Dallas Industrial Sector Boomed With Momentum in 2023

Dallas-Fort Worth’s industrial sector had an active year in 2023, leading the nation in terms of new delivered space, according to CommercialEdge data. The market also attracted a diverse array of companies that benefited from legislative tailwinds such as the Texas CHIPS Act, which spurred semiconductor industry expansion with developer grants.

Leading the charge with a staggering 61.9 million square feet of new deliveries, the Metroplex set a new benchmark for 2023, outpacing the national average more than twice. With a robust pipeline of projects and several notable transactions, the Dallas-Fort Worth area solidified its position as a hotspot for the industrial sector, even as it navigated the complexities of the current economic climate.

Largest new industrial inventory to come online last year

In 2023, Dallas led the industrial sector in terms of deliveries, with almost 61.9 million square feet (6.6 percent of total stock) across 177 properties brought online, more than double the 3.1 percent national average. The metro was followed by Phoenix (32.5 million square feet), Chicago (27.8 million square feet) and the Inland Empire (25.6 million square feet). Dallas’ total industrial inventory at the end of the year was 944.4 million square feet, being surpassed only by Chicago (1 billion square feet).

Last year, 19.1 million square feet of industrial space broke ground in the metro, accounting for 2 percent of total stock.

In the first month of this year, the Metroplex had 27.2 million square feet (2.9 percent of total stock) of industrial space under construction across 91 properties. Among peer markets, Phoenix outpaced Dallas with 11.2 percent of total stock under construction, while Atlanta (1.0 percent), Chicago (1.1 percent) and the Inland Empire (1.6 percent) were at the opposite pole, CommercialEdge shows.

In January, Jackson-Shaw and Compatriot Capital announced plans for Lakeview Business District, a more than 1.8 million-square-foot campus in Rowlett. Construction on the first phase, which consists of five buildings, is expected to start this month.

In October 2023, Walmart opened its 1.5 million-square-foot automated fulfillment center in Lancaster. The facility is part of a 293-acre site that also includes a 730,000-square-foot grocery distribution center.

Investment activity was active, despite challenges

In 2023, Dallas’s transaction activity closely mirrored national trends, declining across the entire country to $52.1 billion, approximately half of 2022’s total. Transaction sales in the Metroplex amounted to almost $3.4 billion, the highest volume in the Southern region. Nationally, only the Inland Empire and Los Angeles surpassed Dallas, with $3.9 and roughly $4 billion, respectively.

The average price per square foot clocked in at $129, on par with the national figure. The Inland Empire ($248) and New Jersey ($218) saw the highest price per square foot among peer markets, while Atlanta ($107), Indianapolis ($99) and Chicago ($92) were at the opposite end.

In October, Affinius Capital sold a 489,310-square-foot Class A industrial building, which is part of its 191-acre Southfield Park 35 campus. TradeLane Properties acquired the asset for $78.6 million or $160.6 per square foot, commanding one of highest prices per square foot.

In the second quarter of 2023, MDH Partners acquired Fort Worth Logistics Hub Building 1 for $67.5 million. VanTrust Real Estate sold the 670,914-square-foot warehouse.

Industrial vacancy rate climbs to new heights

With an increase in industrial space coming online, Dallas-Fort Worth’s vacancy rate clocked in at 4.3 percent in December, a 50-basis-point increase compared to January 2023, but 30 basis points lower than the national average. Atlanta (3.7 percent), Indianapolis (3.3 percent) and Phoenix (3.2 percent) posted the lowest vacancy rates, while the Inland Empire (5.0 percent) and New Jersey (4.8 percent) were some of the peer markets with more vacant industrial space.

In August, LKQ Corp. signed a 523,260-square-foot lease agreement at DFW Park 161, a 197-acre master-planned campus owned by Perot Development Co. and Invesco Real Estate. A few months earlier, Careismatic Brands committed to Ares Management and Archway Properties’ 1 million-square-foot facility to create a shipping hub.

Dallas’ industrial sector ended 2023 with an average rent of $5.77 per square foot, a 7.1 percent increase year-over-year, but still below the $7.7 national figure. Meanwhile, Southern markets Baltimore ($7.7) and Tampa ($7.4) led the region in average industrial rent, according to CommercialEdge information.

The post Dallas Industrial Sector Boomed With Momentum in 2023 appeared first on Commercial Property Executive.