Nearly 150k New Residents Set GPS to DFW in 2017
The population boom is driving demand for industrial users as well as continued efforts to connect distribution processes and hubs, creating ideal conditions for the industrial market to thrive, says AY.
DALLAS—The Dallas-Fort Worth region is home to four of the top 10 fastest-growing US counties. This population boom continues to drive demand, as the resident influx outdid the rest of the nation with 146,000 new residents moving to the DFW area in 2017.
Even with the notion of a potential slowdown, this population boom is driving demand for distribution facilities. This activity, coupled with DFW’s international recognition as a centralized hub for transit, warehousing and distribution, creates ideal conditions for the industrial market to thrive, according to Avison Young’s latest industrial report.
In 2016 and 2017, a total of more than 50 million square feet of industrial space was delivered in DFW, well above the market’s historical average of 15 million square feet per year. Total inventory in the market exceeds 740 million square feet with no sign of a slowdown in groundbreakings. Net absorption for the 12-month period ending with the first quarter of 2018 was nearly 22.4 million square feet, following 26.7 million square feet in the prior 12-month period, according to the report. This momentum has yet to lessen, due largely to the market’s strong economic fundamentals, location, widely available capital, talent pool and favorable regulatory environment.
Average asking rental rates rose marginally year-over-year to $5.36 per square foot in first quarter 2018. Vacancy remained relatively low at 5.6%, yet smaller availabilities are harder to come by due to rising development costs and shifts in speculative projects and build-to-suits, says Avison Young. Buildings that are 25,000 to 200,000 square feet are not as readily available or desirable to build as in previous years. Looking ahead, rising lease renewal rates may push industrial tenants to forgo current locations and consider moving to newer product across the metroplex.
In the large distribution facility category, a three-building, 320,852-square-foot industrial distribution portfolio in Dallas, San Antonio and Lubbock recently sold to a private buyer for an undisclosed price. The properties are occupied by Guardian Building Products, a distributor of exterior building products, with more than 30 US branches.
Guardian will continue leasing the space long term as part of the sale-leaseback transaction. The lease is structured as an absolute triple net with annual rent increases and options for renewal. Managing principal Jonathan Wolfe and Jordan Shtulman of STREAM Capital Partners LLC represented the seller on the transaction.
“Dallas industrial remains one of the strongest industrial markets in the country with single-digit vacancy rates,” Wolfe tells GlobeSt.com.