Commercial Real Estate

CRE Opinion: A Second Phase in South Dallas

The future of the city’s southern industrial market still looks strong.

Rob Huthnance of PLR Development.

We are at a unique point in the industrial market here in Dallas. After a few record-setting years, absorption and leasing—though still very healthy—are returning to normal levels. At the same time, reasonable infill sites are few and far between, with lots of competition chasing just a handful of opportunities.

For some industrial developers, the first reaction is to jump ahead in an effort to discover and pioneer the next hot submarket. Is it Waxahachie? Denton? South Fort Worth? But, what if it’s none of those? What if the “next” location has already been discovered? In my opinion, it has.

Southern Dallas County isn’t yesterday’s news; it’s today’s—and tomorrow’s. The market fundamentals are some of the healthiest in the country and the differentiators when it comes to location and population access have major staying power. The area is already a one-day drive to more than 45 million consumers, and with DFW growing by almost 400 people a day, that number is continuing to rise at a rapid pace. In short, there is a ton of opportunity left.

For this very reason, it’s no surprise that there are 20+ developers in southern Dallas County in different stages of development, and even more looking for sites to build new product. Yet, with construction costs continuing to rise while construction lending tightens, we could see a slow-down in new construction as would-be developers pause to evaluate whether or not new projects are viable.

All of these factors combined point to what might be called phase two of South Dallas. Those players who already have land or product built sit in a unique position to provide users with high-quality distribution space at prices that might be fleeting as rent rates continue to rise with demand.

Southport Logistics Park is in an especially unique position as the only institutional quality park of its kind in the submarket. With tax incentives, entitlements and infrastructure already in place, two buildings complete for a total of nearly 1.5 million square feet, and additional sites ready for more construction, it offers users the ability to secure new, move-in ready e-commerce distribution space, as well as the land to meet the next wave of demand.

So, when will that next wave of demand hit? Both the short and long-term dynamics of the industrial distribution business in South Dallas are very promising, driven by e-commerce, technological advances, and improved material handling equipment. Although infill locations remain tough to secure, it doesn’t look like companies in need of distribution space are going to go elsewhere. Nationally, user demand in the top five markets is double the demand for the next 15 markets combined.

As companies continue to mature and refine their supply chains, the call for large space to meet growing e-commerce needs means that these companies will continue to expand their industrial footprints in these top markets, like DFW. As a submarket, South Dallas’ second-to-none fundamentals bode well for the current—and the next—big boom.

Rob Huthnance is president of PLR Development.

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