Q2 2022 Industrial Real Estate Report: Dallas, TX
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Although Dallas isn’t the biggest city in Texas, its colorful reputation and collection of famous residents and visitors have kept it in the headlines for decades, earning it the nickname “Big D.”
Currently, Dallas is one of the leading markets for industrial real estate, as it’s near several interstate highways and an airport bigger than the island of Manhattan.
This report looks closely at recent industrial real estate activity in and around Dallas during the second quarter of 2022.
General Area Overview & Demographics
One of the 10 most populous cities in the nation, Dallas’ metropolitan area encompasses one-quarter of the population of Texas.
Since Dallas and neighboring city Fort Worth share one of the world’s largest airports, Dallas-Fort Worth International Airport, business data for the two cities is often combined as the Dallas-Fort Worth metroplex or DFW.
Dallas’s economy’s dominant sectors include defense, financial services, information technology, and telecommunications.
The second quarter of 2022 saw industrial real estate turn in some record-breaking figures. Let’s take a closer look.
Summary of Dallas Industrial Real Estate Performance in Q2 2022
Dallas industrial real estate turned in an especially strong performance during Q2 2022, including the second-highest leasing activity on record.
- The 12.2 million sq. ft. lease deal was fueled by the expansion of new-to-market and existing occupiers, both competing for first-generation space.
- As of June 2022, the industrial vacancy rate across the Dallas–Fort Worth metro reached 4.1%.
- With 38 million sq. ft. of industrial space scheduled to hit the market during the second half of 2022, Dallas-Fort Worth claimed the title of the industrial market with the largest projected expansion for the second year in a row.
Since industrial space is a hot commodity in Big D, you may wonder how this has affected rental rates. Here’s some good news: Dallas is still considered affordable.
How much does average Dallas industrial area real estate cost?
Dallas’ central location and relatively low cost of living continue to fuel leasing and distribution demand.
- Average rents approached $6.00 per sq. ft. as of mid-2022, with the most sought-after locations being well above this level.
- The industrial sector with the biggest rise in leasing rates was the warehouse/industrial space serving non-big box retailers. Quoted rental rates averaged $7.64 NNN per sq. ft, which is up 19.9% compared to Q2 2021.
- Dallas industrial rent rates are still considered affordable when compared to logistics hubs like Los Angeles, Chicago, and Denver.
Let’s take a look at additional factors that are driving rent increases.
Purchase & Leasing Activity
Leasing activity within DFW has, for the eighth consecutive year, surpassed 30 million square feet through the first two quarters.
- Demand from all types of companies made it easy for landlords to raise asking rental rates.
- The future delivery of over 58 million square feet over the next 12-24 months will ultimately determine when the rates start leveling out.
Sales activity during the first half of 2022 put the DFW metroplex first in the country within this sector.
- A total of $4 billion in industrial building sales in North Texas was recorded during the first half of 2022 — the most of any U.S. market.
- Industrial warehouse space is particularly sought-after, with over 30 local warehouse projects completed in the second quarter.
Now let’s look at some major industrial acquisitions.
Notable Industrial Real Estate Deals in Dallas in Q2 2022
Global investment firm KKR acquired two industrial properties for around $300 million, including a property in Lancaster, a suburb of Dallas.
- The SouthPointe 20/35 acquisition includes two Class A industrial warehouse buildings in south Dallas, totaling approximately 1.0 million sq. ft.
- This industrial complex includes a facility with a 36-foot clear height and another with a 32-foot clear height on more than 58 acres.
Other big-ticket leasing deals are in the works, including the redevelopment project described below.
Notable Industrial Real Estate Leases in Dallas in Q2 2022
Texas-based real estate investment and development company M2G Ventures is redeveloping and rebranding The Archetype, a six-building light industrial park with a total of 112, 741 sq. ft.
- When complete, leases from 2,500 to 25,000 sq. ft. will be available, plus a single-building opportunity for a key tenant at the front building.
- Logistics, showroom, medical, and e-commerce tenants are expected.
- M2G Ventures describes The Archetype as “designed for tenants that want out-of-the-ordinary space in an out-of-the-ordinary location.”
In addition to renovations to existing industrial real estate, new construction is setting new records in the Dallas-Fort Worth metro area.
New Industrial Real Estate Development Activity in Dallas in Q2 2022
High demand again pushed construction activity to a new record, with 70.1 thousand sq. ft. (MSF) of industrial space under construction, an increase of 149.8% YOY.
- This number puts DFW ahead of the rest of the country in warehouse and distribution construction.
- Dallas-Fort Worth’s construction plans include an additional 46.6 MSF of proposed space over the next three years.
- Speculative sites accounted for the majority of products under construction at 62.3 MSF, (88.9%), with 29.7% of all under-construction projects currently pre-leased.
What’s up next for the Dallas industrial real estate market? Plenty, according to local brokers.
Market Forecast for Dallas’ Industrial Real Estate Market
Industrial and commercial brokers agree that Big D’s industrial outlook will remain positive for the rest of 2022.
- With its central location and extensive transportation and distribution network, Dallas-Fort Worth will remain a vital logistics hub.
- Driven by strong demand and available land for development, construction will remain robust and continue to deliver new Class A product.
- Occupancy growth will continue to meet new supply, keeping vacancy below historical levels.
- Rental rates will see an uptick across Dallas-Fort Worth due to high demand and the arrival of new Class A product.
After reviewing the takeaways below, we think you’ll agree that Dallas industrial real estate offers excellent investment opportunities.
Takeaways for Dallas Industrial Real Estate Investors
This quarter’s 12.2 million s.f. leasing activity was the second-highest on record for Dallas, as new-to-market and existing occupiers expanding continue to compete for first-generation space.
- Tenants competing for space have pushed pre-leasing to 26.3% of the overall 60.5 million s.f. construction pipeline.
- Strong demand and longer construction timelines have kept levels reaching new highs.
- Recent manufacturing projects announced will drive demand over the next several years as suppliers follow these projects into some of the outlying and emerging submarkets.
Do your research, stay diligent, and happy investing.
Methodology
All figures presented in this article are based on MyEListing.com’s commercial real estate listing data in corroboration with other freely available data and information covering the commercial real estate industry.
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