Q1 2023 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.
Dallas is widely known for its striking modern skyline, thriving business community packed with Fortune 500 companies, and significant contributions to art, music, and culinary excellence.
The city boasts major industries such as telecommunications, financial services, healthcare, technology, and manufacturing, which contribute to its robust economy and reputation as an innovation and business hub.
With a population of 6.5 million, Dallas is experiencing a growth rate of 1.33%. In Q1 2023, Dallas's industrial real estate market saw increased vacancies, increased rental rates, and positive absorption.
General Area Overview & Demographics
Dallas is an exciting and bustling city in Texas, known for its rich history, thriving economy, and diverse cultural offerings. It covers an area of approximately 385 square miles (997 square kilometers) and provides a wide range of attractions and opportunities for both residents and visitors. Dallas also sports significantly more affordable industrial rents than its neighbor, Austin.
The city's economy is robust and driven by various industries, making it a major hub for business, finance, and telecommunications. Many Fortune 500 companies have their headquarters in the Dallas region. The Dallas-Fort Worth metroplex, where Dallas is located, offers a strong job market and a dynamic entrepreneurial ecosystem.
Dallas is a melting pot of cultures and backgrounds, making it a vibrant and diverse city. The largest ethnic group in Dallas is White, comprising about 29% of the population, followed by Hispanic or Latino individuals, who make up approximately 42%. African Americans also represent a significant portion, accounting for around 25% of the population. Additionally, there are substantial communities of Asian Americans, Native Americans, and people from other racial and ethnic backgrounds, contributing to the city's multicultural fabric.
The city is home to a thriving arts and cultural scene, with numerous museums, theaters, and galleries to explore. One of the highlights is the Dallas Arts District, situated in the heart of the city, which stands as one of the largest urban cultural districts in the United States. Here, you can find renowned institutions such as the Dallas Museum of Art and the AT&T Performing Arts Center.
For sports enthusiasts, Dallas is a paradise. The city is home to popular professional sports teams like the Dallas Cowboys (NFL), Dallas Mavericks (NBA), and Texas Rangers (MLB). It also hosts major sporting events and boasts state-of-the-art venues that attract visitors from all over the world.
Summary of Dallas Industrial Real Estate Performance in Q1 2023
In Q1 2023, the vacancy rate for Dallas industrial real estate increased to 6.3%, showing a quarter-over-quarter increase of 1.0%. Among the submarkets, South Dallas had the highest vacancy rate at 12.2%, while the Metropolitan/Addison submarket had the lowest at 1.9%.
Absorption for Dallas industrial real estate was at 8.3 million square feet by the end of Q1 2023, indicating healthy demand for available properties.
What Are Industrial Real Estate Rents Like in Dallas, TX?
In Q1 2023, the average rental rate for Dallas industrial real estate continued its trajectory from Q2 2022, rising to $7.55 per square foot.
The highest rates, reaching $11.58 per square foot, were found in the North US 75 Corridor, while the lowest rates were observed in the West I-30 Corridor at $4.44 per square foot.
Purchase & Leasing Activity
Sales volume for Dallas industrial real estate in Q1 2023 was strong at just under $5 billion with an average of $96 per square foot.
About 15.8 million square feet of new deals were leased in Q1 2023.
Notable Industrial Real Estate Deals in Dallas in Q1 2023
There were several notable deals that took place for Dallas industrial real estate in Q1 2023:
- SMC 23rd Street purchased 174,000 square feet for $15 million at $86 per square foot.
- Spirit Realty Capital purchased 237,000 square feet for $34.9 million at $148 per square foot.
- Niagara Bottling leased 1.2 million square feet in the South Dallas submarket.
- Hayes Company leased 900,000 square feet in the East Dallas submarket.
These are select examples among other activity.
New Industrial Real Estate Development Activity in Dallas in Q1 2023
Approximately 65 million square feet of new industrial space were under construction in Q1 2023, with 14 million square feet of this space being built in South Dallas. The rest of the square footage was spread out nearly evenly across the city's other submarkets.
Deliveries for the quarter totaled approximately 19 million square feet.
Market Forecast for Dallas's Industrial Real Estate Market
Looking ahead, there is a projection that new construction square footage in Dallas's industrial sector will decrease in the latter half of the year. Instead, the focus is expected to shift towards second-generation spaces becoming available, a trend driven by tenants showing a preference for high-quality spaces within the city's industrial sector.
As a result, it is anticipated that there may be an increase in vacancies as the year progresses. This shift in the market suggests that tenants are seeking out existing spaces that already meet their quality standards, rather than opting for new construction projects.
Takeaways for Industrial Real Estate Investors
Tenants are currently favoring big-box spaces for more efficient operations. Investors may want to acquire new big-box deliveries as leasable space or look to build if increasingly expensive construction materials are priced within budget.
Do your research, stay diligent, and happy investing.
Methodology
This report was written with property information from the MyEListing.com platform in corroboration with other freely available commercial real estate research data.
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