DFW Industrial Market Recorded Less Absorption, but Saw an Increase in Leasing Activity in Q2 2025

EXECUTIVE SUMMARY

Q2 In Review

The Dallas-Fort Worth (DFW) industrial market experienced improvements in Q2 2025, characterized by lower vacancy rates, higher rental rates, and a healthy jump in leasing demand. The overall vacancy rate decreased from 9.2% to 9.1%, indicating a slight improvement in market conditions for landlords and investors.

Construction activity increased over the quarter, adding 6.4 million square feet to the pipeline, significantly increasing activity to 35 million square feet. Deliveries rose sharply, with 6.8 million square feet delivered this quarter, a 243% increase from Q1 2025. Leasing activity increased by 35.8% over the quarter and by 11% year-over-year.

Quarterly net absorption totaled 6.8 million square feet, primarily driven by warehouse/distribution properties recording 5.5 million sq. ft. The manufacturing segment recorded 1.3 million sq. ft. of positive absorption while Flex posted negative absorption.

Investment sales totaled $1.5 billion over the past year, with significant transactions including the sale of four buildings in the Innovation Drive Park, totaling 283,500 square feet from Wolfspeed | A Cree Company to Form Factor for an undisclosed price.

Meanwhile, rental rates rose 3.5% for the quarter and fell 1.8% year-over-year to an average of $9.72 per square foot.  The market’s shift toward normalization reflects a recalibration after years of extraordinary growth, signaling a steady foundation for future activity.

MARKET OVERVIEW

Dallas Economic Update

Employment in DFW increased in May at an annualized 2.1% after rising 1.9% in April. Texas Job growth increased 2.6% in May. Payroll employment growth was strong, and Dallas-Fort Worth unemployment remained at 3.9% in May. The jobless rate was 4.0 percent in Dallas and 3.9 percent in Fort Worth, below Texas’s jobless rate of 4.1 percent and the nation’s rate of 4.2 percent. The most significant gains were in construction and mining, education and health services, and leisure and hospitality services, while employment slipped in manufacturing, professional and business services, and information services.

Vacancy Rate Decreased 40 basis points to 9.2%

The overall vacancy rate in DFW’s industrial market decreased 10 basis points over the past quarter to 9.1%, representing a 40-basis-point decrease from 9.6% in Q2 2025.  For the different industrial property types, the total vacancy rates are 6.3% for Flex, 4.0% for Manufacturing, and 10.2% for Warehouse/Distribution space, respectively. DFW’s industrial market is currently categorized as having “neutral conditions”—with a vacancy rate between 8% and 10%—meaning neither landlords nor tenants have a significant upper hand in overall lease negotiations.

Construction Deliveries and Construction Pipeline Both Up Quarterly

Deliveries in the DFW industrial market increased significantly to 6.8 million sq. ft., up 243% from the previous quarter, but decreased 52.3% year-over-year.  The under-construction pipeline increased significantly, up 22.4% quarter-over-quarter and 34.4% year-over-year.

Leasing up 35.8% from the Previous Quarter

Leasing activity has increased significantly over the past quarter by 35.8% and 11% over the year, as the amount of new construction coming to the market has returned to historic norms. Recent notable lease transactions include Union Tech signing a lease for 222,000 sq. ft. at 2323 McDaniel Dr in Prologis Valwood 13 and Premier Care signing a 205,000-square-foot lease in Building 3 of Cooper Commerce Center.

Demand Healthy in the First Half of 2025

Net absorption—move-ins minus move-outs—recorded 6.8 million sq. ft. for Q2 2025, pushing the year-to-date total net absorption to 14.4 million sq. ft. Warehouse/distribution properties accounted for most of the positive net absorption for the quarter with 5.5 million sq. ft. recorded, while manufacturing recorded 1.3 million sq. ft. Flex posted negative absorption of -79,651 sq. ft. Notable recent move-ins include DrinkPAK taking 1.4 million sq. ft. in the Carter Pak East Industrial Park, DHL moving into 699,246 sq. ft. in the Sylvania Logistics Center, Excel, Inc. taking 581,000 sq. ft. in Mark IV Commerce Park and Oncor taking 422,000 sq. ft. at 5757 Forbes Rd, Venus, TX.

Investment Sales Trends

CoStar Capital Market Analytics reports that over the past 12 months, sales volume for the DFW market totaled $1.5 billion. This represents 884 properties that sold with an average sales price of $132 per sq. ft. and an average cap rate of 6.4%. Notable recent sales transactions include CTDI’s purchase of the 400,565 sq. ft. Westport Parkway Commerce Center located in the NE Tarrant/Alliance submarket. The building was delivered in 2023 and is 100% available for lease. Additionally, Trammell Crow Company sold the 325,000-square-foot Building L in 35 Eagle Industrial Park Alliance Center North to Wistron Corporation. In addition, Northwestern Mutual Life Insurance Company sold the 7-building portfolio Majestic Airport Center DFW to Majestic Realty Company for an undisclosed price.

Rental Rates Increase Quarterly but Decrease Annually

The average monthly rental rate for the DFW industrial market was $9.72 per sq. ft., up 3.5% from $9.39 in Q1 2025, but down 1.8% year-over-year from $9.90 per sq. ft. The average monthly rate for flex space stood at $13.60 per sq. ft., while the rates for manufacturing space and warehouse/distribution space were $7.28 per sq. ft. and $8.99 per sq. ft., respectively.The Northwest Dallas Outlying and DFW Airport submarkets currently have the highest overall average rates at $15.62 per sq. ft. and $12.20 per sq. ft., respectively.

Steve Triolet
SVP of Research and Market Forecasting
tel 214 223 4008
[email protected]