer. The development, called DFW Inland Port, is planned to include 1.6 million square feet of space. Additional Dallas-area projects include Mountain Creek, a 441,000-square-foot spec building in Dallas; Firewheel Distribution Center, a more than 200,000-square-foot flex/light industrial facility in North Garland; the 483,000-square-foot Northlake Business Center in Northlake; and the more than 200,000-square-foot flex/light industrial Beltway 8 Corporate Centre in Dallas.

IDI has made its entrance into South Dallas with the development of Interstate Commerce Center South, a 617,760-square-foot distribution facility located at the intersection of interstates 20 and 35 in Lancaster. The building, which features a 520-foot wide cross-docked design, will accommodate tenants with needs of 200,000 square feet or more. IDI also started construction this year in North Fort Worth on a 672,678-square-foot, cross-docked distribution facility at Speedway Distribution Center, a master-planned business park located just north of Hillwood’s AllianceTexas.

Hillwood continues to see industrial activity in its AllianceTexas development, and ProLogis leased a total of 500,000 square feet to three customers in the Dallas metropolitan area earlier this year.

Despite these companies and their contributions, the Dallas area is actually contracting in the number of developers, according to Fricke. “The few new developers are smaller, more opportunistic groups that are forming locally, compared to developers entering the market from other regions,” he says.

— Trey Fricke is a principal with Lee & Associates in Dallas/Fort Worth.

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