Market Brief...
Dallas/Fort Worth
INDUSTRIAL
2Q19 Property Pictured Above: Stoneridge
DFW INDUSTRIAL MARKET BRIEF 2Q 2019
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
3
4
HLC SUBMARKET COVERAGE
DFW
HLC DFW INDUSTRIAL MARKET EXPERTS
JIM BRICE
MATT CARTHEY
CANON SHOULTS
JOHN GORMAN
JOSH BARNES
DONNIE ROHDE
ANDREW GILBERT
BEN WALLACE
Partner - Texas Leasing jbrice@hldallas.com 972.280.8306
Partner - Managing Principal mcarthey@hlfortworth.com 817.710.1111
Managing Principal cshoults@hldallas.com 972.280.8328
Senior Vice President jgorman@hldallas.com 214.920.9800
Senior Vice President jbarnes@hldallas.com 972.280.8353
Market Director drohde@hlfortworth.com 817.710.7058
Market Director agilbert@hldallas.com 972.280.8312
Market Associate bwallace@hldallas.com 972.421.1966
JAKE NEAL
THOMAS GRAFTON
GEORGE JENNINGS
KEATON DUHON
MADDY CANTY
HARRISON PUTT
BO PUCKETT
Market Associate jneal@hlfortworth.com 817.284.5555
Market Associate tgrafton@hlfortworth.com 817.632.6152
Market Associate gjennings@hlfortworth.com 817.632.6151
Market Associate kduhon@hlfortworth.com 817.284.5555
Market Associate mcanty@hldallas.com 972.280.8325
Market Analyst hputt@hldallas.com 972.265.0124
Market Analyst bpuckett@hldallas.com 972.265.0123
5
HLC OUTLOOK Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
5,823,040
5,425,478
6,489,690
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
6.3%
6.3%
6.0%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
8,708,726
12,140,634
14,029,054
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
26,254,974
27,226,682
27,823,819
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
6,108,700
5,960,181
7,294,038
The Dallas-Fort Worth industrial market continues to be one of the strongest industrial markets in the country. Previously considered fourth among the preferred locations, Dallas has recently overtaken Chicago as the third most sought-after market for both national logistics distribution and institutional capital. As of 2Q 2019, CoStar reported YTD absorption of approximately 11.2M SF. Additionally, the overall Dallas-Fort Worth industrial market vacancy has remained stabilized at a healthy 6.5% +/- since 1Q 2016. The 26.3M SF of projects under construction, as of 2Q 2019, have also been relatively consistent over the same period of time. The majority of this construction activity encompasses the sub markets of DFW Airport and Great Southwest (each at 2.5M SF), South Dallas (4M SF), North Fort Worth (7.7M SF), and South Stemmons (3.6M SF). The Dallas-Fort Worth industrial market still remains healthy with an overall market vacancy of 6.3%. However, investment capital should observe isolated submarkets, such as South Dallas, whereby the current construction to absorption ratio favors construction to net absorption. Given the lack of available portfolio dispositions, speculative development will likely remain strong in the coming year for the Dallas-Fort Worth industrial 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.
6
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 United States 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 lower basis opportunities, versus “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 the normality, albeit measured, 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 2Q 2019 remains strong despite the typical summer-time slow down. Since 2010, depending on the size of the transaction, rental rates experienced growth of 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
• ICU Medical has signed a 610,806 SF lease in I-35 Logistics Crossing/2801 Houston School Road with Crow Holdings. • Sally’s Beauty has signed a 494,041 SF lease in 15453 Wolff Crossing with Transwestern Investments. • Noble Cotton has signed a 470K SF lease in 1011 Isuzu Parkway with State Teachers Retirement System of Ohio. • FNA has signed a 400K SF lease in 1371 S Town East Boulevard with Cabot. • Samsung has signed a 325K SF lease in 2800 Market Street with Bandera. • NTW Inc signed a 312K SF lease in Wildlife 11/747 Refuge Way with Crow Holdings Industrial. • PVI has signed a 238K SF lease in 425 W Everman Parkway with Majestic Realty. • U.S. Auto Force has signed a 151,176 SF lease in 13330 Senlac Drive with Panattoni. • Rehrig Pacific Company has signed a 127,789 SF renewal in 613-625 Mockingbird Lane with Alpha Industrial Properties. • LPC TX Visual has signed a 75,249 SF renewal in 40404130 Lindbergh with TA Associates. • Jeff Hardage Inc. has signed a 70,400 SF lease in 3650 W Miller Road with TA Associates. • VPX has signed a 38,463 SF lease in Everman Trade Center Building B with TA Realty.
HLC Deal
HLC Deal
HLC Deal
HLC Deal
HLC DFW FACTS & FIGURES
Market
Existing Inventory
Vacancy
12,000,000
9.0% 10,000,000
8.0% 7.0%
8,000,000
6.0% 5.0%
6,000,000
4.0% 4,000,000
3.0%
# Bldgs.
Total RBA
Direct SF
Total SF
Vac. %
2.0%
DFW Airport
629
79,421,523
6,390,552
6,602,165
8.3%
0.0%
East Dallas
595
43,835,935
2,096,353
2,173,183
5.0%
1,098
110,488,406
4,925,162
5,015,162
4.5%
Henderson County
18
1,204,851
29,387
29,387
2.4%
North Fort Worth
678
96,323,407
6,549,886
6,775,551
7.0%
Northeast Dallas
1,487
108,437,881
5,851,025
6,822,668
6.3%
Northwest Dallas
1,347
108,237,451
4,286,709
4,606,432
4.3%
21
2,070,305
17,863
17,863
0.9%
Great SW/Arlington
OVERALL DFW
10.0%
2,000,000
1.0% 0 2Q 16
3Q 16
4Q 16
1Q 17
2Q 17
3Q 17
4Q 17
Absorption
1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
Deliveries
2Q 19
Vacancy
VACANCY - OVERALL DFW
10.0% 9.0% 8.0%
6.90%
6.30%
7.0%
6.7%
6.0%
6.0%
5.0% 4.0% 3.0%
NW Dallas Outlying
2.0%
0.2%
South Dallas
682
99,152,098
12,104,707
12,104,707
12.2%
South Fort Worth
1,423
78,625,532
3,349,631
3,374,012
4.3%
South Stemmons
2,074
109,975,791
4,944,323
5,051,425
4.6%
Totals
10,052
837,773,180
50,545,598
52,573,304
6.3%
1.0%
0.20%
0.0% 2Q 16
3Q 16
4Q 16
1Q
17
2Q 17
3Q 17
4Q 17
Direct
1Q
18
2Q 18
3Q 18
4Q 18
Sublet
1Q
19
2Q 19
Total
ABSORPTION - OVERALL DFW 22,500,000 20,000,000 17,500,000
YTD Net Absorption
YTD Deliveries
Under Construction SF
YTD Leasing Activity
DFW Airport
2,024,871
2,642,047
2,338,465
2,788,471
East Dallas
1,292,720
1,022,130
2,032,979
809,309
Great SW/Arlington
2,921,808
2,991,854
2,604,273
1,710,498
Henderson County
3,200
0
0
0
North Fort Worth
2,363,896
2,277,555
7,705,044
2,795,941
Northeast Dallas
640,784
1,165,097
1,831,388
1,982,601
Northwest Dallas
1,351,681
955,209
1,486,898
3,319,275
6,337
0
25,000
4,700
South Dallas
373,998
404,175
South Fort Worth
143,960
611,084
Market
15,000,000 12,500,000 10,000,000 7,500,000 5,000,000 2,500,000 0 2Q 16
3Q 16
4Q 16
1Q 17
2Q 17
3Q 17
4Q 17
1Q 18
2Q 18
Total Net
3Q 18
4Q 18
1Q 19
2Q 19
Leasing Activity
CONSTRUCTION - OVERALL DFW 30,000,000
25,000,000
NW Dallas Outlying
4,215,610
s
20,000,000
15,000,000
10,000,000
4,172,043
5,000,000
South Stemmons Totals
433,603
950,131
125,263
0
3,581,714
2,316,391
11,248,518
12,068,881
26,254,974
20,849,360 Source: CoStar 2Q 2019 Industrial Report
0 2Q 16
3Q 16
4Q 16
1Q 17
2Q 17
3Q 17
Delivered Inventory
4Q 17
1Q 18
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
Under Construction
7
SUBMARKET INTELLIGENCE GREAT SOUTHWEST/ARLINGTON
HLC OUTLOOK
14+ YEARS CRE EXPERIENCE
The Great Southwest (GSW) submarket consists of approximately 110M SF and, per CoStar reporting, experienced positive absorption of 2,921,808 SF with 1.7M SF of leasing activity in 2Q 2019. This ranks GSW as the leading submarket for 2Q 2019 absorption. GSW reported new completions of 3M SF and an additional 2.6M SF of product currently under construction. The 2Q 2019 vacancy rate improved slightly to 4.5% versus at 4.6% in 1Q 2019. As we continue into 2019, we expect this vacancy rate to remain stable as absorption is keeping pace with construction.
CANON SHOULTS Managing Principal cshoults@hldallas.com 972.280.8328
TOP LEASE TRANSACTIONS Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
650,151
2,271,657
2,165,572
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
4.5%
4.1%
7.1%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
799,579
910,919
2,694,818
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
2,604,273
3,567,836
3,720,486
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
1,167,173
1,824,411
1,068,040
VITAL STATS
10.0%
3,500,000
9.0%
3,000,000
8.0% 2,500,000
7.0% 6.0%
2,000,000
5.0% 1,500,000
4.0% 3.0%
1,000,000
2.0% 500,000
1.0% 0.0%
0 2Q 16
3Q 16
4Q 16
Absorption
1Q 17
2Q 17
3Q 17
4Q 17
1Q 18
Deliveries
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
Vacancy Source: CoStar 2Q 2019 Industrial Report
8
• Noble Cotton has signed a 470K SF lease in 1011 Isuzu Parkway with State Teachers Retirement System of Ohio. • NTW Inc signed a 312,000 SF lease in Wildlife 11/747 Refuge Way with Crow Holdings Industrial. • Bixby Land Company purchased 271,794 SF in 2911 S Great Southwest Parkway from LaSalle. • Expeditor signed a 180,895 SF lease in Liberty Park GSW North/951 Valley View Lane with Liberty Property Trust.
DEALS IN THE MARKET • Park 20/360 – a 1.5M SF seven (7) building project • Cooper I-20 – an 841,899 SF two (2) building project • DFW Logistics Portfolio – a 584,492 SF seven (7) building project
NEW DEVELOPMENTS • Wildlife 7, 9, 10 and 11/2401 N Belt Line Road – a 1,126,180 SF four (4) building project with Crow Holdings Industrial • Cooper I-20 Building C/1131 W Bardin Road – a 420K SF spec development with Flaherty Development/Barings • Oakdale Logistics Center/949 W Oakdale Road – a 401,557 SF spec development with PLR • Park Twenty-Three-Sixty Buildings 2, 6, 7 and 8 – a 361,431 SF four (4) building project with Invesco/Ridge Development • 3301 E Park Row Drive – a 155,730 SF spec development with LaSalle/Stream Realty • Arlington Tech Centre Buildings 1 & 2/2000-2030 E Arbrook Boulevard – a 152K SF two (2) building project with Triten Corporation
LARGE EXISTING VACANCIES • • • • • •
1102 State Highway 161 – 322,824 SF 14900 Trinity Boulevard – 310,000 SF 3254 W Trinity Boulevard – 305,000 SF 2911 S Great Southwest Parkway – 271,794 SF 1011 Isuzu Parkway – 250,000 SF CentrePort 4/14601 Sovereign Road –232,700 SF
SUBMARKET INTELLIGENCE DFW AIRPORT
HLC OUTLOOK
25+ YEARS
The Dallas-Fort Worth (DFW) Airport industrial submarket vacancy rate is 8.3% at the end of 2Q 2019 with absorption of 2,024,871 SF. DFW International Airport is ranked as one of the largest cargo airports in the country. It boasts a high proportion of newer buildings since 2000 and, 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, Uline, PPG, Bed Bath & Beyond, and Fresenius Medical.
CRE EXPERIENCE JIM BRICE
Partner - Texas Leasing jbrice@hldallas.com 972.280.8306
Absorption
vs. Prev. Qtr
Rental rates have remained strong ranging from $4.25 -$8.50 for bulk distribution and shallow bay product. Rental abatements range from 2 to 8 months depending on renewal, versus new deals and the size of the lease transaction. Tenant improvement costs remain high because of increasing tenant demands and construction costs.
vs. 12 Mths Ago
1,858,804
166,067
714,306
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
8.3%
7.9%
5.7%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
1,787,872
1,912,136
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
Market Street with Bandera.
1750 Hurd Drive with Mapletree Investments.
• Fabulous Floors has signed a 43,782 SF lease in
2,338,465
4,687,937
4,110,622
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
292,575
TOP LEASE TRANSACTIONS • Samsung has signed a 325K SF lease in 2800 • Figueroa has signed a 80,851 SF lease in 1720-
1,000,599
2,349,472
The DFW Airport submarket continues to be one of the top three markets for institutional owners to buy or develop in the Metroplex. With fee simple land built out, most of the development currently taking place is on 40-year ground lease land owned by DFW Airport. The developers have banded together and hired Ernst & Young to assist them in obtaining the Triple Freeport Tax Exemption for all buildings south of the airport, located in Passport Park. The goal is to have the exemption in place by the end of 2020 which will dramatically increase the deal flow for bulk product in southern portion DFW Airport.
600 S Royal Lane with Duke Realty.
• Tazmanian Freight has signed a 37,780 SF lease in
500,000
1065 Texan Trail with Prologis.
VITAL STATS
10.0%
2,500,000
9.0% 8.0%
2,000,000
7.0% 6.0%
1,500,000
5.0% 4.0%
1,000,000
3.0% 2.0%
500,000
1.0% 0.0%
0 2Q 16
3Q 16
4Q 16
Absorption
1Q 17
2Q 17
3Q 17
4Q 17
1Q 18
Deliveries
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
LARGE EXISTING VACANCIES • 2601 S Airfield Drive – 1,000,584 SF • 4051 N Street Highway 121 – 548,100 SF • 1717 W Airfield Drive – 498,800 SF • 240 Dividend Drive – 469,502 SF • 2700 Market Street – 375,400 SF • 2450 Esters Boulevard – 213,392 SF • 2800 Valley View Lane – 221,895 SF • 2600 Market Street – 267,254 SF
NEW DEVELOPMENTS • Passport Park Buildings 1 and 2/2600-2650 Rental Car Drive – a 1,816,015 SF two (2) building spec development with Trammel Crow/CBRE • 3400 E Airfield Drive – a 562,640 SF building with Lake Washington Partners • 2900 Genesis Way – a 319,450 SF building with The Trade Group
Vacancy
Source: CoStar 2Q 2019 Industrial Report
9
SUBMARKET INTELLIGENCE NORTHEAST & EAST DALLAS
HLC OUTLOOK
11+ YEARS
With another quarter of positive absorption and historically low vacancy rates, the development wave is alive and well in the Northeast and East Dallas industrial submarkets. With limited land sites available in the more mature submarkets, developers are reaching as far north as McKinney and to the eastern boundaries of Mesquite. New BTS activity including Ashley Furniture, Lollicup, and Goodyear have also reached as far out as Rockwall and Terrell due to the availability of land and labor. Leasing activity has remained strong and slightly outpaces deliveries submarket-wide. However, new frontier markets, such as McKinney, are worth keeping an eye on as tenant demand is not yet proven.
CRE EXPERIENCE JOSH BARNES
Principal jbarnes@hldallas.com 972.280.8353
TOP LEASE TRANSACTIONS • FNA has signed a 400K SF lease in 1371 S Town East Boulevard with Cabot.
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
695,002
1,238,502
372,246
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
5.7%
5.7%
5.5%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
1,361,191
1,430,719
3,432,504
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
3,864,367
3,101,683
4,812,376
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
812,316
1,374,911
212,326
• EcoLab has signed a 218,400 SF lease in 1600 S Jupiter Road with Langford Property Company/ Barings. • DMI has signed a 200K SF lease in S Buckner Boulevard with Exeter. • Tubelight has signed a 126,178 SF lease in 5181 Samuell Boulevard with Prologis. • DSA has signed a 125K SF lease in 4010 Distribution Drive with Primera. • Home Depot has signed a 88,597 SF lease in Frisco Park 25 with Stream. • Jeff Hardage Incorporated has signed a 70,400 SF lease in 3650 W Miller Road with TA Associates.
HLC Deal
VITAL STATS
7.0%
1,800,000 1,600,000 1,400,000
6.5%
1,200,000 1,000,000 6.0% 800,000 600,000 5.5%
400,000 200,000
5.0%
0 2Q 16
3Q 16
4Q 16
Absorption
1Q 17
2Q 17
3Q 17
4Q 17
1Q 18
Deliveries
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
Vacancy
Source: CoStar 2Q 2019 Industrial Report
10
DEALS IN THE MARKET • DFW Logistics Portfolio – a seven (7) building project currently owned by Prologis
• Dallas Infill Industrial – a 1.56M SF seven (7) building project currently owned by Rialto
• Jupiter Business Park – a 141,200 SF five (5) building project currently owned by Berkeley
NEW DEVELOPMENTS • S Buckner Boulevard – a 813,500 SF two (2) building spec development with Exeter
• I-30/Hwy 80 – a 237,473 SF spec development
HLC Deal
with Prologis
• Core 5 Plano – a 167,048 SF two (2) building project with Core 5
• McKinney National Business Park – a 150,500 SF two (2) building spec development with Sentinel Capital • 15800 Executive Drive – a 141,960 SF building with Blue Star Land
LARGE EXISTING VACANCIES • 5151 Samuell Boulevard – 442,035 SF • 8901 Forney Road – 419,626 SF • 3000 West Kingsley – 341,840 SF • 3800 Leon Road – 329,091 SF
SUBMARKET INTELLIGENCE NORTHWEST DALLAS
HLC OUTLOOK
7+ YEARS
Through 2Q 2019, Northwest Dallas industrial submarket continues to be one of the strongest submarkets in the Dallas-Fort Worth metroplex. The submarket posted a 4.3% vacancy rate at the end of 2Q which decreased from the 4.5% rate posted at the end of 1Q. Billingsley completed their four (4) building development at Mercer Business Park and are planning to break ground in 3Q for a fifth building in the park which will total 175K SF. Building four at Prologis’ Valwood Corporate Park was completed just prior to the end of 3Q 2018 which totals 235,900 SF and has leased half of the building, leaving 118K SF available. All other buildings in Prologis’ development are 100% leased. Core5 broke ground on Valwood Crossroads at Belt Line and Luna for two (2) buildings totaling 620K SF and Smith Systems has already signed a lease to occupy both buildings. Panattoni has also completed their 151,176 SF development in Valwood which was leased in 2Q to United States Auto Force. There has been strong leasing activity between 20K and 150K SF in the submarket, and rental rates have continued to increase as the market continues to tighten. All indicators point to the Northwest Dallas industrial submarket to remain strong throughout 2019.
CRE EXPERIENCE ANDREW GILBERT Market Director agilbert@hldallas.com 972.280.8312
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
840,232
511,449
438,328
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
4.3%
4.5%
4.6%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
1,470,544
1,848,731
1,815,934
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
1,486,898
2,121,462
2,434,773
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
634,564
320,645
257,591
VITAL STATS
8.0%
2,000,000 1,800,000
7.0%
1,600,000 6.0% 1,400,000 5.0%
1,200,000
4.0%
1,000,000 800,000
3.0%
600,000 2.0% 400,000 1.0%
200,000
0.0%
0 2Q 16
3Q 16
4Q 16
Absorption
1Q 17
2Q 17
3Q 17
4Q 17
1Q 18
Deliveries
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
Vacancy Source: CoStar 2Q 1Q 2019 Industrial Report
TOP TRANSACTIONS • Staton Wholesale has signed a 200,042 SF renewal in 4530 Simonton with Gillis Thomas Company.
• U.S. Auto Force has signed a 151,176 SF lease in 13330 Senlac Drive with Panattoni.
• LPC TX Visual has signed a 75,249 SF renewal in
HLC Deal
4040-4130 Lindbergh with TA Associates Realty.
• Elkay Plastics has signed a 55,728 SF renewal and expansion in 2833 Eisenhower Street with Duke Realty. • Texas Twist has signed a 48K SF renewal in 2305 Belt Line Road with Ivanhoe Cambridge
DEALS IN THE MARKET • TA Realty Infill Portfolio – a 1.4M SF fourteen
NEW DEVELOPMENTS • Valwood Crossroads – a 620K SF two (2) building project with Core5
• First Park 121/Phase 1 – a 345,280 SF two (2) building project with First Industrial
• Mercer Business Park – a 175K SF fifth building addition with Billingsley
LARGE EXISTING VACANCIES • 1900 N Josey Lane – 259,900 SF • 14325 Gillis Road – 175,300 SF • 2099 Valley View Lane – 150K SF • 1625 Hutton Drive – 118,195 SF
HLC Deal
(14) building project which includes 4415-4585 Simonton Road, 4040-4130 Lindbergh, and 11351215 Crowley Drive with TA Realty in Northwest Dallas • Dallas Infill Industrial Portfolio: a 1.6M SF nineteen (19) building project which includes 2115 W Valley View – a 264,209 SF project with Rialto Capital
HLC Deal
11
SUBMARKET INTELLIGENCE SOUTH DALLAS
HLC OUTLOOK
30+ YEARS
The South Dallas Industrial submarket, as surveyed, is 122M SF and is now 11.3% vacant which is 1.4% lower than reported in 1Q 2019. Although not reported by CoStar, South Dallas signed new leases of 1,725,757 SF in 2Q 2019. South Dallas has 7.87M SF under construction in the I-30 and I-20 Corridors combined and it continues to outpace absorption. However, 75% or 5.9M SF of the new construction is for build-to-suit or design build assignments. The remaining 25% or 1.96 Million SF under construction is speculative development and 1.7 Million SF. The southern corridors along I-20, I-35, and I-45 continue to produce new opportunities for development. Unfortunately, the supply of new product by capital sources far exceeded the submarket demand and deal velocity, causing South Dallas to lead the Dallas market as the only submarket with double digit vacancy of 11.4%.
CRE EXPERIENCE JOHN GORMAN Senior Vice President 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.
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
274,244
99,754
1,953,521
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
12.2%
12.1%
12.7%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
1,694,170
2,477,873
1,083,975
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
4,215,610
4,213,785
5,359,469
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
404,175
0
3,358,851
VITAL STATS
16.0%
TOP LEASE TRANSACTIONS • ICU Medical has signed a 610,806 SF lease in I-35
3,500,000
14.0%
3,000,000
12.0%
2,500,000
10.0%
Logistics Crossing/2801 Houston School Road with Crow Holdings. • Global Industrial has signed a 489K SF lease in 2119 N Interstate 35E with Hillwood. • Inmar/Medturn has signed a 355,042 SF lease in 3845 Gifford Street with Principal. • Book Squared has signed a 178,200 SF lease in 4445 Rock Quarry with Nuveen. • Mars & Armatures has signed a 92,709 SF lease in 3400 Houston School Road with CalStrs. • United Natural Foods has signed a 471,889 SF renewal in at 2100 Danieldale Road with CalStrs. • Portacool has signed a 287,196 SF renewal in 201 S Interstate 45 with Pure Industrial.
2,000,000 8.0% 1,500,000 6.0% 1,000,000
4.0%
500,000
2.0% 0.0%
0 2Q 16
3Q 16
4Q 16
Absorption
1Q 17
2Q 17
3Q 17
4Q 17
1Q 18
Deliveries
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
Vacancy Source: CoStar 2Q 2019 Industrial Report
12
DEALS IN THE MARKET • 2821 Danieldale Road – a 1,003,733 SF two (2) building project • Penn Distribution Center – a 823,379 SF building project • I-30 Distribution Center – a 725K SF building project • LogistiCenter at Dallas/9890 Bonnie View Road – a 626,439 SF building project
NEW DEVELOPMENTS • 1401 Chalk Hill Road – a 672,775 SF building project with Clarion Partners • 1501 Chalk Hill Road – a 608,939 SF building project with Clarion Partners • 4025 E Interstate 30 – a 296,615 SF building project with Heitman • 4000 Interstate 30 – a 193K SF building project with USAA/Ironwood Realty Partners
LARGE EXISTING VACANCIES • Bonnie View Road and Cleveland Road – 1,044,647 SF
• 3535 N Houston School Road – 900,043 SF • 3300 Cedardale Road Building 1 – 776,630 SF • SouthPointe 20/35 – 660,312 SF spec • 2801 N Houston School Road – 610,086 SF
SUBMARKET INTELLIGENCE SOUTH STEMMONS
HLC OUTLOOK
7+ YEARS
At the end of 2Q 2019, the South Stemmons industrial submarket posted a 3.4% vacancy rate compared to 3.3% vacancy rate at the end of 1Q and the submarket 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 10K-40K SF. Although absorption for 2Q totaled a negative 350K SF, this is due to the demand slowing down for some of the larger suites, more than 40K SF in the Brookhollow submarket. However, tenants under 40K SF are continuing to relocate into Brookhollow from the Design District and there is still massive demand for 5K-30K SF in the submarket. I expect the negative absorption number to reverse as we move further into 2019 due to the lack of development sites in the submarket. Since 2013, rental rates in the submarket have increased 40% for space under 50K SF and in some cases, renewals have increased more than 50%. This is a key statistic as this size encompasses the majority of spaces in the submarket. Rental rates for 50K SF deals have increased into the high $4 per SF range and rates for 10K SF are now reaching high $5 per SF start rates. 20K-25K SF are creeping up into the $5 per SF range. I expect this trend to continue through 2019.
CRE EXPERIENCE ANDREW GILBERT Market Director agilbert@hldallas.com 972.280.8312
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
647,562
522,299
338,191
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
4.6%
5.2%
4.4%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
HLC Deal
1,288,378
1,028,013
1,825,021
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
3,581,714
3,581,714
-
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
-
-
702,215
VITAL STATS
10.0%
TOP TRANSACTIONS • Rehrig Pacific Company has signed a 127,789 SF
750,000
9.0%
675,000
8.0%
600,000
7.0%
525,000
6.0%
450,000
5.0%
375,000
4.0%
300,000
3.0%
225,000
2.0%
150,000
1.0%
renewal in 613- 625 Mockingbird Lane with Alpha Industrial Properties. • Imlach Collins has signed a 82,357 SF renewal in 4653 Leston Street with Monit Investments. • Euro Logistics has signed a 48K SF lease in 2650 Manana with Gillis Thomas Company. • Music & Arts Center has signed a 30,041 SF renewal in 4949 Sharp Street and 520 Mockingbird with TA Associates.
• Dallas Infill Industrial Portfolio – a 1.6M SF nineteen (19) building project which includes 2727 Airport Freeway – a 91,800 SF project with Rialto Capital
NEW DEVELOPMENTS • Core Logistics Center – a 388,822 SF two (2) building project with Crow Industrial
HLC Deal
DEALS IN THE MARKET • Texas Infill Portfolio – a 1.4M SF fourteen (14) building project which includes Dallas Commerce Center – a 554,444 SF project with TA Realty
LARGE EXISTING VACANCIES • 4025 E I-30 – 296,615 SF • 10880 Goodnight Lane – 199,070 SF • 10900 Goodnight Lane – 189,752 SF
75,000
0.0%
0 2Q 16
3Q 16
4Q 16
Absorption
1Q 17
2Q 17
3Q 17
4Q 17
1Q 18
Deliveries
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
Vacancy
Source: CoStar 2Q 2019 Industrial Report
13
SUBMARKET INTELLIGENCE NORTH FORT WORTH
HLC OUTLOOK
7 YEARS
The North Fort Worth industrial submarket continues to perform at a high level through 2Q 2019. While getting close during 1Q, the year-to-date net absorption of 2,363,896 SF finally outpaced year-to-date deliveries of 2,277,555 SF, dropping the vacancy rate slightly from 7.5% down to 7.0% by the end of 2Q. Overall absorption in the Alliance submarket through the end of 2019 and into early 2020 will be something to keep an eye on moving forward. With nearly 6M SF currently under construction in that market alone, expect to see the overall vacancy rate increase significantly as projects come online. In North Fort Worth proper, at the intersection of I-35 and Loop 820, expect to see rental rates continue to trend upward as land constraints tighten even further.
CRE EXPERIENCE GEORGE JENNINGS Market Associate gjennings@hlfortworth.com 817.632.6151
Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
829,188
1,534,708
911,698
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
7.0%
7.5%
3.5%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
738,030
2,057,911
674,719
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
7,705,044
5,177,662
7,029,243
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
425,000
1,852,555
907,754
VITAL STATS
12.0%
3,000,000
10.0%
2,500,000
8.0%
2,000,000
6.0%
1,500,000
4.0%
1,000,000
2.0%
500,000
0.0%
0 2Q 16
3Q 16
4Q 16
Absorption
1Q 17
2Q 17
3Q 17
4Q 17
1Q 18
Deliveries
2Q 18
3Q 18
4Q 18
1Q 19
2Q 19
Vacancy Source: CoStar 2Q 2019 Industrial Report
TOP LEASE TRANSACTIONS • Sally’s Beauty has signed a 494,041 SF lease in 15453 Wolff Crossing with Transwestern Investments. • Rush Trucking has signed a 109,092 SF lease in 1051 Republic Drive with Hillwood. • Ferguson has signed a 58,026 SF lease in 2700 NE Loop 820 with EastGroup.
DEALS IN THE MARKET • Cantrell 1 and 2 – a 491K SF building • Clorox Distribution Center – a 540K SF building • 120 Intermodal Parkway – 369,530 SF of a 579,530 SF portfolio
NEW DEVELOPMENTS • Speedway Logistics Crossing – a 1,594,020 SF three (3) building project with Scannell
• Westport 11 – a 1,200,536 SF building project with Hillwood
• Northwest Commerce Park – a 1,051,240 SF three (3) building project with Stream
• Loop 820 & Mark IV – 1,025,500 SF three (3) building project with Crow Industrial
• Hunt Southwest – a 1,023,488 SF building project • 2 Haslet County Road – a 1,007,000 SF building 14
project with NorthPoint Development
• Westport Logistics Park – a 882,565 SF two (2) building project with CT Realty
• Alliance Center North 3 – a 783,465 SF building project with Hillwood
• Alliance Northport 1 – a 500,555 SF building project with Hillwood
• 1101 I-35 W – a 403K SF building project with TCRG Properties
• Southlake/Grapevine project – a 327,219 SF four (4) building project with Frontier Equity and Rialto
• Fossil Creek Crossing 3 and 4 – a 312,004 SF
building addition with Alpha Industrial Properties (KKR) • Northport 5 – a 225,930 SF building project with Hillwood • I-35 and Loop 820 – a 198,589 SF building project with First Industrial Realty Trust, Inc.
LARGE EXISTING VACANCIES • 15245 Heritage Parkway – 1,089,642 SF • 2112 Eagle Parkway – 407,800 SF • 4801 Westport Parkway – 400,000 SF • 16200 Three Wide Drive – 316,128 SF • 5650 Alliance Gateway Freeway – 303,458 SF • 1201 NE Loop 820 – 270,000 SF
SUBMARKET INTELLIGENCE SOUTH FORT WORTH
HLC OUTLOOK The South Fort Worth industrial submarket posted a mid-year vacancy of 4.3%, a figure that is down from the 5.7% vacancy rate that it had 2Q 2018. This is an interesting statistic as this submarket had only delivered 325K SF at the midpoint of 2018, compared to the 611K SF that has been delivered YTD. Also, the submarket experienced a nearly identical mid-year total industrial leasing activity in 2019 as it did mid-year 2018. As of the end of 2Q 2019, there is upward of 4,452,000 SF proposed or under construction. Crow Holdings and Rob Riner Companies have broken ground on a four (4) building spec project totaling 1,058,844 SF while Black Creek Group has closed on its site located on the southwest corner of Joel East and Oakgrove and will break ground on approximately 566K SF in three (3) buildings late 4Q. We don’t expect groundbreaking on the majority of the remaining 3M SF to hit at once, as Majestic, Mereken Land, Jackson Shaw, Carter Foundation, Hillwood, and TCRG control most of the developable tracts. That said, two (2) large build-to-suits in the market could make by years-end, landing on these controlled sites.
16+ YEARS CRE EXPERIENCE MATT CARTHEY
Partner mcarthey@hlfortworth.com 817.710.1111
TOP LEASE TRANSACTIONS • PVI has signed a 238K SF lease in 425 W Everman Absorption
vs. Prev. Qtr
vs. 12 Mths Ago
4,033
147,993
247,610
Vacancy
vs. Prev. Qtr
vs. 12 Mths Ago
4.3%
3.9%
4.9%
Leasing Act.
vs. Prev. Qtr
vs. 12 Mths Ago
HLC Deal
356,235
593,896
574,147
U/C SF
vs. Prev. Qtr
vs. 12 Mths Ago
433,603
749,603
356,850
Delivered SF
vs. Prev. Qtr
vs. 12 Mths Ago
316,000
295,084
287,261
900,000
4.0%
700,000 600,000
3.0%
500,000 400,000
2.0%
300,000 200,000
1.0%
100,000 0.0%
0 3Q 16
4Q 16
1Q 17
Absorption
2Q 17
3Q 17
4Q 17
1Q 18
Deliveries
2Q 18
building
LARGE EXISTING VACANCIES • 7550 Oak Grove Road – 471K SF • 8600 Will Rogers Boulevard – 300K SF • 6601 Oak Grove Road – 264,125 SF • 160 W Everman Parkway – 217,537 SF • 5000 South Freeway – 153,938 SF • 301 E Risinger Road – 148,450 SF
building • 5301 Sun Valley Drive – a 31,900 SF building 800,000
2Q 16
DEALS IN THE MARKET • 7400 Jack Newell Boulevard S – a 79,800 SF
Tools
• 5328 E Lancaster Avenue – a 69,836 SF class B
VITAL STATS
5.0%
Parkway with Majestic Realty. • Lone Star Packaging Solutions has signed a 42,000 SF in 911 S 5th Street with Randall Stepp. • VPX has signed a 38,463 SF lease in Everman Trade Center Building B with TA Realty.
• 501 Easy Drive – a 173,603 SF building with Klein
3Q 18
4Q 18
1Q 19
2Q 19
Vacancy
Source: CoStar 2Q 2019 Industrial Report
NEW DEVELOPMENTS • Carter Distribution Center FED – A new 4 building HLC Deal
speculative project totaling 1,058,844 SF being developed by Rob Riner Companies and Crow Holdings Capital. • Black Creek Group will break ground on its 566,000 SF speculative development located on the southwest corner Joel East and Oak Grove Road 4Q 2019 • 6000 Cirrus Drive – a 200K SF building with Golden State Foods 15
DALLAS
5950 Berkshire Lane Suite 900 Dallas, Texas 75225 T 972.241.8300 F 972.241.7955
FORT WORTH
1200 Summit Avenue Suite 300 Fort Worth, Texas 76102 T 817.710.1110 F 817.810.9017
www.holtlunsford.com
HOUSTON
11451 Katy Freeway Suite 300 Houston, Texas 77079 T 713.850.8500 F 713.850.8550