In case you missed the Federal Reserve’s most recent job statistics, since the recession ended in June 2009, Texas has created 37 percent of all new jobs in the United States. That adds up to 265,000 new jobs. Take out New York (98,000) and Pennsylvania (93,000), and we’ve created the same number of jobs as the rest of the states combined. And as we all know, the real estate market is tied to jobs. Locally, industrial leasing has certainly showed the effects of the job growth.
During the past 12 months, the industrial vacancy rate has come down a full percentage point, from about 12 percent to about 11 percent, based on year-to-date numbers. And only a few buildings are under construction: Whirlpool’s 1-million-square-foot distribution center in Wilmer is now complete; the Andrews Distributing building is under construction in Allen for 305,000 square feet, and Gateway Tire is building a 205,000-square-foot facility on Belt Line Road in Carrollton.
I cannot recall a time when we’ve had so little being built. But it does give us the opportunity to soak up some vacancy.
Several large deals have been made since first-quarter 2011 statistics came out. Additionally, rumor is that Home Depot is close to signing a very large lease in the South Dallas area; and GE Transportation is still in the making near Texas Motor Speedway, unless it has been finalized in the last few weeks.
To put things in perspective, according to CoStar, our total industrial market is about 764 million square feet, of which 621 million square feet is warehouse and 143 million square feet is flex. The total vacancy is 85 million square feet, with 68 million square feet in warehouse and 17 million square feet in flex.
If you run a survey of buildings 100,000 square feet and larger for all of North Texas, you come up with 192 properties. That sounds like a lot, but no user ever looks at the entire DFW market, and no one ever looks at “100,000 SF and up.” If you run the survey for 100,000 to 120,000 square feet and limit to 24’ clear (hardly restricted to modern), you cut the number of available options in half. Run it again for Dallas County only and you cut it in half again—down to fewer than 50 buildings.
Run a survey of 250,000 square feet and up and you get 46 DFW properties. Change that to 250,000 to 270,000 square feet in Dallas County, 28’ clear and higher, and it’s now down to 19 properties.
When you start looking at availabilities that are at least 500,000 square feet in size, you’re down to fewer than 10, and several of those are the single-tenant options, making them more difficult to lease, due to less flexibility.
It’s clear that the North Texas industrial market is performing better than some survey numbers would indicate. It’s too large to look at in its entirety—you have to break activity out by submarkets to understand what is really going on.
We’re seeing some owners in certain submarkets begin to raise asking rents. We’ve seen deals get done at rates a good bit higher than last year, and much higher than 2009 in certain submarkets.
That being said, during the next few months we should see a summer slowdown. I don’t expect many large deals to get signed, other than those discussed here.
Allen Gump is executive vice president of the industrial division at Colliers International. Contact him at [email protected].
