Despite not being the largest city in Texas, Dallas has earned itself a reputation for being one of the most colorful cities in the state.
Dallas is one of America’s most important markets for industrial real estate because it’s located near several major interstates and airports.
This report examines recent industrial real estate activity near Dallas during the second half of 2022.
Dallas Demographics
Among the top 10 most populated cities in America, Dallas’ metro area comprises one-quarter of the entire state of Texas.
Because Dallas and the nearby city of Fort Worth both have an airport called Dallas/Fort Worth International Airport (DFW), they’re often referred to as the “Dallas-Fort Worth Metroplex.”
Dallas’s economy is dominated by the aerospace, banking, insurance, IT, and telecom industries.
Industrial real estate turned in record-setting numbers during the second quarter of 2022. Here’s why.
Industrial Real Estate Performance in Dallas
During Q2 2022, Dallas industrial real estate experienced vigorous leasing activity, the highest on record.
- The $12.2 million square foot lease was driven by the expansion of new tenants and existing occupiers competing to fill up first-gen space.
- According to the U.S. Census Bureau, as of June 2022, the industrial vacancy rate for the Dallas–Fort Worth Metro Area was 4.1 percent.
- With 38 million square feet of industrial space slated to be built by the end of 2022, Dallas-Forth Worth has again been named the nation’s top industrial market.
With industrial real estate becoming increasingly scarce in big cities across America, you might wonder if Dallas’s industrial property market has changed since the recession. Fortunately for buyers, Dallas remains an affordable city.
What are Dallas industrial area real estate costs?
Because of its central location and relatively low costs, Dallas continues to be an attractive place for companies to lease space.
- As of mid-2022, average rents were approaching $6.00 per square foot, with the most sought-after areas being well above this level.
- The industrial space with the highest increase in lease prices was the warehouse/industrial spaces serving non-big box retail stores. Average quoted rents for these properties increased by 19.9 percent year-over-year.
- Dallas has low industrial rents compared to logistics hubs like LA, Chicago, and Denver, which makes it an attractive option for companies looking to relocate their operations.
We’ll now examine some additional factors that are contributing to rising rents.
Purchase & Leasing Activity
Dallas/Fort Worth’s leasing activity exceeded 30 million square feet for the eighth year.
- Demand for industrial space has increased rents.
- The future delivery of nearly 60 million square feet over the coming year will likely dictate when the rates begin to level off.
According to sales activity during the first half (H1) of 2022, the Dallas/Fort Worth metroplex was ranked first in the nation for this industry.
- Industrial buildings sold for $4 billion across North Texas during the first six months of 20202. That is the highest amount in the country.
- Industrial warehouses are particularly desirable, with over 30 local industrial warehousing projects completed in the second business quarter/
Dallas Commercial Real Estate Development
Construction activity was at a new high last month, with 70.1 thousand square feet of industrial property under construction, up by 149.8 percent from the previous year.
- Dallas has built up its warehouse and distribution infrastructure faster than any other city in America.
- DFW’s construction plans call for an additional 46.6 million square feet of new office space over the next three-year period.
- Pre-leasing was most common among speculative websites, accounting for 88.9% of all under-constructed projects.
Plenty is going on in the Dallas industrial real estate sector right now.
Dallas’ Industrial Real Estate Market Forecast
According to industry experts, Big D’s economic outlook remains optimistic for the foreseeable future.
- Dallas-Fort Worth remains a crucial logistics center with its central location and vast transport and distribution networks.
- With strong demand and plenty of available land in Dallas for building, construction will continue to be robust and produce new industrial properties.
- Vacancies will remain at historically low levels for the foreseeable future.
- Rental rates will increase throughout Dallas-Fort Worth because of high rental demands and the arrival of new class-A properties.
Reviewing the takeaways below, we’ll agree that investing in Dallas industrial real estate has excellent potential for returns.