Industrial real estate is typically properties used by manufacturing companies and production companies. They include properties such as warehouses, factory buildings, garages, manufacturing buildings, distribution buildings, showrooms, docking bays, and plant sites. Let’s discuss Industrial Real Estate Investment in Dallas.
Industrial real estate investments are high-risk, high-profits investments. An industrial real estate investor needs to know the ins and outs of industrial real estate investment.
Dallas industrial real estate market is one of the most solid real estate markets in the U.S. The market has continued to grow strong from previous years through the first quarter of 2019.
Dallas is a good investment ground for industrial real estate investors who wish to make good profits from their investments.
Dallas Industrial Real Estate Trends
The Dallas industrial real estate market has continued to make good records and has been very solid in 2018 through to 2019.
Industrial rentals have continued to surge higher while development and construction sector continues to spring up due to good economy and e-commerce in the city of Dallas. This is validated by a recent report from COMMERCIAL Cafe’s.
In the year 2019, Dallas has experienced stability and continuity in terms of development as the total square footage scheduled for delivery by the end of the year is set to match the total pipeline volume of the year 2018.
In 2018, developers brought 270 projects which amounted to 105.7 million square feet of new industrial space to the U.S. In 2019, 304 projects amounting to 104.6 million square feet are expected to be delivered.
All these projects need more industrial space and properties, leading to an increase in demand for industrial real estate in Dallas and the U.S in general.
Dallas-Fort Worth, Chicago, and the Inland Empire are the top three locations for industrial construction in 2018 and also in the year 2019.
Dallas-Fort Worth is the third most attractive industrial real estate market and it is estimated to move upwards with more projects expected to be available. According to reports from Yardi Matrix, about 57 more projects amounting to approximately 18 million square feet is expected to be available in Dallas in 2019.
The most active owners of industrial property by square footage this year are Crow Holdings at 2.24 million square feet with five projects, the second is Hillwood at 2.16 million square feet with four projects and Trammel Crow at 2.01 million square feet with three projects.
Dallas-Fort Worth has also been ranked as one of the top investment targets among the U.S. metros. It was listed as the second most desirable investment market by investors for the third year consecutively. This is according to the CBRE’s 2019 Americas Investor Intentions Survey.
According to Randy Baird, the CBRE executive vice president, “There has been unprecedented investor interest for industrial and logistics properties in the Dallas-Fort Worth area coming not only from U.S investors but also global capital from Asia, Europe, and the Middle East”.
Dallas-Fort Worth is catching the interest of all types of capital since we are at a central point in the US production network. We have a pro-business environment with low costs of doing business and we have country driving populace development.
Investors are pulled in not just by the present market essentials, which are more grounded than at any other time, yet by the long haul see that Dallas-Fort Worth and Texas all in all will keep on outpacing the nation in populace and occupation development, meaning long haul asset appreciation.”
The study, which covers all asset types, found in 2019, additional investors are organizing auxiliary markets that can offer more potential for both values and pay development. Investor’s interest for secondary resources expanded for the fifth year in a role at 33% to increase critical ground on value-add at 37% as the most preferred strategy.
The survey likewise analyzed how investors see every one of the different types of assets, both Industrial and logistics is as yet the preferred property type by 39% of investors as the most appealing for investment in 2019.
Multifamily intently followed in the runner up, with 37% of investors naming it as the next most attractive property type which has gone up from 20% in 2018. Office properties were preferred by 10% of investors as the most appealing for purchase in 2019.
As far as multifamily investment is concerned, Dallas Fort-Worth has been appealing to capital because of the amazing economic growth we have seen through this cycle, bringing about solid retention and lease development in the multifamily space.
This economic growth combined with multifamily is being seen as the most recession-proof asset class has prompted the extraordinary flow of capital into the multifamily space.
Generally, the survey demonstrates that investors will stay active in the commercial real estate market in Dallas this year, with 98% of respondents planning to make investments.
There has been an articulated move toward more prominent alert, with the portion of investors wanting to either keep up or increase spending in 2019 tumbling to 75% from 88% in 2018.
Dallas Economy and Industrial growth Q1 2019
The Dallas-Fort Worth economy keeps on flourishing, as population and business growth surges higher. As per Moody’s Analytics, the Dallas-Fort Worth population increased by 104,000 yearly. This equates an average of 290 new residents every day, reaching a population of 7.6 million residents toward the end of March 2019.
The Dallas-Fort Worth employment rate also increased during this time by 96,000. The unemployment rate remained at 3.5% at the end of Q1 2019. Out of the 96,000 new jobs, 21% (20,522 jobs) are from the industrial sector comprising of goods production and trade, transportation, and utilities.
The trade, transportation, and utilities account for 61% of the whole industrial sector which is the leading indicator for the expansion of industrial space.
Dallas Fort-Worth Industrial Real Estate Market Q1 2019
The Dallas-Fort Worth (DFW) industrial market closed Q1 2019 with a slight decrease of 10 basis points (bps) in opening quarter-over-quarter, posting a rate of 7.0%. This denotes a 60 bps uptick from the 6.4% rate toward the end of Q1 2018, a result of the 29.1 million square feet (msf) of new supply added to the DFW market.
The DFW industrial market saw 9.3 msf of new leasing during the first quarter, leading by South Dallas (2.8 msf), Great Southwest (1.1 msf), Alliance (1.1 msf) and North Fort Worth (1.1 msf).
Dallas-Fort Worth’s industrial market produced 5.2 msf of net retention in Q1, somewhat outpacing the 5 msf of new supply included during the quarter. This denotes the tenth straight quarter that net ingestion in the DFW industrial market has surpassed 3.0 msf.
Great Southwest led the market in net retention for the quarter with 1.6 msf. Firmly following was Alliance with 1.5 msf, of which 1.3 msf was an aftereffect of Stanley Black and Decker possessing their Alliance Northport build-to-suit.
The Mesquite submarket was not a long way behind, retaining almost 860,000 square feet (sf), most of which was due to Ashley Furniture’s move-in to their new local appropriation focus.
During the first quarter, developers included almost 5.1 msf of new item to the local inventory, 55% of which was work to-suit item. Of the 22 projects completed, the average size of the building was around 230,000 sf.
Cushman and Wakefield are following an extra 30.1 msf of industrial product right now under development. This denotes the first run through in DFW history that product under development has arrived at the 30 msf edge.
Of this record-breaking new supply under development, 18 msf is theoretical item 23% of which has just been pre-rented. In light of current interest, the general opportunity rate is required to encounter just a little uptick for a quarter or two preceding by and by leveling out.
Asking rates stay stable in the DFW industrial market. The first quarter finished up with an overall asking rate of $5.19 psf, denoting a 2.8% increment from the rate that was set toward the end of 2018.
The warehouse and distribution product type, which as of now has an asking rate of $4.35 psf, produces the highest quarter-over-quarter gain in the DFW area, increasing by 2.1%.
Dallas Economy and Industrial growth Q2 2019
The Dallas-Fort Worth (DFW) economy keeps growing strong both in growth of its population and employment. As of June 2019, the population attained a new high of 7.6 million residents and job market grew by 97,000 over the previous year.
According to Moody’s Analytics, industrial jobs represented 24,700 jobs which are 25% of all the new jobs added. The market for industrial demands is driven by trade transportation, and utility sector jobs, accounting for 74% (800,400 jobs).
The industrial employment in DFW as of June 2019 is totaled at 1,084,000 jobs. Due to the addition of jobs in the industrial sector, the unemployment rate has reduced below the national unemployment rate.
Dallas Fort-Worth Industrial Real Estate Market Q2 2019
The DFW industrial market maintained solid positive momentum through the first half of 2019. The quarter shut with a 10-bps decline in vacancies to 6.9% compared with the earlier quarter.
The vacancy rate increased by 50 bps year-over-year because of the high volume of new supply.
Developers added 4.7 million square feet (msf) of new products to the market in Q2 and an aggregate of 9.8 msf of new deliveries year-to-date 2019.
Build-to-suit projects were 72% of newly completed projects. The 12 projects finished this quarter had an average building size of 390,000 sf.
Last quarter instituted the market’s first time in history surpassing more than 30 msf of under construction activity. Construction stayed at a high in the market with an extra 30.3 msf, bringing the market to the second consecutive quarter of surpassing 30 msf in under construction activity.
Speculative projects represented most of the projects under construction at 21.4 msf (70%). Just around 10% of the speculative projects are currently pre-rented. High demand for products in the DFW market will keep vacancy rates generally stable with slow decreases.
The overall leasing activity (excluding renewals) totaled 4.5 msf with the most activity in South Dallas at 1.0 msf. The Pinnacle/Turnpike and Alliance submarkets followed with 833,000 sf and 691,000 sf.
The DFW industrial market continues with its positive occupancy growth and retained 5.7 msf in the second quarter of 2019.
Net retention outpaced new supply included the quarter by 1.0 msf. This denoted the eleventh straight quarter net absorption surpassed 3.0 msf in the market.
The highest cumulative increase in occupancy was in the DFW Airport submarket at 2.9 msf pursued by Great Southwest and Pinnacle/Turnpike at 1.2 msf and 830,000 msf.
Asking rental rates remained generally stable in 2019 in the DFW modern market with a 0.2% decline compared with the earlier quarter.
Generally, rental rates diminished by 5.8% year-over-year to $5.18 per square foot (psf) on a yearly net premise. Compared to the in-place rate at year-end 2018, asking rent increased by 2.6%.