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4 Drivers for Industrial Growth

Industrial development in North Texas is on the rise and the experts at Bisnow’s DFW Industrial Real Estate Summit gave us four reasons why it’s not slowing down any time soon.

1. Population Growth


Dalfen America Corp's Sean Dalfen (right, with DFW Airport's Mark Witte) says the 33% population growth in DFW since 2000 has been a big metric in his decision to focus more attention on North Texas and the state as a whole. His company has 5.2M SF of new development in the works across the Metroplex, including a three-phase project at DFW International Airport. DAC is in a big growth mode; closing about $300M in industrial acquisitions across Canada and the US in the past 24 to 30 months.

2. Ready Capital


Alliance Tax Advisors' Jennifer Keierleber, Mike Fritz, Kristi Lazo and Mark Wood bookend Majestic Realty Co's Al Sorrels, along with Glenn CRE's Pax Glenn. Al says deal flow is still good and there’s a lot of product coming on line. Much of that is because capital is interested in industrial. A deal with a strong sponsor can get up to 80% LTC. Hillwood has a 1M SF project at Alliance off I-35 and now there’s another 1M SF project going up across the street. “That’s how much capital wants to go out,” he says. Majestic just completed a 1M SF building at a 200-acre development in Lewisville and is starting on two more buildings there at 250k SF and 300k SF. Majestic is also starting on a 250k SF spec building on its 100-acre development in Hutchins. You can talk industrial projects with him, just don’t remind him of that last-second goaltending call that dashed SMU’s March Madness dreams.

3. Rising Rents


Holt Lunsford Commercial's Jim Brice (left, with JLL's Kurt Griffin) says the big difference between this real estate cycle and the last boom is that when industrial vacancy hit 9% in 2012, only 2M SF was delivered instead of the usual flood of new inventory. By controlling that supply, even as demand grew, the market has been able to bump annual rents by 2% to 3% and there’s been up to 25% to 30% increase on rents on the shallow bay product, he says. Shallow bay is in big demand, especially as homebuilding has increased and there’s a need to warehouse just about anything that goes into new home construction. Jim also tells us HLC has 1M SF of industrial projects under development and another 500k SF that was completed in Q4. 

4. More Build-to-suit & Smaller Deals


Event panel: Sean, Jim, Duke Realty’s Jeff Thornton, moderator Munsch Hardt Kopf and Harr's David Coligado, Al, and Courtland Development's Jon Napper. Jon says there were 55 deals done last year; seven were over 400k SF and 44 were 200k SF or smaller. He believes those smaller deals will be a big portion of the market this year. He also thinks big occupiers aren’t looking for the 1M SF spec projects; they want build-to-suit projects. “Name the last five big deals and they’re all build-to-suits,” he says. These company leaders have agendas they’re addressing and they want to dictate how their facilities look and function, he says. He has multiple projects in the works, including two 200k SF projects. He recently purchased 560 acres in South Dallas and sold 90 acres to Crow Holdings in Mountain Creek. He is also partnering on several build-to-suit projects, including the 680k SF Ulta in Mountain Creek. We also hear that congrats are in order; David tells us Munsch Hardt Kopf and Harr is celebrating its 30th anniversary this year.