Population Boom is Clearly Driving Demand

DALLAS—With industrial absorption increasing across Texas, it should come as no surprise that construction in this sector is rising, especially in cities such as Austin and Dallas. In addition, traditionally considered an oil city by many, Houston has grown into much more, which can be attributed to the growth in e-commerce, leading to an increased port activity, in addition to the diversification of the region, helping to steer the focus away from oil-related dependency.

Moderator Micah Rabalais, senior research analyst, Avison Young, will lead the panel discussion, “Industrial: Current Trends and Market Drivers,” today at RealShare Texas. Speakers will include Jeremy Garner, principal of Trammell Crow Company; Robb La Montagne, director of development for Hunt Southwest Real Estate Development LLC and Robert Kramp, director of research and analysis in the Texas and Oklahoma division of CBRE.

In preparation for the session, GlobeSt.com got an exclusive sneak peek from Kramp about population growth and e-commerce trends. Kramp pointed out that Texas’ population is projected to grow by 16.5% by 2030 to 32.7 million people. Meanwhile, the four major MSAs that anchor the Texas Triangle are projected to grow by 18.3% to 21.7 million during the same time period. That is, approximately 66.3.8% of the Texas population will live in and along the Texas Triangle.

With regard to e-commerce, Kramp said that phenomenon’s influence cannot be understated.

“Despite the huge boost e-commerce has added to demand this cycle, consumer goods are quite literally still the bread and butter of the supply chain system,” he tells GlobeSt.com. “Texas will only have more demand among these types of industrial occupiers as the state’s population continues to grow.”

This growth has resulted in Texas becoming an international powerhouse. The growth drivers and resulting demand can be attributed to several factors, Kramp points out. Texas has a well-known pro-business and favorable tax climate, making it a destination for corporations that use all types of commercial real estate. Specifically, industrial occupiers can take advantage of Freeport exemptions in select taxing jurisdictions, providing property tax relief on goods staying in the state only 175 days, he says.

“Additionally, Texas leads the nation with 32 foreign trade zones, more than any other state. Texas also shares a border with one of our most important trading partners, Mexico, which exceeded $97 billion in trade with the state in 2017,” Kramp tells GlobeSt.com. “International trade supports 910,304 jobs in Texas, 95% of which are supported by manufactured goods, according to the Department of Commerce. Texas also enjoys a south-central location, which is not only in the center of the Sunbelt–the nation’s fastest growing region–but also enjoys a major deep-water port at Houston.”

Texas also has multiple north-south and east-west corridors of both road and rail, which stretch from the border to the middle reaches of the country and are part of coast-to-coast flows, he observes. In DFW, which really is one of the nation’s five super-regional distribution markets, this trend is even more pronounced as the big boxes here are serving the local catchment population of 7.2 million and populations further afield.

“Of course, for every headline-grabbing ‘big bomber’ that gets taken down, there are many more local businesses that are taking down space too, often backfilling warehouse space that is being vacated by occupiers who are consolidating into these massive projects,” Kramp tells GlobeSt.com. “The main areas of demand across the state are distribution spaces used to get goods to customers. Be it e-commerce specific, direct to consumers or more traditional distribution product, Texas’ population boom is without a doubt driving this demand.” ATTENTION! If you, your company or someone you know has made an indelible impact on the business of industrial real estate, we want to hear about it!  Submit a nomination to Real Estate Forum’s Industrial Influencers before the June 15th deadline.