Building the future in DFW’s Industrial market with expansive construction and
market optimism in the face of rising vacancies

EXECUTIVE SUMMARY

Q1 in Review

By the end of Q1 2024, the overall vacancy rate in the Dallas-Fort Worth (DFW) industrial market rose 120 basis points quarter-over-quarter, from 8.6% to 9.8%. A 9.8% vacancy rate defines DFW’s industrial market as neutral regarding landlord or tenant favorable conditions. Net absorption was positive for the record, but far below the norm as construction deliveries remained high. Five of the ten industrial submarkets have double-digit total vacancy rates, which has been the result of record-breaking construction deliveries over the past two years. Still, average asking rates have remained at all-time highs and are up roughly 13% over the past year.

DFW Economic Update

The Dallas–Fort Worth economy expanded in February. Job growth accelerated, and unemployment held steady for the third straight month at 3.7%. DFW payroll employment expanded an annualized 2.9% (10,000 jobs) in February following job declines in the previous month. In the three months through February, employment was up a modest 1.3% in DFW—below its trend growth rate. Job gains were mixed across sectors during this period, with job growth led by other services and manufacturing. Payrolls were flat in trade, transportation and utilities and declined in information services and construction and mining.

MARKET OVERVIEW

Vacancy Rate Increases to 9.8%

The overall vacancy rate in DFW’s industrial market rose to 9.8%, increasing 120 basis points from 8.6% in Q4 2023. While vacancies in the largest Warehouse/Distribution segment are higher than the historic norm, the Flex and Manufacturing sectors have near record low vacancy rates of 5.7% and 3.2%, respectively. Half of the industrial submarkets (South Dallas, East Dallas, North Fort Worth, DFW Airport and NW Dallas Outlying) have double-digit vacancy rates due to over 70 million sq. ft. of new construction that was completed in DFW in 2023. This was a record-breaking figure that is unlikely to be matched again for at least the next 10 years, as the construction pipeline currently stands at 30.6 million sq. ft.

Deliveries Up 9% From Previous Quarter

Deliveries in the DFW industrial market increased to 16.2 million sq. ft., up 9% quarter-over-quarter from 14.9 million sq. ft. In 2023, a record-high 70 million sq. ft. was delivered to the market. The historic amount of space typically delivered to the DFW market is about 20 million sq. ft. per year. Notable new construction for early 2024 include: Tradepoint 45 West, a 1,351,372-sq.-ft. industrial property occupied by Trina Solar; 35 Eagle Building C, a 1,251,160-sq.-ft. spec property in Alliance; and 3333 W University Dr, a 899,770-sq.-ft. multi-tenant property in Denton that is completely occupied.

Leasing Down 16% From Previous Quarter

Net absorption was lower than normal for the first quarter, but recently signed leases inked in the first quarter point to stronger absorption later in the year. Notable transactions in early 2024 include Post Consumer Brands leasing 1.1 million sq. ft. of space at Logistix Hub, Orbis leasing 659,049 sq. ft. at 7121 Shelby Ave, Barrett Distribution Centers leasing 529,047 sq. ft. at Exeter East Logistics Park and Frito-Lay leasing 515,000 sq. ft. at Prologis Mountain Creek.

Net Absorption Remains Positive but Lower than the Norm

Net absorption—move-ins minus move-outs—is at 811,101 sq. ft. for Q1 2024. This was down 85% from the previous quarter as the frenzied pace of demand took a breather for the quarter. The most notable pullback in demand was from the largest segment of the market (500,000+ sq. ft. Warehouse/Distribution properties) and the Flex sector, which had a negative 601,377 sq. ft. of net absorption for the quarter. Recent notable move-ins include Trina Solar moving into 1.4 million sq. ft. at Tradepoint 45 West and Vehicle Accessory Group moving into 325,218 sq. ft. at Alcott Logistics Staton in Mesquite.

Investment Sales Trends

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