Another strong year is coming for DFW industrial, though it won't match the near record absorption of 2013, JLL managing director for industrial/logistics Terry Darrow tells us. (Last year, everything was filled, including doughnuts. Thus, the cronut.) Here are a few key insights:
1) Positive net absorption
Terry (left, with Cushman & Wakefield of Texas EVP Bill McClung) tells us DFW recorded 9.1M SF of positive net absorption in the Q4, bringing the year-end total to a near record-setting 17.2M SF. Much of the net absorption last year was attributed to several large built-to-suit projects that were completed near the end of the year (the two Amazon buildings, Restoration Hardware, L’Oreal, etc.), he says.
2) Increased construction
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The result of the positive absorption: more construction. About 6.4M SF was completed in 2013 and the average is about 9M SF. What's underway is 8.8M SF, but 43% is built-to-suit, Terry tells us. Typically BTS makes up about 20% of construction. (The only thing people are comfortable speculating on is who will/won't get into the Baseball Hall of Fame today.)
3) More land sales
With the construction cycle getting closer to normal, developers have become much more active taking land positions, for both BTS and spec, Terry says. Asking rates are beginning to edge upward (effective rates have been increasing for two and a half years) as some spec projects have hit the market. Additional rate increases are expected over the next year, as new state-of-the-art product pushes the average rate up, and higher construction costs, along with the possibility of higher interest rates, all place upward pressure on rents.
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