3Q 2018 DFW Industrial Market Brief by Holt Lunsford Commercial

Market Brief...

Dallas/Fort Worth

INDUSTRIAL

3Q18 Property Pictured Above: Everman Trade Center | I-35W & Everman Parkway | Fort Worth, Texas 76108

DFW INDUSTRIAL MARKET BRIEF 3Q 2018

MESSAGE FROM HOLT

As we celebrate our 25th year in business, we are extremely honored to work with each of you. We attribute our success to you, our clients, for providing us the opportunity to earn your business and your trust. We have the best professionals in the real estate industry, skillfully trained and ready to provide exemplary service to our clients at all times. Our company was founded on integrity and market knowledgeâ&#x20AC;&#x201D;and these same principles are incorporated into a set of core Values that are the cornerstone of our business today. Thank you for your loyalty and for entrusting Holt Lunsford Commercial with your real estate needs. As we celebrate the past and look forward to the future with great enthusiasm, we remain highly committed to you, our valued clients.

Holt Lunsford, Founder & CEO

DFW INDUSTRIAL MARKET BRIEF 3Q 2018

TABLE OF CONTENTS 1. DALLAS/FORT WORTH INDUSTRIAL SUBMARKETS & EXPERTS

1 2 3

2. OVERALL DALLAS/FORT WORTH INDUSTRIAL MARKET A. Industrial Trends & Transactions

B. Facts and Figures

2. 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

HLC SUBMARKET COVERAGE

DFW

HLC DFW INDUSTRIAL MARKET EXPERTS

JIM BRICE

MATT CARTHEY

CANON SHOULTS

JOHN GORMAN

JOSH BARNES

DONNIE ROHDE

ANDREW GILBERT

Partner - Texas Leasing jbrice@hldallas.com 972.280.8306

Partner mcarthey@hlfortworth.com 817.710.1111

Managing Principal cshoults@hldallas.com 972.280.8328

Principal jgorman@hldallas.com 214.920.9800

Principal jbarnes@hldallas.com 972.280.8353

Market Director drohde@hlfortworth.com 817.710.7058

Market Director agilbert@hldallas.com 972.280.8312

BEN WALLACE

JAKE NEAL

THOMAS GRAFTON

CLAY BALCH

GEORGE JENNINGS

KEATON DUHON

MADDY CANTY

Market Associate bwallace@hldallas.com 972.421.1966

Market Associate jneal@hlfortworth.com 817.284.5555

Market Associate tgrafton@hlfortworth.com 817.632.6152

Brokerage Services Associate cbalch@hldallas.com 972.421.1956

Market Associate gjennings@hlfortworth.com 817.632.6151

Market Associate kduhon@hlfortworth.com 817.284.5555

Market Analyst mcanty@hldallas.com 972.280.8325

HLC OUTLOOK Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

3,695,539

7,141,411

5,466,037

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

6.3%

6.1%

6.7%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

11,051,126

8,819,217

12,402,150

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

24,812,129

25,017,684

24,899,293

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

5,920,094

7,102,546

5,813,811

The DFW industrial market continues to be one of the strongest industrial markets in the country and a top four choice for both national logistics distribution and institutional capital. As of 3Q 2018, CoStar reported YTD absorption of approximately 13 million SF which is slightly off pace from 3Q 2017. However, the overall DFW industrial market vacancy remains stabilized at a healthy 6.3%. Notably, the 25 million SF of projects under construction as of 3Q 2018 exceeds 3Q 2017 under construction numbers by 3M SF. In addition, YTD deliveries are outpacing YTD absorption by 3M SF. The majority of this construction activity encompasses the sub markets of GSW (4.6M SF), South Dallas (2.8M SF), North Fort Worth (2.7M SF) and DFW Airport (3.6M SF). The DFW Industrial market still remains healthy with an overall market vacancy of 6.3%. However, investment capital should observe isolated submarket trends whereby the current construction/ absorption ratio is favoring construction outpacing net absorption. Given the lack of available portfolio dispositions, 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. As evidenced by the increased number of forward transactions.

HLC DFW

INDUSTRIAL TRENDS & TRANSACTIONS TRENDS & TRANSACTIONS

Industrial product continues to be in high demand for institutional investment including foreign sources of capital seeking to invest in the US economy. So much so that forward positions are becoming more prevalent. Additionally, we continue to see new sources of capital competing for deals. Speculative development remains at a historical peak due to the lack of acquisition opportunities and capital sources seeking alternative basis positions to “retail” pricing resulting from high demand and historically low cap rates. Due to continued population growth and consumer demand, E-commerce groups and third-party logistics providers 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) in submarkets with new construction opportunities, existing second-generation space seeks to remain competitive and 3) new development under construction seeks to secure a tenant base prior to additional projects breaking ground. Deal velocity in 2018 has diminished such that rental abatement has intensified as owners seek to secure a limited number of transactions. Since 2010, depending on the size of the transaction, rental rates have increased 20%-30% with 2%-4% annual escalations accepted by the market. However, leases that have previously experienced substantive rent increases (leases signed in 2015) may have stabilized base rents albeit still subject to annualized rent increases upon expiration.

TOP LEASE TRANSACTIONS

• Home Depot Build-to-Suit with NorthPoint Development for 2.3 million square feet in two buildings (1.5M + 800K SF) at 9314 W Jefferson Boulevard • Mars Petco Build-to-Suit- Bandera is building a 1.5M SF building for Mars Petco in Passport Park between Market Street and Rochelle

• Amazon Build-to-Suit of 855,000 SF with Hillwood at 1301 Chalk Hill Road off Interstate 30 • McLane Company, Inc. has leased 670,300 SF of cold storage space at Provender Logistics Center • Elements International leased 487,200 SF at 2250 Trade Center Drive with IDI Logistics • Alan Ritchey, Inc. leased 450,340 SF from Clarion/ Jackson Shaw at 4931 Conflans Road • Quest Window Systems leased 327,600 SF at 1720 S Jupiter Road with Langford Property Company • Cintas leased 261,818 SF from GLP/Hillwood at CentrePort 4 – Sovereign Road & Amon Carter • Best Inc. leased 214,649 SF at 39324 I-20 with Trammell Crow • Viracon signed a 144,800 SF Built to Suit at Buckner Road with Exeter

TOP HLC LEASE TRANSACTIONS • CHEP USA leased 155,200 SF at 5301 Alliance Gateway from Brookfield Properties • RTP leased 135,141 SF of space at Carter Distribution Center Building B from Crow Holdings • Hobi International renewed their lease of 98,489 SF at 7601 Ambassador Row from Frontier Equity • Product Innovations Research renewed and expanded into a total of 98,257 SF at 1103-1215 Trend Drive with Stonelake • Baylor Health Care System renewed their lease of 80,000 SF at 4051 La Reunion • LPC TX Visual, LLC leased 75,249 SF at 4040 Lindbergh with TA Realty • Chaperral Dodge, Inc leased 72,929 SF at 3310 W Kingsley Road with Clarion • Cowtown Materials, Inc leased 64,249 SF at 1200-120 Crosby Road with Frontier Equity • Mueller Streamline Company renewed their lease of 55,585 SF at 631-641 W Mockingbird Lane with TA Realty

HLC Deal

HLC DFW FACTS & FIGURES

Market

Existing Inventory

10,000,000 7.0% 8,000,000

6.5%

6,000,000

4,000,000

Total RBA

Direct SF

Total SF

Vac. %

DFW Airport

619

74,268,586

3,575,017

4,222,970

5.7%

East Dallas

599

43,010,266

2,479,496

5.8%

1,086

106,863,961

6,329,870

6,458,258

6.0%

1,186,131

29,387

2.5%

Henderson County

12,000,000

Vacancy

# Bldgs.

Great SW/Arlington

OVERALL DFW

7.5%

North Fort Worth

649

90,167,170

4,751,158

4,789,158

5.3%

Northeast Dallas

1,474

105,687,286

5,308,922

5,936,956

5.6%

Northwest Dallas

1,344

107,184,633

5,032,790

5,290,296

4.9%

NW Dallas Outlying

3,355,095

41,725

1.2%

South Dallas

676

97,747,634

13,204,524

13,441,116

13.8%

South Fort Worth

1,402

77,820,317

2,965,284

3,063,981

3.9%

South Stemmons

2,099

110,466,785

5,186,127

5,687,911

5.1%

Totals

9,992

817,757,864

48,904,300

51,441,254

6.3%

6.0% 2,000,000

5.5%

0 Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Absorption

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Deliveries

Q3 18

Vacancy

VACANCY - OVERALL DFW

8.0%

7.10% 7.0%

6.30%

6.9%

6.0% 6.0% 5.0% 4.0% 3.0%

3.0%

2.0%

2.0% 1.0% 0.0%

Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Direct

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Sublet

Q3 18

Total

ABSORPTION - OVERALL DFW 20,000,000 18,000,000 16,000,000

YTD Net Absorption

YTD Deliveries

Under Construction SF

YTD Leasing Activity

DFW Airport

1,329,136

1,557,812

3,639,692

3,004,168

East Dallas

203,000

487,200

1,906,475

1,122,520

4,301,602

1,197,000

4,575,042

7,887,964

Henderson County

North Fort Worth

2,764,979

3,266,117

2,665,154

1,489,476

Northeast Dallas

1,603,537

538,821

2,612,824

3,343,223

Northwest Dallas

68,151

692,754

2,326,830

5,538,664

154,809

1,199,100

28,880

2,768,803

6,689,219

2,750,564

3,427,725

South Fort Worth

978,277

320,811

1,284,734

2,204,969

South Stemmons

(1,200,004)

1,078,933

1,851,714

2,905,170

Totals

12,972,290

15,828,667

24,812,129

30,952,759

Market

Great SW/Arlington

14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Total Net

Q3 17

Q4 17

Q1 18

Q2 18

Q3 18

Leasing Activity

CONSTRUCTION - OVERALL DFW 30,000,000

NW Dallas Outlying South Dallas

25,000,000

20,000,000

15,000,000

10,000,000

5,000,000

Source: CoStar 3Q 2018 Industrial Report

Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Delivered Inventory

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Q3 18

Under Construction

SUBMARKET INTELLIGENCE GREAT SOUTHWEST/ARLINGTON

HLC OUTLOOK

14+ YEARS CRE EXPERIENCE

The Great Southwest submarket consists of approximately 107M SF, and per CoStar reporting experienced YTD positive absorption of 4,301,602 SF with 7.9M SF of leasing activity. This ranks GSW as the leading submarket for YTD absorption and leasing activity. GSW absorption through 3Q has already outpaced all of 2017 absorption (3.9M SF). GSW reported new completions of 1.2M SF and an additional 4.6M SF of product currently under construction. (However, General Motors accounts for 2.2M SF of the construction activity.) The 3Q 2018 vacancy rate improved markedly to 6.0% versus 2Q 2018 at 6.9%. As we continue into 2018, we expect this vacancy rate to tighten even more as tenants absorb additional product and new development begins to taper.

CANON SHOULTS Managing Principal cshoults@hldallas.com 972.280.8328

TOP LEASE TRANSACTIONS • Alan Ritchey, Inc. leased 450,340 SF from Clarion/ Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

917,927

2,588,530

595,805

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

6.0%

6.9%

8.6%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

2,336,952

2,105,277

2,392,743

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

4,575,042

3,448,692

6,181,871

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,197,000

750,000

VITAL STATS 3,000,000

9.0%

2,500,000

8.0%

2,000,000

7.0%

1,500,000

6.0%

1,000,000

5.0%

500,000

4.0%

0 Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Deliveries

Q3 17

Q4 17

Q1 18

Q2 18

Q3 18

Vacancy

Source: CoStar 3Q 2018 Industrial Report

1,126,286 SF Total with Crow Holdings

• Cintas leased 261,818 SF from GLP/Hillwood at

• 2911 S Great Southwest Parkway – 271,794 SF with

CentrePort 4 – Sovereign Road & Amon Carter • Dametic Corp. leased 170,000 SF from Scannell Properties at 2710 Forum Drive • Advanced Integration Tech renewed their 88,000 SF lease with ProLogis at 901 Avenue S • Chase Industrial leased 172,120 SF from Liberty Property Trust at 5481 Frye Road

LaSalle • 4100 New York Avenue – 110,468 SF with a private investor/developer • Parc Southwest – 5250 Frye Road and 5251 Frye Road – 292,997 SF spec with GID/Jackson Shaw • Sovereign Road & Amon Carter – CentrePort 4 – 494,518 SF spec with GLP/Hillwood (Cintas leased 261,818 SF) • 2525 E Abram Street/General Motors Assembly Plant Expansion – 1,000,000 SF • General Motors Buildings 1 & 2 – 1.2 M SF development with NorthPoint Development (100% leased to GM vendors) • Liberty Park GSW Building 1 – 172,120 SF spec with Liberty Property Trust (100% leased to Chase Industrial) • 949 W Oakdale Road – 401,557 SF spec with PLR

DEALS ON THE MARKET • Lucid Audio (user) is selling CentrePort VII. The

10.0%

Q3 15

Jackson Shaw at 4931 Conflans Road

NEW DEVELOPMENTS • Wildlife 7, 9, 10 & 11 – 2401 N Belt Line Road –

building is 117,481 total SF. • Home Depot is selling their 322,824 SF building at 1102 State Highway 161/Pioneer Gardens in Grand Prairie. • Crow Holdings Industrial is selling their two building 509,733 SF project at MacArthur Crossing. • Stonelake purchased Westpark Distribution Center from TA Realty. The building is 425,870 SF. • KKR/Alpha Industrial Properties purchased Texas Urban Logistics Portfolio from Crow Holdings – the portfolio consists of 2.35M SF and 391,000 SF of the package is in GSW.

LARGE EXISTING VACANCIES • 14900 Frye Road – 494,990 SF • 950 E Avenue K – 487,752 SF • 951 Valley View Lane – 341,442 • 4925 New York Avenue – 242,370 • 14601 Sovereign Road – CentrePort 4 – 232,700 SF • 1301 Ave T – 210,000 SF

SUBMARKET INTELLIGENCE DFW AIRPORT

HLC OUTLOOK

25+ YEARS

The DFW Airport market vacancy rate is 5.7% at the end of 3Q 2018 with absorption of 596,275 SF. DFW International Airport is not only one of the busiest in the U.S. for passenger travel, but it also ranks as one of the largest cargo airports in the country. It boasts a high proportion of newer buildings built since 2000, as a result, the submarket has a high concentration of efficient product with clear heights and dock configurations suitable for modern distribution. The submarket consists of large big box users including Amazon, Samsung, Uline, Kellogg’s and The Container Store to name a few. This submarket was the fastest to rebound from the downturn in 2008.

CRE EXPERIENCE JIM BRICE

Partner - Texas Leasing jbrice@hldallas.com 972.280.8306

Absorption

vs. Prev. Qtr

Rental rates have remained strong ranging from $3.85 -$8.50 for bulk distribution and shallow bay product. Rental abatements range from 2 months to 8 months depending on renewal versus new deals and the size of the lease transaction. Tenant Improvement costs remain high because increasing tenant demands and construction costs. Trammell Crow Company has 144 acres in Passport Park with two buildings totaling 1.8 million square feet; dirt work has begun.

vs. 12 Mths Ago

596,275

733,106

1,089,884

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.7%

6.2%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

812,577

1,021,079

2,041,482

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

3,639,692

4,297,612

2,836,992

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

657,920

500,000

504,356

VITAL STATS 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%

5.0% 4.0%

(500,000) Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Deliveries

Q3 17

Q4 17

Q1 18

Q2 18

Q3 18

Vacancy

Source: CoStar 3Q 2018 Industrial Report

DFW Airport market continues to be one of the top three markets for institutional owners to buy or develop in the Metroplex. Majority of the fee simple land has been developed with most of the developments taking place on 40-year ground lease land owned by DFW Airport.

TOP LEASE TRANSACTIONS • Thirty-One Gifts leased 651,518 SF at 951 Garden Ridge from Prologis

• American Hotel Registry leased 225,000 SF at 3801 S 20th Avenue (International Logistics Center) from Cabot • Shade Structures leased 205,945 SF at 2580 Esters Boulevard at DFW Trade Center III from Invesco • Aviall leased 166,704 SF at 100 S Royal Lane from ML Realty

DEALS ON THE MARKET • Dalfen Industrial purchased Skyway Business Center from Hartman. The building totals 66,504 SF.

NEW DEVELOPMENTS • Gateway Logistics Center – five (5) building development totaling 1,409,400 SF being developed by Bandera Ventures • Mars Petco Build-to-Suit Bandera is building a 1.5M SF building for Mars Petco in Passport Park between Market Street and Rochelle

• DFW Commerce Center Building 1 – 1,000,584 SF building being developed by Copeland Commercial • Prologis Park 121 – building 5 consists of 188,240 SF being developed by Prologis • Passport Park – three (3) building development totaling 1,231,318 SF being developed by Dalfen Industrial • PPG Industries Distribution – Duke is building a 634,200 SF built-to-suit for PPG Industries. They will occupy 450,000 SF

LARGE EXISTING VACANCIES • 1717 W Airfield Drive – 498,800 SF • 801 Industrial Boulevard – 348,979 SF • 2800 Valley View Lane – 294,795 SF • 4051 N State Highway 121 – 200,000 SF • 1040 Trade Avenue – 169,050 SF

SUBMARKET INTELLIGENCE NORTHEAST & EAST DALLAS

11+ YEARS

HLC OUTLOOK

CRE EXPERIENCE

The Northeast and East Dallas submarkets performed extremely well in 3Q with another consecutive quarter of positive absorption reaching a historical low vacancy rate of 5.7%. We continue to see strong activity and have seen rates push past historical levels and they continue to steadily increase. Spec warehouse and newer second-generation space in Garland between 100 – 200,000 SF is now being quoted between $4.05 – $4.95 NNN. Construction has increased considerably over the last 12 months with more announcements on the way. Activity remains strong throughout the market as landlords of new construction are consistently putting out proposals during the early phases of construction. We expect concessions to remain low and rates to steadily increase throughout these markets.

JOSH BARNES

Principal jbarnes@hldallas.com 972.280.8353

TOP LEASE TRANSACTIONS Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

926,542

448,338

222,308

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.7%

5.9%

6.4%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

2,009,961

1,671,626

1,663,189

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

4,519,299

4,696,689

2,332,813

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

672,108

212,326

621,890

VITAL STATS

8.0%

1,600,000 1,400,000 1,200,000 1,000,000

7.0%

800,000 600,000 400,000 200,000

6.0%

0 (200,000) (400,000) (600,000)

5.0% Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Deliveries

Q3 17

Q4 17

Q1 18

Q2 18

Q3 18

Vacancy

Source: CoStar 3Q 2018 Industrial Report

• Elements International leased 487,200 SF at 2250 Trade Center Drive with IDI Logistics • Quest Window Systems leased 327,600 SF at 1720 S Jupiter Road with Langford Property Company • Viracon signed a 144,800 SF Build-to-Suit at Buckner Road with Exeter • Kirchoff Automotive renewed and expanded into 114,515 SF at 3901 W Miller Road with First Industrial • Twin Med leased 144,098 SF at 10401 Miller Road with Colony Industrial • Undisclosed Tenant leased 109,830 SF at 1330 S Jupiter Road with Langford Property Company • DA Rugs leased 86,240 SF at 2525 S Shiloh Road with Colony Industrial • Chaperral Dodge, Inc leased 72,929 SF at 3310 W Kingsley Road with Clarion

HLC Deal

DEALS ON THE MARKET • Kingsley Transit Center being sold by HLC – 218,787 SF building at 3422 Kingsley Road; owned by Clarion. • I-35 Portfolio being sold by Eastdil – consists of 2 flex/ industrial buildings in Plano and 1 industrial building in Garland; owned by GLP. • 3414 Herrmann Drive being sold by HLC – 124,800 SF flex/industrial building; owned by Frontier Equity.

HLC Deal

NEW DEVELOPMENTS • 1601 South Shiloh Road in Garland – Speculative Two building development totaling 248,825 SF by Huntington Industrial Partners; 32’ clear height, cross dock • Parc Northeast – Speculative Four building development totaling 434,640 SF by Jackson Shaw; 28’ clear height, 3 Rear Load buildings, 1 Front Load building • Exeter Property Company is under construction at S Buckner Road – Speculative Two building project totaling 813,500 SF; 32’ clear 583,200 SF cross dock and 32’ clear 230,300 SF front load • 1330-1720 South Jupiter Road in Garland – Speculative Three building spec development totaling 764,400 SF by Langford Property Company; 36’ clear cross dock configurations with trailer parking; to be delivered October 2018 • 1581 Corporate Drive – Speculative 115,176 SF building development by Dalfen; 32’ clear, Rear Load • Wilmeth @ i75 – Speculative 202,270 SF building development by Hunt Southwest; 32’ clear, Read Load

HLC Deal

LARGE EXISTING VACANCIES • 3800 Leon Road – 378,959 SF • 3000 West Kingsley – 341,840 SF; sublease by Apex Tools • 1600 S Jupiter Road – 218,400 SF • 2600 McCree Road – 157,980 SF • 3310 W Kingsley Road – 145,858 SF

SUBMARKET INTELLIGENCE NORTHWEST DALLAS

7+ YEARS

HLC OUTLOOK

CRE EXPERIENCE

Through the third quarter of 2018, Northwest Dallas continued to prove to be one of the strongest submarkets in the Dallas/Fort Worth Metroplex. The submarket posted a 4.9% vacancy rate which is near the same rate as the end of quarter two 2018 (4.6%). Billingsley recently completed their four-building development at Mercer Business Park which they are now 100% occupied. Building Four at Prologis’ Valwood Corporate Park was completed just prior to the end of the quarter which totals 235,900 SF and is currently vacant. Core5 recently broke ground on Valwood Crossings at Belt Line and Luna for two buildings totaling 620,000 SF and Panattoni began their 151,176 SF spec facility in July. Rents have continued to increase due to the market tightening as spaces between 50 – 150,000 SF are diminishing which is the primary size range in Valwood. All indicators point to the market remaining strong throughout 2018 and into 2019.

ANDREW GILBERT Market Director agilbert@hldallas.com 972.280.8312

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(350,462)

627,255

632,577

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

4.9%

4.3%

4.9%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

2,225,216

1,548,001

1,890,254

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,326,830

2,053,709

1,667,782

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

356,260

336,494

121,758

TOP TRANSACTIONS • Lexington Realty Trust purchased 2115 E Belt Line from Rialto Capital. The building totals 356,855 SF and Rudy’s Tortillas occupies nearly 300,000 SF. • KKR purchased the Texas Urban Logistics Portfolio from Crow Holdings. They were 27 buildings in Dallas and Houston totaling 2.3M SF. Two of the buildings are located in Northwest Dallas. • ML Realty Partners purchased 2908 Commodore which is an 81,435 SF freestanding facility in Northwest Dallas. • LPC TX Visual, LLC leased 75,249 SF at 4040 Lindbergh with TA Realty. • Cowtown Materials, Inc leased 64,249 SF at 12001210 Crosby Road with Frontier Equity. • Product Innovations Research renewed and expanded into a total of 98,257 SF at 1103-1207 Trend Drive with Stonelake Capital Partners. • L.E. Klein Company renewed their lease of 58,202 SF at 2115 E Belt Line Road with Rialto Capital. • US Pack leased 50,000 SF at 1613 Hutton Drive with ProLogis.

HLC Deal

VITAL STATS

10.0%

2,000,000

HLC Deal

9.0%

1,500,000

8.0% 1,000,000 7.0% 500,000 6.0%

HLC Deal

5.0%

4.0%

(500,000) Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Deliveries

Q3 Q4 17 17

Q1 18

Q2 18

Q3 18

Vacancy Source: CoStar 3Q 2018 Industrial Report

DEALS ON THE MARKET • Dallas and Houston Infill Light Industrial Portfolio – 1.07M SF in 12 buildings. One of the buildings is in Northwest Dallas at 2425 Carter Drive. • Josey Lane Distribution Center – HLC is selling this 259,900 SF building located at 1900 N Josey. The building is currently occupied by PPG Industries through April 2019.

HLC Deal

NEW DEVELOPMENTS • Valwood Crossings – Two buildings project totaling 620,000 SF at the Northeast corner of Belt Line and Luna. Both buildings to be completed by 4Q this year. Core5 is the developer. • Valwood Logistics Center – Panattoni broke ground on their 151,176 SF rear-load building in July. The site is located at Valley View and Senlac.

LARGE EXISTING VACANCIES • 1625 Hutton – 235,900 SF • 1001 W Crosby Road – 135,950 SF • 14325 Gillis Road – 175,300 SF • 4700-4720 Simonton Road – 152,519 SF • 2099 Valley View Lane – 150,000 SF 13

SUBMARKET INTELLIGENCE SOUTH DALLAS

30+ YEARS

HLC OUTLOOK

CRE EXPERIENCE

South Dallas Industrial submarket as surveyed is 120M SF and is now 13.5% vacant, which is 1.6% higher than reported in 2Q 2018. New construction continues outpacing absorption. South Dallas reported net absorption of 463,999 SF in 3Q 2018 according to CoStar which can only be attributed to time of reporting because there were no notable new lease transactions in spec development to ease the deliveries of new construction. In 3Q 2018 South Dallas delivered 3.4 Million SF of new bulk warehouse. South Dallas still has 1.5 M SF remaining under construction. As expected, the southern corridors along I-20, I-35, and I-45 have continue to produce new opportunities for development but, the supply of new product by capital sources has far exceeded the submarket demand and deal velocity and subsequently leads the Dallas market as the only submarket with double digit vacancy of 13.5%. Corridors such as SE Dallas/Interstate 45 have 22% vacancy.

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.

TOP LEASE TRANSACTIONS Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

887,037

1,994,508

1,080,947

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

13.8%

12.6%

12.0%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,604,300

220,314

1,843,318

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,750,564

3,878,503

5,784,805

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,266,259

3,344,580

2,142,672

VITAL STATS

15.0%

3,700,000 13.0%

3,200,000 2,700,000

11.0%

2,200,000 9.0%

• Home Depot Build-to-Suit with NorthPoint Development for 2.3 million square feet in two buildings (1.5M + 800K sf) at 9314 W Jefferson Boulevard • Amazon build-to-suit of 855,000 SF with Hillwood at 1301 Chalk Hill Road off Interstate 30

TOP SALES TRANSACTIONS • 3535 North Houston School Road from Copeland Commercial (seller) to Liberty Property Trust (buyer) – 900,043 SF • 4910 Merrifield Road Building 7 from Courtland Development (Seller) to Cummins Southern Plains (buyer) – 54,600 SF in Mountain Creek • Amazon Build-to-Suit of 855,000 SF from Hillwood (Seller) to Granite (buyer) at 1301 Chalk Hill Road off Interstate 30

1,700,000 1,200,000

7.0%

700,000 5.0%

200,000 (300,000)

3.0% Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Deliveries

Q3 17

Q4 17

Q1 18

Q2 18

Q3 18

Vacancy Source: CoStar 3Q 2018 Industrial Report

NEW DEVELOPMENTS • I-35 Logistics Crossing (Crow Holdings) – 1,221,612 SF (2 Buildings, 610,806 SF each) • 4910 & 4940 Merrifield Road Building 7 & 8 (Courtland) – (54,600 SF, Building 7 & 100,360 SF Building 8) in Mountain Creek • SouthLink (Hines) - 1,044,647 SF at Bonnie View Road and Cleveland Road

• Crossroads Trade at 2119 N Interstate 35E – 948,392 SF with Hillwood/Clarion

UNDER CONSTRUCTION • Park 20/35, Building 5 – 237,678 SF by CalSTRS • 1401 & 1501 Chalk Hill Road – 672,775 SF & 608,939 SF by Hillwood & Trammell Crow

LARGE EXISTING VACANCIES • Southport Parkway, Building 1 - 1,075,260 SF spec SouthPort Logistics Park (Interstate 45) • Crossroadds Trade at 2119 N Interstate 35E – 948,392 SF with Hillwood/Clarion • Liberty Property Trust (formerly Copeland) – 900,043 SF at 3535 N Houston School Road • 3300 Cedardale Road, Building 1 – 776,630 SF with Morgan Stanley • I-35 Logistics Crossing at 2801 N Houston School Road – 1,221,612 SF (2 buildings @ 610,086 SF each) with Crow Holdings • SouthPointe 20/35 – 660,312 SF spec with UBS • LogistiCenter at Dallas – 626,439 SF spec with Dermody Properties at 9890 Bonnie View Road

SUBMARKET INTELLIGENCE SOUTH STEMMONS

7+ YEARS

HLC OUTLOOK

CRE EXPERIENCE

At the end of 3Q 2018, the South Stemmons industrial submarket posted a 3.5% vacancy rate and continues to be one of the strongest performing submarkets in Dallas. There is a strong amount of leasing activity throughout the submarket for tenants between 10 – 50,000 SF. Although absorption for 3Q totaled a negative 145,000 SF, this is due to tenants relocating from the Design District with rates continuing to rise quickly in that area. I expect the negative absorption number to reverse through the remainder of 2018 due to the lack of development sites in the submarket. As we progress into 4Q, rental rates are expected to increase as the submarket becomes tighter and tenants are relocating 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 through 4Q 2018.

ANDREW GILBERT Market Director agilbert@hldallas.com 972.280.8312

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(145,000)

(52,000)

(287,000)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

3.5%

3.2%

3.8%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

592,451

1,155,528

1,518,178

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

380,000

1,093,933

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

702,215

from Crow Holdings. They were 27 buildings in Dallas and Houston totaling 2.3M SF. Two (2) of the buildings are located in Northwest Dallas. • ML Realty purchased 7601 Ambassador Row which is a 185,220 SF building located in West Brookhollow. • Hobi International renewed their lease of 98,489 SF at 7601 Ambassador Row from Frontier Equity. • Mueller Streamline Company renewed their lease of 55,585 SF at 631-641 W Mockingbird Lane with TA Realty. • Sharp Show Services expanded into 32,000 SF at 4653 Leston Avenue.

LARGE EXISTING VACANCIES • 8801 Ambassador Row – 183,443 SF • 11325 Gemini Lane – 76,945 SF • 3305 Manor Way – 68,300 SF • 1900 Anson Road – 66,331 SF

HLC Deal

VITAL STATS

9.0%

TOP TRANSACTIONS • KKR purchased the Texas Urban Logistics Portfolio

1,000,000 800,000

8.0%

600,000 7.0%

400,000

6.0%

200,000 0

5.0%

(200,000) 4.0%

(400,000)

3.0%

(600,000) Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Deliveries

Q3 17

Q4 17

Q1 18

Q2 18

Q3 18

Vacancy

Source: CoStar 3Q 2018 Industrial Report

DEALS ON THE MARKET • 10750 Denton Drive – Formerly occupied by Hollander Sleep Products who still owns the building. The building totals 252,229 SF and is located at Denton Drive and Walnut Hill. • 2651 Manana – 67,000 SF located in Hines North. There is currently 40,000 SF of vacancy. • 4811 Lakawana – 50,000 SF building in West Brookhollow. The building is fully vacant.

SUBMARKET INTELLIGENCE NORTH FORT WORTH

12+ YEARS

HLC OUTLOOK

CRE EXPERIENCE

The North Fort Worth industrial submarket maintained positive momentum through the 3Q which is not reflected in the vacancy posting of 5.3%, up from the 3.6% posting after 2Q. With projects such as Trammell Crow’s 35 Eagle and Fossil Creek Crossing having been delivered towards the end of 3Q, the fourth quarter is poised to continue the trend of positive absorption which has posted a year-to-date number of 2,532,441 SF.

DONNIE ROHDE

Market Director drohde@hlfortworth.com 817.710.7058

Developers remain bullish on North Fort Worth as shown by the 2,665,154 SF currently under construction with announcements for another 2 million square feet of spec product to be brought into the market.

TOP SALE TRANSACTIONS Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

593,937

992,713

2,326,993

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.3%

3.9%

5.5%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

305,619

602,572

515,067

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,665,154

4,442,645

4,232,383

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,951,547

522,670

1,654,135

VITAL STATS

12.0%

3,000,000

10.0%

2,000,000

8.0%

1,000,000

6.0%

4.0%

(1,000,000)

• KKR purchased the two (2) building, 432,485 SF Fossil Creek Crossing project from Huntington. • John Hancock purchased the 603,050 SF, 300 Gateway Parkway building from UBS. • Pure Industrial Real Estate Trust purchased 657,043 SF located at 4800 N Sylvania Road from Hunt Southwest. • Prattco International purchased 1403 S Cherry Lane from Cooperative Industries.

TOP LEASE TRANSACTIONS • CHEP USA leased 155,200 SF at 5301 Alliance Gateway from Brookfield Properties • Westin Automotive leased 128,400 SF at 4675 Railhead Road from James Campbell Company • Mygrant Glass leased 34,840 SF at 4630 N Beach Street from Mercantile Partners

DEALS ON THE MARKET

•

• •

•

• Fossil Creek – 564,458 SF being sold by Space Center • Park 820 – 491,000 SF being sold by Scannell Properties

NEW DEVELOPMENTS 2.0%

(2,000,000) Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Deliveries

Q3 17

Q4 17

Q1 18

Q2 18

Q3 18

Vacancy Source: CoStar 3Q 2018 Industrial Report

• Hillwood is under construction on Alliance Northport 3 (1,214,526 SF) in Northlake, Texas, pre-leased to Black & Decker with expected 1Q 2019 delivery. Alliance Northport is a 260-acre site at I-35W & Hwy 114 which can accommodate more than 3M SF. • Hillwood is also under construction on Alliance Northport 1, a 500,555 SF cross-dock facility in Northlake, Texas.

Hillwood is also poised to break ground on Alliance Center North 3 a 782,000 SF cross-dock facility. DHL is under construction on Buildings A (705,956 SF) & B (493,500 SF) on FM 156 and Hwy 114 in Justin, Texas. Both cross-dock facilities are slated for a 1Q 2019 delivery. Hunt Southwest is slated to break ground on a 1,023,488 SF facility no later that October 2018. The million SF facility will be located near the NW corner of Loop 820 and Mark IV Parkway. TCRG is under construction on building 500 at Synergy Crossing which will be 750,000 SF. Andrews Distributing is near completion on a 400,000 SF building located in Railhead Industrial Park. The building is to be delivered in 4Q of 2018. EastGroup Properties, Inc. is under construction on Parc North Building 5, a 100,036 SF shallow-bay facility fronting Loop 820. First Industrial Realty Trust, Inc. has started site work on a 198,589 SF, cross-dock facility in the NEQ of I-35 and Loop 820 in Fort Worth.

LARGE EXISTING VACANCIES • • • • • • •

14901 N Beach Street – 1,111,500 SF 15245 Heritage Parkway – 1,089,642 SF 2112 Eagle Parkway – 407,800 SF 4801 Westport Parkway – 400,000 SF 5180 N Railhead Road – 362,670 SF 16200 Three Wide Drive – 316,128 SF 5650 Alliance Gateway Freeway – 303,458 SF

SUBMARKET INTELLIGENCE SOUTH FORT WORTH

16+ YEARS

HLC OUTLOOK

CRE EXPERIENCE

The South Fort Worth industrial submarket posted a second quarter vacancy of 3.9%. This is down from 5.7% in the 2Q of 2018. As of 3Q 2018, there is upwards of 4,150,000 SF of proposed industrial development, with 1,284,754 SF currently under construction and 320,811 SF delivered. We don’t expect a flood of the 4,150,000 SF to hit at once as Majestic, Mereken Land, Carter Foundation, Hillwood and TCRG control most of the developable tracts, however this hasn’t deterred other developers and institutional property owners from trying to enter the submarket. Current lack of supply and increasing demand doesn’t appear to be slowing down. This is highlighted by south Fort Worth’s 3Q 2018 leasing activity of 2,205,000 SF. A figure that is up 57% from the previous quarters activity of 945,800 SF, and 75.5% higher than 1Q’s 540,800 SF.

MATT CARTHEY

Partner mcarthey@hlfortworth.com 817.710.1111

The YTD net absorption in south Fort Worth posted a balance at the end of 3Q of 978,277 SF. A figure that has spiked drastically from the 2Q absorption number of 121,701 SF. The south Fort Worth bulk warehouse vacancy of 3.4% has the lowest vacancy in the submarket for the first time in over two years, edging out the historically low shallow bay product. This is due to the fact that 1.1 million SF of bulk warehouse vacancy was absorbed between 2Q and 3Q YTD. Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

646,392

245,461

40,299

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

3.9%

4.7%

2.8%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,157,570

479,020

536,219

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,284,734

1,000,734

768,714

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

16,000

287,261

19,000

VITAL STATS

7.0%

800,000 600,000

6.0%

400,000 200,000

5.0%

0 -200,000

4.0%

-400,000 -600,000

3.0%

-800,000 2.0%

-1,000,000 Q3 15

Q4 15

Q1 16

Q2 16

Absorption

Q3 16

Q4 16

Q1 17

Q2 17

Deliveries

Q3 17

Q4 17

Q1 18

Q2 18

TOP LEASE TRANSACTIONS • McLane Company, Inc. has leased 670,300 SF of cold storage space at Provender Logistics Center • RTP leased 135,141 SF of space at Carter Distribution Center Bldg. B from Crow Holdings • Havener Companies leased an entire building consisting of 131,996 SF to RTP • Goodman leased 41,324 SF of space from Pure Industrial at Riverbend Distribution Center • TA Realty leased 24,419 SF of space to Tubing Central at 7821-7865 Will Roger’s Boulevard

HLC Deal

DEALS ON THE MARKET • Prattco Creekway Industrial (PCI) acquired three industrial buildings located off I-20 in the West Business Park located west of downtown Fort Worth. The three buildings totaled 77,640 SF in size was sold by local businessman, Rick Stacy.

NEW DEVELOPMENTS • Frontier Equity and TA Realty are underway on Everman Trade Center, a four-building shallow bay development located at the northwest corner of Everman Parkway and I-35 in south Fort Worth. This project includes four (4) rear load buildings totaling 457,745 SF with buildings ranging from 56,353 SF to 217,537 SF. The project is slated to deliver early 1Q 2019. • Hunt Southwest has begun construction on DFW Coldspot, which marks Hunt’s entry into the south Fort Worth submarket. The speculative 300,000 SF Food Processing building is set to deliver 2Q 2019 and will be located at 8600 Will Rogers Boulevard.

LARGE EXISTING VACANCIES • • • • •

7550 Oak Grove Road – 498,475 SF 425 W Everman Parkway – 287,261 SF 6601 Oak Grove Road – 264,125 SF 301 E Risinger Road – 193,200 SF 5000 South Freeway – 154,815 SF

Q3 18

Vacancy

Source: CoStar 3Q 2018 Industrial Report

SUBMARKET INTELLIGENCE NORTH FORT WORTH

12+ YEARS

HLC OUTLOOK

CRE EXPERIENCE

DONNIE ROHDE

Market Director drohde@hlfortworth.com 817.710.7058

TOP SALE TRANSACTIONS Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

593,937

992,713

2,326,993

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.3%

3.9%

5.5%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

305,619

602,572

515,067

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,665,154

4,442,645

4,232,383

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,951,547

522,670

1,654,135

VITAL STATS

12.0%

3,000,000

10.0%

2,000,000

8.0%

1,000,000

6.0%

4.0%

(1,000,000)

DEALS ON THE MARKET

•

• •

•

• 1Fossil Creek – 564,458 SF being sold by Space Center • Park 820 – 491,000 SF being sold by Scannell Properties

NEW DEVELOPMENTS 2.0%

(2,000,000) Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Q2 17

Deliveries

Q3 17

Q4 17

Q1 18

Q2 18

Q3 18

Vacancy Source: CoStar 3Q 2018 Industrial Report

LARGE EXISTING VACANCIES • • • • • • •

DALLAS

5950 Berkshire Lane Suite 900 Dallas, Texas 75225 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

www.holtlunsford.com

HOUSTON

11757 Katy Freeway Suite 250 Houston, Texas 77079 T 713.850.8500 F 713.850.8550