Q2 2012 Dallas, Texas Industrial Submarket Trends

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Q2 2012 Dallas, Texas Industrial Submarket Trends

Note: The submarket designations as used here (Northwest, for example) refer to the geography of the Dallas area, not to the Metroplex as a whole.


  • As Dallas has grown in importance as a major national inland port, south Dallas County has emerged as a center for massive intermodal-related demand and development.
  • Major national developers including Majestic Realty, Duke Realty, First Industrial, Hillwood, ProLogis, Trammell Crow, and others have been active in the south county towns of Wilmer, Lancaster, DeSoto, and Hutchins, as well as south Dallas itself.
  • By Reis’ submarket designations, much of this activity belongs to the 10.3-million-square-foot emerging Far South Dallas warehouse/distribution submarket.
  • Wilmer, however, is spread across both this submarket and the 3.4- million-square-foot Far East/Southeast Dallas submarket adjacent on the east. I-45 forms the dividing line between the two.
  • Thus the large Far South Dallas and adjacent portions of Far East/Southeast Dallas are essentially unified as a single large market entity; both participate in the same trends related to intermodal-related development.
  • Net absorption for these two south-side submarkets in the second quarter of 2012 amounted to 227,000 square feet.
  • Notably, however, net absorption in Far South Dallas during the second quarter alone, in the absence of new supply deliveries, was positive 225,000 square feet (in the wake of a substantial first quarter loss).
  • No space completed construction in either submarket over the first half of 2012.
  • With Far South Dallas bearing a large portion of development leading up to and into the recession, vacancy rose as high as 31.6% in third quarter 2009.
  • A descent has followed: the Far South Dallas warehouse/distribution vacancy rate for the second quarter of 2012 was 21.7%, down 220 basis points for the quarter alone, down 230 from a year earlier.
  • Strong rent growth has emerged. At $3.50 psf and $3.20 psf, second quarter asking and effective average warehouse/distribution lease rates were up fully 2.9% each since year-end. Respective gains for the second quarter alone were 1.2% and 1.6%.
  • Quarter-end warehouse/distribution vacancy in Far East-Southeast Dallas, where construction has been quieter, was considerably lower at 8.5%, down 10 basis points from a quarter earlier.
  • Rent growth also has been quieter. At $3.58 psf and $3.36 psf, asking and effective average lease rates were up 0.8% and 0.9% for the period and were up 1.7% and 1.8% since year-end.
  • DLH. The centerpiece of south Dallas industrial real estate is the massive Dallas Logistics Hub (DLH) inland port. The project is master-planned for 60 million square feet of commercial and residential development. About 500 acres of the DLH site have been developed.
  • More. DLH Master Land Holdings LLC, an affiliate of The Allen Group, exited bankruptcy in January 2012. Of DLH’s 4,300 acres, 1,380 were returned to creditors.
  • Background. Prior to filing bankruptcy, two spec projects with a combined total of

827,900 square feet were built at DLH

  • .
  • Extensive long-term development planning is indicated for the DLH area.
  • New spec. Prologis announced plans for a June 28 groundbreaking for the construction of a 653,500-square-foot purely speculative warehouse project in its 202-acre Prologis Park 20-35 business park in Lancaster, the Dallas Business Journal reported at the time.
  • Confidence in demand. Prologis has no tenants lined up for the new project, an executive with Colliers International informed the source, adding that “there’s a big volume of activity out there right now.”
  • More. Three undisclosed potential tenants “are seeking industrial space of more than 1 million square feet in the D/FW market, and all three of them are looking in South Dallas,” added the executive.
  • More. Prologis already has developed two 600,000-square-foot buildings at the park, which opened in 2007, according to the report. Both buildings are fully leased.
  • More. Reis reports four buildings with a combined total of 1.3 million square feet are currently planned for Prologis Park 20-35.
  • Kohl’s. The sole other project currently under construction in the Far South Dallas submarket is the 951,500-square-foot, e-commerce distribution center for Kohl’s at I-35 and Centre Park in developer Hillwood’s Crossroads Trade Center in DeSoto. Reis expects completion in September.
  • More. Kohl’s has agreed to purchase the project upon completion.
  • More. Reis reports the 1.0-million-square-foot Building 3 project currently planned for Crossroads Trade Center.
  • Whirlpool. The largest recent completion was Duke Realty’s May 2011 finish of the $40.8 million, 1.02-million-square-foot distribution center for Whirlpool within First Industrial Realty’s 365-acre First Park DalPort Distribution Center in Wilmer.
  • More. Reis reports 5.6 million square feet of additional warehouse/distribution space in 10 buildings have been proposed for First Park DalPort.
  • Home Depot. Home Depot has leased an 887,000-square-foot building at Trammell Crow Company’s (TCC) I-20 Distribution Center in south Dallas. The building had stood empty for some two years.
  • More. To complete the deal with Home Depot, TCC “had to work with multiple entities to secure a 286,000-square-foot expansion and $4.1 million in financing from the City of Dallas and Dallas County for road improvements,” the Journal reported in April. Home Depot’s lease, accordingly, runs to more than 1.1 million square feet.
  • Recent sales activity includes MHM Redbird LLC’s acquisition of a two-building, 76%-occupied industrial portfolio at 5050 Investment Drive and 4545-4687 Mint Way in south Dallas, GlobeSt.com reported in August. The price was not disclosed.
  • South Korean auto parts manufacturer Mobis acquired a 442,000- square-foot building in Lancaster in April, the Texas Real Estate Commission (TREC) reported at the time.
  • Also in Lancaster, seven buildings with a combined total of 4.9 million square feet have been proposed for Ridge Logistics Center, Reis reports. Ridge Property Trust is the developer.
  • Recent deals include Denver-based Mile Hi Specialty Food Inc.’s lease for 128,525 square feet at Stoneridge Business Park near interstates 20 and 35E, the Journal reported in June.
  • Outlook: Reis expects a flat performance for 2012 overall before new supply and net absorption totals rise in 2013. Vacancy in the Far South submarket should end the year at 21.7% and could rise slightly in 2013. Strong rent growth—respective gains of 5.9% and 5.1% for asking and effective averages—is predicted for 2012. For its part, the Far East/Southeast submarket should see a year-end vacancy rate of 8.5%. Modest rent gains of 3.4% and 3.0% are expected for asking and effective averages, respectively, this year.
  • The intermodal factor with its long-term development and demand profiles makes Far South Dallas one of the metro area’s most dynamic submarkets.

Other South: Irving/Grand Prairie

  • The 12.0-million-square-foot Irving/Grand Prairie warehouse/distribution submarket enjoys proximity to D/FW Airport to the near north.
  • More. A 420,000-square-foot second phase has been proposed.
  • Reis reports the $5.15 million ($22 psf) May 31 sale of the 229,000- square-foot, fully occupied distribution center at 2829 Sea Harbor Road, Dallas. Fainbarg V LP and TA Associates Realty and partner were the respective buyer and seller.
  • Net absorption year-to-date through the second quarter was negative 264,000 square feet. The second quarter total alone, however, was positive 51,000 square feet.

A 15,300-square-foot facility for Loftin Equipment Company completed

  • construction during the first quarter in Irving.
  • No projects have delivered since. None were under construction as of late July.
  • Second quarter vacancy was 17.5%, down 40 basis points from a quarter earlier, up 490 year-over-year as a result of preceding negative net absorption.
  • At $3.76 psf and $3.42 psf, asking and effective average lease rates for the second quarter were up 1.6% and 1.5%, respectively, for the quarter and were up 2.5% and 1.8% since year-end.
  • Outlook: Reis expects a strong performance for the second half of the year as positive absorption, at about 200,000 square feet over the next two quarters, drops the vacancy rate to 15.8%. Respective gains of 4.9% and 3.0% are forecast for the mean asking and effective rents for the year.

Northwest/Airport-Dallas County; Carrollton; Farmers Branch

  • Proximity to D/FW International Airport has made the northwest suburban cities of Coppell, Irving, Carrollton, and Lewisville attractive to related development.
  • For its 28.6-million-square-foot Airport-Dallas County warehouse/distribution space submarket, Reis put first half 2012 net absorption at 372,000 square feet alongside no new supply. The second quarter absorption total was 515,000 square feet.
  • Warehouse/distribution vacancy ended second quarter at 13.8%, down 180 basis points for the period, down 400 year-over-year.
  • Warehouse/distribution space rents were $4.72 psf for asking and $4.36 psf for effective averages, up 0.9% each for the quarter, up 0.9% and 1.2%, respectively, since year-end.
  • No industrial space of any description was under construction in this submarket per this report date.
  • Entitlements for warehouse/distribution space in local business parks total 3.3 million square feet in 11 structures.
  • Included are 1.3 million square feet in two buildings proposed for Hillwood Investment Properties’ Tradepoint Business Park in Coppell.
  • The same total has been proposed for three buildings at Majestic Realty’s Majestic Airport Center in Lewisville.
  • Pegasus Logistics Group has signed a lease for 255,000 square feet of office and industrial space at 301 Airport Drive in Coppell, the Dallas Business Journal reported in July. “The company plans to consolidate its 70,000-square-foot corporate headquarters in Coppell with its 200,000-square-foot distribution facility off Highway 121 in Grapevine.”
  • Outlook: Reis expects 207,000 square feet of warehouse/distribution space to complete construction during the second half of the year. Net absorption, however, should run far ahead at approximately 500,000 square feet for the year. Rent growth at about 2.0% is anticipated. Construction is expected to heat up in 2013.

Northwest/Denton County

  • With 28.4 million square feet of warehouse/distribution space, the Denton County submarket has seen no space complete construction since two Flex/R&D projects delivered a total of 198,000 square feet in 2010.
  • Total first half 2012 warehouse/distribution net absorption was minimal at 2,000 square feet. The total for the second quarter was negative 53,000 square feet.
  • This follows the 1.4 million square feet of positive net absorption alongside minimal new supply reported for 2011.
  • Second quarter 2012 vacancy was 12.1%, up 20 basis points for the quarter, down 250 from four quarters prior.
  • In the wake of large losses through the first three quarters of last year, rent growth turned positive during the fourth quarter.
  • Growth has continued. At $3.98 psf and $3.69 psf, second quarter 2012 asking and effective averages were up 0.8% and 1.1%, respectively, from the quarter before and were up 1.5% and 1.7% since year-end.
  • Current construction consists of a 450,000-square-foot facility for Target Corporation at Airport and Corbin roads, Denton. Reis expects completion in March 2013.
  • Coming soon—spec. Industrial Developments International Inc. (IDI) is “ready to break ground” on a 529,155-square-foot speculative project at Valley Parkway
  • Distribution Center in Lewisville,” TREC reported in August. A September start is planned, according to the source.
  • More. “Not many people have product on the drawing board or are actually breaking ground,” said an IDI executive. “Demand is strong . . . and we are seeing rents back to where they were in 2007 and 2008.”
  • Integrity Retail Distribution Inc. has leased 126,100 square feet of office and warehouse space at 500 Enterprise Drive, Flower Mound, the Journal reported in August.
  • In a relocation from east suburban Garland, Kellogg Company has leased 1.0 million square feet in Majestic Realty’s Majestic Airport Center in Lewisville, the Dallas Business Journal reported in May. The move was announced in November. The building had been empty since mid-2008.
  • Proposed are 576,000 square feet of Flex/R&D space, 321,000 of which are claimed by four buildings in Cornerstone Business Park in Flower Mound. The remaining 255,000 square feet belong to the second phase of 712 Business Park in Frisco.
  • Outlook: Positive absorption, roughly equivalent to new supply, will result in a 10-basis-point decline in the vacancy rate by year-end. Rent growth in the vicinity of 3.0% is expected for the year all told.



  • Reflecting the market’s heavy high-tech orientation (space in Plano and Richardson, in particular), vacancy in the suburban northeast has tended to run high. The recent economic downturn has resulted in new increases in the rate, which had fallen previously.
  • The Plano-Allen-McKinney and Richardson submarkets, site of the “Richardson Telecom Corridor,” host a combined total of 9.9 million square feet of existing Flex/R&D space inventory.
  • Combined Flex/R&D total net absorption for first half of 2012 for the two markets was virtually zero (negative 2,000 square feet, combined).
  • The total net absorption for Plano/Allen/McKinney at mid-year, however, was positive 38,000 square feet, including the second quarter’s 91,000-square-foot total.
  • Second quarter vacancy rates for Plano-Allen-McKinney and Richardson submarkets were 12.4% and 17.0%, respectively, down 220 and up 90 basis points for the period.
  • The Plano-Allen-McKinney second quarter average asking rent was $8.15 psf, up 0.2% for the quarter; the Richardson average asking rent was $7.20 psf, down 0.3% for the quarter.
  • Reis reports one Flex/R&D project under construction metro wide per the date of this report—the 75,800-square-foot headquarters for Traxxas at S. Custer and W. Stacy roads in McKinney. A December 2012 completion is expected.

Warehouse /Distribution

  • Net absorption in the 20.6-million-square-foot Plano-Allen-McKinney warehouse/distribution market for the first half of 2012 was negative 30,000 square feet.
  • The net absorption total for the second quarter alone, however, was positive 138,000 square feet.
  • Second quarter warehouse/distribution vacancy was 9.6%, down 70 basis points for the period, up 10 year-over-year.
  • Average asking and effective lease rates were $5.56 psf and $5.18 psf, up 0.5% and 0.6%, respectively, for the quarter, up 0.9% and 0.6% since year-end following an anemic performance in 2011.
  • The 305,000-square-foot Andrews Distributing Facility completed construction in January at 1300 Allen Station Parkway, Allen.
  • A 202,000-square-foot manufacturing facility expansion for Encore Wire Corporation was completed in July at 1329 Millwood Road in McKinney.
  • Blockbuster bust. Blockbuster Inc.’s exit to Colorado following its acquisition by Denver-based Dish Network Corporation has left vacant an 888,096-square-foot complex in McKinney, the Journal reported in June.
  • More. The McKinney property previously occupied by Blockbuster at 3000 Redbud Boulevard includes a 708,000-square-foot warehouse facility along with a 142,296-square-foot office building, and a 37,800-square-foot data center.


  • Prologis, Inc. signed a build-to-suit agreement in June with a third-party logistics provider Prime Distribution Services for a 398,000- square-foot build-to-suit, which is expandable by 187,000 square feet. PRNewswire reported in June.
  • More. Construction of the facility at Eastpoint Drive and S. Buckner Boulevard in the Central Dallas Southeast submarket began in July, Reis reports. According to PRNewswire, the facility is expected to be designed in accordance with the City of Dallas Green Building Program specifications, making it eligible for LEED certification. A February 2013 completion date is cited.
  • “Westmount Realty Capital spent $12 million in its purchase of a 1.1- million-square-foot, 70%-leased distribution center in Garland Business Park at 2600 McCree Road near LBJ Freeway in northeast suburban Garland, TREC reported in June. The property will be renamed Garland Logistics Park.
  • Reis reports the $6.745 million ($33 psf) May 29 sale of the 202,559- square-foot warehouse at 4747 Leston Avenue, Dallas, within Reis’ Central Dallas West submarket. G&I VII Regal LP and partners and Weingarten Realty were the respective buyer and seller.