DFW INDUSTRIAL MARKET BRIEF 4Q2017
TABLE OF CONTENTS
1. DALLAS/FORT WORTH INDUSTRIAL TEAM
1 2 3 4
2. DALLAS/FORT WORTH INDUSTRIAL SUBMARKETS
2. OVERALL DALLAS/FORT WORTH INDUSTRIAL MARKET A. Dallas/Fort Worth Overall Industrial Market Overview
B. Facts and Figures
3. SUBMARKET INTELLIGENCE A. Great Southwest/Arlington
B. C. D. E. F. G.
DFW Airport Northeast Dallas South Dallas Northwest Dallas North Fort Worth South Fort Worth
DFW INDUSTRIAL MARKET BRIEF 4Q 2017
HLC INDUSTRIAL DALLAS/FORT WORTH
TEAM
Partner - Texas Leasing jbrice@hldallas.com 972.280.8328
JIM BRICE
MATT CARTHEY
Partner mcarthey@hlfortworth.com 817.710.1111
CANON SHOULTS
DONNIE RHODE
ANDREW GILBERT Market Associate agilbert@hldallas.com 972.381.8312
BEN WALLACE
Market Director drhode@hlfortworth.com 817.710.7058
Market Associate bwallace@hldallas.com 972.421.1966
CLAY BALCH
GEORGE JENNINGS
MADDY CANTY
Brokerage Services Associate cbalch@hldallas.com 972.421.1956
1
Market Associate gjennings@hlfortworth.com 817.632.6151
DFW INDUSTRIAL MARKET BRIEF 4Q 2017
Managing Principal cshoults@hldallas.com 972.280.8328
Market Analyst mcanty@hldallas.com 972.280.8325
JOHN GORMAN
JOSHUA BARNES
JAKE NEAL
THOMAS GRAFTON
Principal jgorman@hldallas.com 214.920.9800
Market Associate jneal@hlfortworth.com 817.284.5555
Principal jbarnes@hldallas.com 972.280.8353
Market Associate tgrafton@hlfortworth.com 817.632.6152
HLC INDUSTRIAL DALLAS/FORT WORTH
SUBMARKETS
HLC SQUARE FOOTAGE BY SUBMARKET
DFW INDUSTRIAL MARKET BRIEF 4Q 2017
2
HLC INDUSTRIAL DALLAS/FORT WORTH
TRENDS AND TRANSACTIONS HLC OUTLOOK
The DFW industrial market continues to be one of the strongest industrial markets in the country and a top four choice for national logistics distribution. The overall industrial market persists with a single digit vacancy rate of 6.7%. Through 4Q 2017, leasing absorption in DFW remained strong posting approximately 21.9 million SF. However, 2017 deliveries totaled 26.4 million SF, outpacing absorption by 4.5 million SF. Between build-to-suits and speculative development, the market has approximately 19.9 million SF under construction. This activity encompasses the sub markets of North Fort Worth, South Dallas, GSW, Northwest Dallas, Northeast Dallas and DFW Airport. South Dallas notably accounts for approximately 5 million SF of the total construction activity. Albeit a healthy overall market at 6.7% vacancy, investment capital should observe isolated submarket trends whereby the current construction/absorption ratio is favoring new construction outpacing net absorption. Speculative development will likely remain strong in the coming year for the DFW market as capital sources continue to accept leasing risk to obtain lower basis positions and build to a yield rather than competing for inferior product with record low cap rates.
TRENDS & TRANSACTIONS • Industrial product continues to be in high demand for institutional investment. • Speculative development remains at a historical peak as capital sources seek alternative basis positions to “retail” acquisitions resulting from high demand and historically low cap rates. • Due to continued population growth and consumer demand, E-commerce groups continue to be a driving force in the demand of bulk warehouse for fulfillment centers. • Rental abatement has been re-established as a norm in the market as Landlords 1) seek to maximize property valuations through face rate and rent growth 2) second generation space seeks to remain competitive with new development and 3) new development under construction seeks to secure a tenant base prior to additional projects breaking ground. • Since 2010, depending on the size of the transaction, rental rates have increased 20%-30% with 2%-4% annual escalations accepted by the market.
TOP LEASE TRANSACTIONS • Unilever Distribution Center renewed 822,550 SF with Gramercy Property Trust at 201 Sunridge Boulevard, Wilmer on Interstate 45 • Haier Appliances leased 703,040 SF from Crow Holdings Industrial at 2401 Belt Line Road/Wildlife 6 • 3M Leased 603,050 SF at 300 Gateway Pkwy from UBS
3
DFW INDUSTRIAL MARKET BRIEF 4Q 2017
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
7,211,570
4,758,548
6,651,843
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
6.7%
6.7%
6.3%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
6,263,965
9,399,532
15,298,090
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
19,937,608
21,288,997
25,672,604
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
6,653,954
4,795,078
5,406,576 Source: CoStar 2017 4Q Industrial Report
The majority of submarkets for 2018 should remain in single digit vacancy rates. However, submarkets such as South Dallas, GSW and South Stemmons are reporting double digit vacancy in bulk warehouse as new construction has outpaced net absorption. Rental rates are stabilized under favorable conditions although concessions are more prominent from new development projects. Dallas is one of the top four regional distribution hubs in the country, yet the supply/demand equilibrium may have been exceeded in certain submarkets requiring a tapering of select new construction.
• Drivetime LLC leased 300,890 SF at South Freeway from TCRG in south central Fort Worth • TTI has leased 190,000 SF from Mercantile Partners at 2601-2651 Sylvania Cross Drive • Chandler Signs leased 169,762 SF from Hillwood at 14201 Sovereign Boulevard • Zobele Group leased 164,914 SF at 3502 Regency Crest from Stag Industrial
TOP HLC LEASE TRANSACTIONS • Sealy leased 240,049 SF of climate controlled space to Alcon Laboratories as well as 264,125 SF to Dematic in their Crossroads 35/20 building located at 6601 Oak Grove Road. • Alcon Research renewed and extended 402,500 SF at 6445 Will Rogers & 6440 Oak Grove within Carter Park Distribution Center owned by TA Realty. • Alpha Furniture leased 150,305 SF from David Tessel at 2401 W Marshall. • Dallas Warehouse leased 141,867 SF from David Tessel at 2401 W Marshall. • Distribution International Southwest, Inc. leased 135,579 SF with Principal Real Estate Investors at 2322 French Settlement Road. • Intermex Products leased 104,000 SF from Crow Holdings at 1375 Avenue S.
HLC INDUSTRIAL DALLAS/FORT WORTH
FACTS AND FIGURES
CONSTRUCTION - OVERALL DFW
VACANCY - OVERALL DFW 8.0%
7.50%
30,000,000
6.70% 7.4%
7.0%
25,000,000 6.4%
6.0%
20,000,000
5.0% 4.0%
15,000,000
3.0%
10,000,000
2.0%
0.20% Q4 14
Q1 15
Q2 15
Q3 15
Q4 15
Q1 16
Total Vacancy
Q2 16
Q3 16
Q4 16
Direct Vacancy
Q1 17
Q2 17
5,000,000
1.0%
0.20% Q3 17
0.0%
Q4 17
Q4 14
Q1 15
Q2 15
Q3 15
Sublet Vacancy
Q4 15
Q1 16
Q2 16
Q3 16
Under Construction
ABSORPTION - OVERALL DFW
Q4 16
Q1 17
Q2 17
Q3 17
0
Q4 17
Delivered Inventory
OVERVIEW - OVERALL DFW 20,000,000
12,000,000
8.0%
18,000,000 16,000,000
10,000,000 7.5%
14,000,000
8,000,000
12,000,000 10,000,000
7.0%
6,000,000
8,000,000
4,000,000 6,000,000
6.5%
4,000,000
2,000,000
2,000,000
Q4 14
Q1 15
Q2 15
Q3 15
Q4 15
Q1 16
Leasing Activity
Q2 16
Q3 16
Q4 16
Q1 17
Q2 17
Q3 17
Q4 17
6.0%
0
Q4 14
Q1 15
Q2 15
Q3 15
Q4 15
Absorption
Total Net Absorption
Existing Inventory
Vacancy
Q1 16
Q2 16 Vacancy
Q3 16
Q4 16
Q1 17
Q2 17
Q3 17
Q4 17
0
Deliveries
# Bldgs.
Total RBA
Direct SF
Total SF
Vac. %
YTD Net Absorption
YTD Deliveries
Under Construction SF
YTD Leasing Activity
DFW Airport
602
71,174,526
3,858,475
4,033,671
5.7%
1,579,334
1,960,857
2,174,702
5,651,417
East Dallas
578
40,841,559
2,131,935
2,131,935
5.2%
643,722
351,874
877,230
1,047,304
1,067
104,001,438
8,810,634
8,991,714
8.6%
3,925,987
6,308,824
2,894,122
7,860,356
North Fort Worth
573
83,770,540
4,206,149
4,217,149
5.0%
6,246,850
3,788,671
3,224,330
4,946,520
Northeast Dallas
1,409
102,307,271
6,062,736
6,760,384
6.6%
2,765,582
4,012,061
1,236,670
4,987,034
Northwest Dallas
1,300
103,515,968
4,443,681
4,588,917
4.4%
3,573,322
2,363,219
1,154,175
5,420,638
637
87,473,234
8,782,509
9,019,101
10.3%
4,095,472
5,904,797
7,351,835
3,726,497
South Fort Worth
1,281
72,233,721
4,072,621
4,184,118
5.8%
(805,258)
987,414
325,611
2,451,189
South Stemmons
2,056
112,908,184
7,820,681
7,939,054
7.0%
(114,522)
748,241
698,933
2,948,505
Totals
9,503
778,226,441
50,189,421
51,866,043
6.7%
21,910,489
26,425,958
19,937,608
39,039,460
Market
Great SW/Arlington
South Dallas
Source: CoStar 20174Q Industrial Report
DFW INDUSTRIAL MARKET BRIEF 4Q 2017
4
SUBMARKET INTELLIGENCE
GREAT SOUTHWEST/ARLINGTON HLC OUTLOOK The Great Southwest submarket consists of 104 M SF and experienced positive absorption of 2,042,889 SF during the fourth quarter of 2017. GSW concluded 2017 with net positive absorption of 3,925,987 SF. GSW was the most active submarket for new development during 2017 and posted year end deliveries of 6,308,824 SF. Leasing activity and velocity remained consistent, posting over 7.8 M SF of leasing activity YE 2017. Despite the large increase of newly delivered product; the year end vacancy rate stayed unchanged versus Q3 at a relatively healthy 8.8%. As we head into 2018, we expect this vacancy rate to return to lower levels as tenants absorb additional product and new development begins to taper.
CANON SHOULTS Managing Principal cshoults@hldallas.com 972.280.8328
VITAL STATS
Absorption
9.0%
3,000,000
2,500,000
8.0%
2,000,000 7.0% 1,500,000 6.0% 1,000,000
5.0%
4.0%
500,000
Q4 14
Q1 15
Q2 15
Q3 15
Q4 15
Absorption
Q1 16
Q2 16
Q3 16
Q4 16
Deliveries
Q1 17
Q2 17
Q3 17
Q4 17
0
vs. Prev. Qtr
vs. 12 Mths Ago
2,042,889
98,740
1,320,236
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
8.6%
8.6%
6.6%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
881,405
1,974,952
1,883,987
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
2,894,122
4,648,343
5,505,699
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
2,248,739
750,000
1,452,084
Vacancy
Source: CoStar 2017 4Q Industrial Report
TOP LEASE TRANSACTIONS
NEW DEVELOPMENTS
• Haier Appliances leased 703,040 SF from Crow Holdings Industrial at 2401 N Belt Line Road/Wildlife 6
• Sovereign Road & Amon Carter – CentrePort IV – 494,518 SF with Hillwood
• Chandler Signs leased 169,762 SF from Hillwood at 14201 Sovereign Boulevard
• 2525 E Abram Street/General Motors Assembly Plant Expansion – 1,000,000 SF
• Dallas Warehouse leased 141,867 SF from Industrial Crossing, LLC at 2401 West Marshall
• 2251 E Bardin Road – 365,000 SF spec developed Liberty Property Trust and leased by FedEx
• Intermex Products renewed 104,000 SF from Crow Holdings at 1375 Avenue S
• Park 20/360 – 4 building development 1,262,040 SF spec with Invesco
• Coca Cola leased 93,051 SF from Cabot at 5111 Frye Road
• 2401 N Belt Line Road/Wildlife 6 – 832,000 SF spec with Crow Holdings Industrial and leased by Haier Appliances
HLC Deal
HLC Deal
DEALS ON THE MARKET • CentrePort IV - Class A 494,518 SF forward deal; Hillwood is the seller and under contract with GLP. • 3100 State Highway 161 – 265,877 SF; SoHo Partners was the seller and Colony was the buyer. • Cabot Industrial Value Fund IV LP – Including several assets in GSW; Cabot is the seller and under contract with Blackstone.
LARGE EXISTING VACANCIES • NWC I-20 & Hwy 360/Park Twenty – Three Sixty – 722,733 SF • 950 E Ave K/GSW 360 Global Logistics Park– 487,752 SF • 1011 Isuzu Parkway/Regency II – 470,000 SF • NWQ Conflans Road & Hwy 360/Parc GSW - Building A – 450,340 SF • 1400 N Highway 360/GSW 360 Global Logistics Park – 437,000 SF • 14200 FAA Boulevard/CentrePort II – 430,759 SF • 1111 W Bardin Road/Cooper I-20 – 420,000 SF
5
DFW INDUSTRIAL MARKET BRIEF 4Q 2017
SUBMARKET INTELLIGENCE
DFW AIRPORT
HLC OUTLOOK The DFW Airport market vacancy rate decreased slightly over the past quarter from 5.9% to 5.7%. The decrease in vacancy rate is coupled with 416,208 SF of absorption through Q4 2017 and 1,575,339 SF for the year. Development remained strong with approximately 2.1 million SF under construction. Deals 300,00 SF and below have remained very active but deals larger than 400,000 SF has been slow. Deals have been taking longer to execute and tenant improvement dollars remain relatively high. With limited supply of fee simple land coupled with rising construction costs, speculative developments have been quoting $3.75 - $4.50 NNN for bulk warehouses. The remaining forty-year ground leases on the southern boundary of the DFW Airport have nearly all been tied up by developers.
JIM BRICE
Partner - Texas Leasing jbrice@hldallas.com 972.280.8328
VITAL STATS
Absorption
11.0%
2,500,000
10.0%
2,000,000
9.0%
1,500,000
8.0%
1,000,000
7.0%
500,000
6.0%
0
5.0%
Q4 14
Q1 15
Q2 15
Q3 15 Absorption
Q4 15
Q1 16
Q2 16
Q3 16
Q4 16
Deliveries
Q1 17
Q2 17
Q3 17
Q4 17
(500,000)
vs. Prev. Qtr
vs. 12 Mths Ago
416,208
1,147,618
2,202,396
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
5.7%
5.9%
5.1%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
630,309
1,698,201
3,450,965
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
2,174,702
2,247,533
3,112,316
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
266,766
504,356
204,175
Vacancy
Source: CoStar 2017 4Q Industrial Report
TOP LEASE TRANSACTIONS
• Expedia leased 122,766 SF from Clarion at 200 Northpoint Drive • Mannatech leased 52,992 SF from Stockbridge at 1410 Lakeside Parkway • ShipBob leased 50,502 SF from DCT at 4051 Freeport • Aeronet, Inc leased 42,295 SF from ML Realty at 401 Southwestern Boulevard
DEALS ON THE MARKET
• DFW Airport Industrial Portfolio – 577,621 SF, owned by Trans Pacific Development • 500 Industrial Boulevard – 191,800 SF owned by Standard Motor Products
• 3175 and 3193 Bass Pro Drive – two building development totaling 193,935 SF to be delivered July 2018. The development is owned by DCT Industrial Trust and will be leased by ESRP. • 3701, 3711 and 3801 S 20th Avenue – 3 building development totaling 646,796 SF to be delivered August 2018. The development is owned by Cabot and will be leased by Stream Realty Partners.
LARGE EXISTING VACANCIES • 4255 Patriot Drive – 280,981 SF • 220 N Freeport Parkway – 211,000 SF • 801 Industrial Boulevard – 204,556 SF • 2580 Esters Boulevard – 202,350 SF
NEW DEVELOPMENTS
• 2800 Valley View Lane – A 294,795 SF building being developed and owned by Johnson Development Company will be delivered in January 2018. The building is being leased by Cushman & Wakefield. • 2601 W Bethel Road – 1,008,176 SF being developed by Perot Development to be leased by Perot Development. Project to be delivered February 2018.
• 1040 Trade Avenue – 169,050 SF • 100 S Royal Lane – 166,704 SF • 4450 W Walnut Hill Lane – 161,782 SF • 1225 Mustang Drive – 158,466 SF
DFW INDUSTRIAL MARKET BRIEF 4Q 2017
6
SUBMARKET INTELLIGENCE
NORTHEAST AND EAST DALLAS HLC OUTLOOK The Northeast and East Dallas submarkets continued to perform steadily through the end of 2018 with over 1.5 million SF of net absorption in the 4th quarter alone. We continue to see strong activity and have seen rates push past historical levels and they continue to gradually increase. Spec warehouse and newer second-generation space between 100 – 200,000 SF now being quoted between $4.05 – $4.75 NNN. Construction has increased considerably over the last 12 months with 4M SF being delivered in 2017 and over 2M currently under construction, with more on the way. Activity remains strong, however with a few new projects on the ground and more coming we anticipate that concessions might potentially increase in the short term, but rates should continue to increase steadily.
JOSHUA BARNES Market Director jbarnes@hldallas.com 972.280.8353
VITAL STATS
Absorption
8.0%
2,000,000
1,500,000
7.0% 1,000,000
500,000 6.0%
0
5.0%
Q4 14
Q1 15
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
Absorption
Q3 16
Q4 16
Deliveries
Q1 17
Q2 17
Q3 17
Q4 17
(500,000)
vs. Prev. Qtr
vs. 12 Mths Ago
1,546,890
339,916
94,781
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
6.2%
6.4%
5.9%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
910,621
1,484,791
2,307,937
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
2,113,900
2,435,900
3,993,935
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
1,401,500
621,890
269,211
Vacancy
Source: CoStar 2017 4Q Industrial Report
TOP LEASE TRANSACTIONS
• Zobele Group leased 164,914 SF at 3502 Regency Crest from Stag Industrial • Varsity Sports leased 84,000 SF at 640 Shiloh Road from Trident Capital • Maya Management leased 53,647 SF at 11411-11421 Hillguard in Dallas • Austin Rig & Crate leased 47,500 SF at 10425 Plano Road in Dallas • Clarion Technologies leased 43,650 SF at 2179 S Shiloh Road in Garland • Midwest Vet renewed their 42,728 SF lease at 11240 Grader Street in Dallas
HLC Deal
HLC Deal
DEALS ON THE MARKET
• Kingsley Transit Center being sold by HLC – 347,822 Two building project at 3310-3422 Kingsley Road; owned by Clarion • Northgate II being sold by Stream - 193,931 SF building; owned by PS Business Parks • Berkeley Portfolio being sold by HFF – 1.6 M SF portfolio in DFW/Atlanta; 4 buildings totaling 121,924 SF in Richardson
HLC Deal
NEW DEVELOPMENTS
• 1601 South Shiloh Road in Garland – Two building development totaling 248,825 SF by Huntington Industrial Partners; 32’ clear height, cross dock
HLC Deal
7
DFW INDUSTRIAL MARKET BRIEF 4Q 2017
• 1200 South Jupiter Road in Garland – 3 building spec development totaling 764,400 SF by Langford Property Company; cross dock configurations with trailer parking; to be delivered mid 2018 • 4000 E Scyene Road – Ashley Furniture Building totaling 877,230 SF; to be delivered August 2018 • I-75/Wilmeth in McKinney – 202,270 SF spec building under construction by Hunt Southwest; rear load building with additional land for trailer parking and 32’ clear height; to be delivered mid 2018 • 2200 Trade Center in Mesquite – 487,200 SF spec building under construction by IDI; cross dock configuration with 36’ clear height; to be delivered late 2018
LARGE EXISTING VACANCIES
• 3800 Leon Road – 494,000 SF • 5151 Samuell Boulevard – 442,035 SF; space to be vacated by Ashley Furniture • 8901 Forney Road – 419,626 SF • 3310-3422 West Kingsley – 347,822 SF; 2 building project • 3000 West Kingsley – 341,840 SF; sublease by Apex Tools • 5200 E Grand Avenue – 339,479 SF • 1201 Big Town Boulevard – 208,750
SUBMARKET INTELLIGENCE
SOUTH DALLAS
HLC OUTLOOK South Dallas Industrial submarket as surveyed is 118 M SF and is now 9.1% vacant which is unchanged from that reported in 3Q 2017. New construction continues outpacing absorption. South Dallas reported net absorption of 1.9 M SF in 4Q 2017. New construction was mitigated with 478,798 SF SF of new transactions from Distribution International (135K), Freeman Audio Visual (90K), Vestcom (87K), Matthews International (62K), and Quality Logistics (60K SF), and Leslie’s Poolmart (43K). In 4Q 2017 South Dallas delivered 1.1M SF of new bulk warehouse. South Dallas still has 5.0M SF remaining under construction. As expected, the southern corridors along I-20, I-35, and I-45 will continue to produce new opportunities for development but, the equilibrium needle between supply and demand is going to remain volatile as opportunity encounters overbuilding.
JOHN GORMAN Principal jgorman@hldallas.com 214.920.9800
Please note: The area CoStar uses for the South Dallas Submarket differs slightly from the Submarket John covers. Numbers may vary.
VITAL STATS
Absorption
12.0%
700,708
-193,313
vs. Prev. Qtr
vs. 12 Mths Ago
2,600,000
10.3%
11.4%
8.4%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
1,600,000
581,450
1,237,289
1,503,894
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
8.0%
4.0% 600,000 2.0%
0.0%
Q4 14
Q1 15
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
Absorption
Q3 16
Q4 16
Deliveries
Q1 17
Q2 17
Q3 17
Q4 17
vs. 12 Mths Ago
1,905,805
10.0%
6.0%
vs. Prev. Qtr
Vacancy
3,600,000
(400,000)
7,351,835
5,782,135
6,254,766
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
754,897
1,123,939
1,093,829
Vacancy
Source: CoStar 2017 4tQ Industrial Report
TOP LEASE TRANSACTIONS
• Crossroads Trade Center Bld. 3 – 948,392 SF spec with Clarion/Hillwood (Interstate 35)
• Unilever Distribution Center renewed 822,550 SF with Gramercy Property Trust at 201 Sunridge Boulevard, Wilmer on Interstate 45.
• Hines broke ground on 1,044,647 SF of their SouthLink project (expandable to 1,540,000 SF) at Bonnie View Road and Cleveland Road
• Distribution International leased 135,579 SF with Principal Global Investors at 2322 French Settlement on Interstate 30.
HLC Deal
• Freeman Audio Visual expanded by 90,063 SF with Clarion at in Pinnacle Park on Interstate 30. HLC Deal
• Vestcom leased 87,655 SF from TA Realty (Stoneridge 12) at 2627 W Danieldale Road off Interstate 20.
HLC Deal
• Matthews International leased 62,301 SF from TA Realty (Stoneridge12) at 2627 W Danieldale Road off Interstate 20.
• Morgan Stanley broke ground at 3300/3900 Cedardale Road Development for 776,629 SF
LARGE EXISTING VACANCIES • Southport Parkway, Building 1 - 1,075,260 SF spec SouthPort Logistics Park (Interstate 45) • Copeland Commercial – 900,043 SF at 3535 N Houston School Road
• Quality Logistics expanded 60,000 SF at 3601 Pinnacle Point Drive on Interstate 30.
• Core 5 Industrial – 754,897 SF spec with Core 5 at 1200 W Wintergreen Road (Interstate 45)
• Leslie’s Poolmart expanded by 43,200 SF with IDI Gazeley at 5220 S Westmoreland Road.
• SouthPointe 20/35 – 660,312 SF spec with Clarion
DEALS ON THE MARKET • Paul’s Group Portfolio – 645,282 SF (3 buildings) Mountain Creek and Interstate 20. • Mountain Creek Distribution Center II with Crow Holdings is the seller– 663,000 SF.
• LogistiCenter at Dallas – 626,439 SF spec with Dermody Properties at 9890 Bonnie View Road • Park 20 – 468,300 SF with Huntington Industrial Partners on Houston School Road • 1240 Centre Park Boulevard (Eagle Park 20/35)- 454,408 SF spec now with Morgan Stanely
NEW DEVELOPMENTS • I-35 Logistics Crossing – 1,221,612 SF (2 Buildings 610,806 SF each) by Crow Holdings • Mountain Creek DC – 1,021,440 SF by First Industrial
DFW INDUSTRIAL MARKET BRIEF 4Q 2017
8
SUBMARKET INTELLIGENCE
NORTHWEST DALLAS
HLC OUTLOOK Over the past quarter, Northwest Dallas continued to prove to be one of the strongest submarkets in Dallas. The submarket posted a 4.4% vacancy rate which was an improvement compared to Q3 2017 (4.9%). Billingsley recently completed their four-building development at Mercer Business Park which leaves ProLogis’ Valwood Corporate Park as the only development highlight this quarter as the quality sites to develop are diminishing in Northwest Dallas. As the market tightens, expect rates to continue to rise and rent concessions continue to diminish. All indicators point to the market remaining strong throughout 2018.
ANDREW GILBERT Market Associate agilbert@hldallas.com 972.381.8312
VITAL STATS
Absorption
10.0%
2,000,000
9.0%
1,500,000
8.0% 1,000,000 7.0% 500,000 6.0% 0
5.0%
4.0%
Q4 14
Q1 15
Q2 15
Q3 15
Q4 15
Q1 16
Absorption
Q2 16
Q3 16
Q4 16
Q1 17
Deliveries
Q2 17
Q3 17
Q4 17
(500,000)
vs. Prev. Qtr
vs. 12 Mths Ago
986,466
656,925
822,474
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
4.4%
4.9%
5.7%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
905,418
1,586,834
2,056,423
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
1,154,175
1,600,594
2,739,019
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
615,888
121,758
534,598
Vacancy
Source: CoStar 2017 4Q Industrial Report
TOP TRANSACTIONS
• Chrysler signed a new lease totaling 150,000 SF at Prologis new development on Hutton. • Illes Foods has doubled their footprint at 2022 McKenzie as they expanded into an additional 81,912 SF. They now occupy 155,496 SF. Prologis is the landlord. • Pro Health renewed their 124,950 SF lease with Billingsley at 2100 Luna Road. • Snap Drape Brands renewed their 45,000 SF lease with GLP at 2045 Westgate in Carrollton. • Adler Real Estate Partners purchased Addison Tech Center which is a Class A, four building project located in Addison, Texas near the Addison Airport. • EGW Utilities sold two buildings at 1406 Hutton and 1410 Dunn to High Street Realty. EGW leased back 65,000 SF.
HLC Deal
DEALS ON THE MARKET
• Chrysler Portfolio – Two buildings totaling nearly 450,000 SF. One building located in Carrollton at 2205 E Belt Line Road and is 255,422 SF. The second building is in St. Louis and totals 191,000 square feet. Block Partners is the seller from Kansas City. Chrysler will continue to occupy the Dallas building through 2019. • 2325 Belt Line – 138,317 SF occupied by Iron Mountain who
9
DFW INDUSTRIAL MARKET BRIEF 4Q 2017
will be vacating in June ’18. Located with frontage on Belt Line Road. • DFW/Atlanta Portfolio – 11 buildings totaling 1.6M SF located in DFW and Atlanta. Berkeley Capital is the seller.
NEW DEVELOPMENTS
• 1310 Electronics (Valwood Corporate Center) – Building Four totaling 235,900 SF to be completed in Q2 2018 by Prologis.
LARGE EXISTING VACANCIES • • • • •
2701 S Valley Parkway (Building 6)- 329,060 SF 2900 S Valley Parkway (Building 5) – 222,686 SF 2099 Valley View – 177,805 SF 1001 W Crosby – 135,950 SF 1900 Lakeway Drive – 130,400 SF
SUBMARKET INTELLIGENCE
SOUTH STEMMONS
HLC OUTLOOK
Through the fourth quarter of 2017, the South Stemmons industrial submarket posted a 2.7% vacancy rate and continues to be one of the strongest performing submarkets in Dallas. There continues to be a strong amount of leasing activity throughout the submarket for tenants between 10 – 50,000 square feet. Although absorption for Q4 totaled a negative 250,000 SF, I expect this number to reverse in 2018 due to the high demand of tenants pursuing a location along I-35 and the lack of developments in the submarket. As we begin in 2018, rental rates are expected to continue to increase as the submarket becomes tighter and tenants are continuing to relocate north on I-35 from the spike in rental rates in the Design District. Since 2013, rents in the submarket have increased 30% for space under 50,000 SF. This is a key statistic as this size encompasses the majority of spaces in the submarket. Rental rates for 50,000 SF deals have increased into the high $3/SF range and rates for 10,000 SF are now reaching $5.00/SF start rates. 20-25,000 SF are creeping up into the low $4’s. I expect this trend to continue throughout 2018.
ANDREW GILBERT Market Associate agilbert@hldallas.com 972.381.8312
VITAL STATS
Absorption
10.0%
9.0%
8.0%
(250,000)
(500,000)
67,656
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
600,000
2.7%
3.2%
2.9%
400,000
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
617,853
660,370
2,238,316
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
0 (200,000) (400,000) 6.0%
Q4 14
Q1 15
Q2 15
Q3 15
Q4 15
Q1 16
Absorption
Q2 16
Q3 16
Deliveries
Q4 16
Q1 17
Q2 17
Q3 17
Q4 17
vs. 12 Mths Ago
800,000
200,000
7.0%
vs. Prev. Qtr
1,000,000
(600,000)
698,933
713,933
733,241
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
15,000
-
292,200
Vacancy
Source: CoStar 2017 4Q Industrial Report
TOP TRANSACTIONS
• Prologis purchased the 200,000 SF building at 8801 Ambassador Row. The seller was Freeman who will continue to occupy the building through mid 2019. • Caliber Collision signed a lease for 98,521 SF at 1910 Crown in Farmers Branch. • G&C Direct Mail Marketing leased 20,650 SF at 1125 Union Bower in Irving. • Store Display Fixtures renewed their lease at 444 Mockingbird Lane totaling 20K SF. • TA Associates Realty purchased the 72,000 SF building located at 10647-10657 Shady Trail from Lincoln Property Company.
HLC Deal
LARGE EXISTING VACANCIES • • • • • • •
7601 Ambassador Row – 86,731 SF 2606 Brenner Drive – 65,726 SF 2025 Royal Lane – 50,027 SF 2682 Brenner Drive – 50,580 SF 2650 Manana – 48,000 SF 3000 Pegasus Park Drive – 31,910 SF 3151 Halifax – 25,000 SF
HLC Deal
DEALS ON THE MARKET
• DFW/Atlanta Industrial Portfolio – 11 buildings totaling 1.6M SF with three buildings located in Atlanta. The seller is Berkeley Capital. The Plaza at Walnut Hill is located in the South Stemmons Submarket. • Westwood Business Park – The project consists of twelve flex buildings totaling 227,709 SF. • Norris Systems is selling a 79,184 SF class B building at 2659 Nova Road.
DFW INDUSTRIAL MARKET BRIEF 4Q 2017
10
SUBMARKET INTELLIGENCE
NORTH FORT WORTH
HLC OUTLOOK
The North Fort Worth industrial submarket was able to maintain positive momentum through the end of 2017 by posting a 4th quarter vacancy of 4.9%, down from the 5.9% posted in Q3 and down further from the Q4 2016 posting of 7.7% . The 2017 year-end net absorption figure of 6,449,390 SF highlights the strength and momentum of the North Fort Worth market and sheds a light on the reasoning behind the perpetuation of new spec developments. North Fort Worth ended the 2017 calendar year with more the 3.6 million square feet of spec developments under construction. Throughout the year, the most vibrant sector in North Fort Worth was in bulk warehousing. Roughly 90% of the overall, year-end net absorption in North Fort Worth came from this sector alone and reduced the overall vacancy rate to a 3-year low to 4.9%. As projects such as 35 Eagle, Synergy Crossing, Fossil Creek Crossing and Park 820 come to completion, expect to see continued positive absorption by bulk distribution users that prefer the transit amenities North Fort Worth and Alliance have to offer.
DONNIE ROHDE Market Director drohde@hlfortworth.com 817.710.7058
VITAL STATS
Absorption
12.0%
3,000,000
10.0%
2,000,000
8.0%
1,000,000
6.0%
0
4.0%
(1,000,000)
2.0%
Q4 14
Q1 15
Q2 15
Q3 15
Q4 15
Q1 16
Q2 16
Absorption
Q3 16
Q4 16
Q1 17
Deliveries
Q2 17
Q3 17
Q4 17
(2,000,000)
vs. Prev. Qtr
vs. 12 Mths Ago
1,171,802
2,325,633
1,793,316
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
5.0%
5.6%
8.3%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
1,050,335
289,734
1,503,067
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
3,224,330
3,091,845
3,113,628
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
600,000
1,654,135
1,258,979
Vacancy
Source: CoStar 2017 4Q Industrial Report
TOP SALE TRANSACTIONS
• Pure Industrial Real Estate Trust purchased the 301,500 SF Riverbend West Distribution Center (2101 Reeves Pl) from Hunt Southwest. • Morgan Stanley purchased the 660,860 SF, two-building, Ridge Railhead project from LaSalle Investment Management (400 E Industrial Avenue & 5180 N Railhead Road)
• •
TOP LEASE TRANSACTIONS
• 3M Leased 603,050 SF at 300 Gateway Parkway from UBS • Woods Distribution leased 250,000 from TCRG at 2900 Meacham Boulevard. • Carolina Beverage has expanded its presence in Alliance by leasing an additional 201,204 SF at 1051 Republic Drive. • TTI has renewed 190,000 SF with Mercantile Partners at 26012651 Sylvania Cross Drive • SkyCam has leased 74,000 SF from EastGroup Properties at 2751 Northern Cross Boulevard
DEALS ON THE MARKET
• 1801 Riverbend West Drive – 101,500 SF • 10705 North Freeway – 101,218 SF
NEW DEVELOPMENTS
• Trammell Crow has walls erected on buildings A (1,089,642 SF), H (312,733 SF) & J (234,277 SF), in the expansion of 35 Eagle in Alliance. The 3 buildings are expected to deliver in Q1 of 2018. • Ironwood Realty Partners, LLC and TCRG Properties has walls erected on the first of a 5-building development at the NW corner of I-35 and Golden Triangle Boulevard. The first building
11
DFW INDUSTRIAL MARKET BRIEF 4Q 2017
• •
to deliver will be a 503,500 SF cross-dock facility and is expected to deliver in Q1 2018. The entire development is slated for 2.8 million SF. Andrews Distributing has walls erected on a 400,000 SF building located in Railhead Industrial Park. The building is to be delivered in Q4 of 2018 Scannell Properties has broken ground on a 221,000 SF rearload facility near the NW corner of Loop 820 and Blue Mound Road Building 1 is expected to deliver Q2 of 2018. Phase 2 of the project will include a 270,000 SF partial cross-dock building just to the west of Building 1. Huntington Industrial Partners is currently under construction on a two-building, cross-dock project totaling 432,485 SF at the NE corner of I-35 and Loop 820. Delivery is set for Q2 2018. JP Morgan is currently under construction on Ridge Railhead 2, formerly owned by LaSalle Investment Management. The 361,860 SF, cross-dock facility at 5180 N Railhead Rd should be completed by the end of Q1 2018.
LARGE EXISTING VACANCIES • • • • • • • •
14901 N Beach Street – 1,111,500 SF 3300 Eagle Parkway – 588,262 SF 5555 N Beach Street – 561,119 SF 5650 Alliance Gateway Freeway – 445,870 SF 1051 Republic Drive – 201,204 SF 4630 N Beach Street – 187,000 SF 920 Westport Parkway – 183,908 SF 4601 Gold Spike Drive – 183,832 SF
SUBMARKET INTELLIGENCE
SOUTH FORT WORTH
HLC OUTLOOK
The South Fort Worth industrial submarket posted a fourth quarter vacancy of 5.8%. This is up from 3.7% in the third quarter due to the delivery of Carter Distribution Center Buildings B (270,282 SF) & C (218,282 SF). As of Q4 2017, there is upwards of 4,000,000 SF of proposed industrial development, of which 325,611 SF is currently under construction. We fully expect another 452,000 SF of shallow bay product to break ground in the 1st quarter of 2018. However, we don’t expect the remainder of the 4,000,000 SF to hit at once as Majestic, Mereken Land, Carter Foundation and TCRG control most of the developable tracts, but do presume increased activity from new developers seeking to enter the market. Current lack of supply and increasing demand doesn’t appear to be slowing down, thus fueling a fire under developers to enter the submarket. This is highlighted by south Fort Worth’s YTD delivered square footage of 987,414. A figure that is up significantly from last years posted deliveries of 376,500 SF.
MATT CARTHEY
Shallow Bay product remains very strong and in high demand posting a vacancy rate of 2.3% up from 2.2% in the third quarter. This marks the lowest of all product types in the South Fort Worth submarket. Due to the lack of supply and increased development we expect this to increase through 2018.
Partner, Shareholder mcarthey@hlfortworth.com 817.710.1111
VITAL STATS
Absorption
33,089
468,857
vs. Prev. Qtr
vs. 12 Mths Ago
400,000
5.8%
3.7%
3.4%
200,000
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
686,574
467,361
353,501
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
600,000 6.0%
0 -200,000 -400,000
4.0% -600,000 -800,000 3.0%
Q4 14
Q1 15
Q2 15
Q3 15
Q4 15
Absorption
Q1 16
Q2 16
Q3 16
Q4 16
Deliveries
Q1 17
Q2 17
Q3 17
Q4 17
vs. 12 Mths Ago
(812,913)
800,000
5.0%
vs. Prev. Qtr
Vacancy
1,000,000
7.0%
-1,000,000
325,611
768,714
220,000
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
751,164
19,000
301,500
Vacancy
Source: CoStar 2017 4Q Industrial Report
TOP LEASE TRANSACTIONS
• Drivetime LLC has leased 300,890 SF at 5000 South Freeway from TCRG in south central Fort Worth • UTEX Industries leased 135,182 SF from Aztec Industries at 102 Sentry Drive in Mansfield • Sealy has leased 240,049 SF of climate controlled space to Alcon Laboratories as well as 264,125 SF to Dematic in their Crossroads 35/20 building located at 6601 Oak Grove Road • Alcon Research renewed and extended 402,500 SF at 6445 Will Rogers & 6440 Oak Grove within Carter Park Distribution Center owned by TA Realty
HLC Deal
HLC Deal
DEALS ON THE MARKET
• 5041-5021 David Strickland Road – Berkeley Properties has selected a local buyer who is currently working with them on a contract to purchase the 18 building 136,200 SF portfolio • HFF, on behalf of Berkeley Properties, is marking the sale of a multi-market portfolio with two of the assets residing in southeast Fort Worth. Berry Business Center is a 223,725 SF five building project, and Village Creek Business Park is a 430,000 SF seven building project
NEW DEVELOPMENTS
• Crow Holdings Capital Real Estate & Rob Riner Companies have delivered buildings B & C at Carter Distribution Center totaling 488,564 SF and located at 6633 – 6657 Oak Grove Road. Building B totals 270,282 SF and can be demised to 67,860 SF while Building C totals 218,272 SF and can be demised to 54,860 SF. Both buildings offer cross dock configuration, substantial car and trailer parking, 32’ CH, the ability to offer secured perimeter, private drive access ideal for truck staging and ESFR sprinklers. • Majestic Realty has broken ground on a 287,261 SF rear load facility located southwest of Everman Parkway and I-35 in south Fort Worth. This will be the first of five buildings constructed within their Southland Business Park Phase 1 development, which is slated to house a little over 1.9mm SF total. The estimated delivery date is June 2018. • Hunt Southwest has completed a pad site at 8600 Will Rogers Blvd within Carter Business Park. They have partnered with CBRE who is marketing the property as a 300,000 Class A Food Processing Facility build-to-suite.
LARGE EXISTING VACANCIES • • • • •
7220-7550 Oak Grove Road – 1,142,150 SF 6633 Oak Grove Road – 270,282 SF 6657 Oak Grove Road – 218,282 SF 5000 South Freeway – 185,000 SF 1801 Riverbend West Drive – 101,500 SF DFW INDUSTRIAL MARKET BRIEF 4Q 2017
12
DALLAS
5055 Keller Springs Road Suite 300 Addison, Texas 75001 T 972.241.8300 F 972.241.7955
FORT WORTH
300 Throckmorton Street Suite 550 Fort Worth, Texas 76102 T 817.710.1110 F 817.810.9017
HOUSTON
11757 Katy Freeway Suite 250 Houston, Texas 77079 T 713.850.8500 F 713.850.8550