Dallas-Fort Worth’s historically strong industrial market reached record heights in the second quarter, driven by increased demand from the booming data center industry. 

The metro's industrial leasing activity jumped nearly 4% quarter-over-quarter, bringing its first-half total to a record 40.3M SF, according to Cushman & Wakefield's marketbeat report for the second quarter. DFW’s industrial demand was driven by all the usual suspects: third-party logistics, manufacturing, e-commerce fulfillment and retail wholesales, plus one newcomer, Cushman & Wakefield Senior Research Manager Andrew Matheny said.

“That nice healthy mix of industries that we have in Dallas-Fort Worth has been very strong with demand this year,” Matheny said. “Then on top of that, just the added bonus of data center-related suppliers, servicers, manufacturers has helped put the industrial market over the top into record-breaking territory.”

Industrial landlords set another record by signing more than 72M SF in new commitments over the past 12 months. Nearly a third of that total went to 23 "big-box" users of 500K SF and up.

Matheny said leasing activity for big-box spaces will only accelerate as options begin to dwindle across the metro.

DFW’s 29.8M SF construction pipeline was down slightly from Q1 thanks to 13.6M SF in deliveries during the second quarter. The metro’s industrial pipeline accounts for nearly 10% of the nation’s more than 300M SF under construction. 

Industrial activity was brisk across the country during the second quarter as Cushman & Wakefield reported new leasing volume in the U.S. reached its highest level since 2022. DFW was one of just nine markets across the country to record more than 10M SF of leasing activity, and was the leader in the metric by more than 40%. 

DFW’s average asking rents grew by more than 13% from last year to a new high of $9.19 per SF. Nationally, asking rents rose by less than 3% to $10.32 per SF. 

In addition to the increased demand from the data center industry, DFW’s business-friendly climate and central location within the U.S. help it stand out from other areas of the country. 

"We've got great access from rail, from air, and also from trucking transit, just by being at the bull's-eye of the United States," Bradford Commercial Real Estate Services Vice President Luke Clardy said. "So just geographically, it's a great location for … anybody's trying to do distribution."

Net absorption hit 9M SF in DFW during the second quarter, pushing the year-to-date total to 13.6M SF. That matches the pace of new supply for the metro, which also sits at 13.6M SF for the first half of the year. 

With demand and supply balanced, DFW’s overall vacancy ticked down to just over 8%. That puts it slightly above the national vacancy rate, which fell 10 basis points to just under 7% for the second quarter.

DFW’s absorption total is down from the same time last year, but there's another 20M SF that's been leased but not yet occupied. Cushman & Wakefield counts absorption only when users actually move in, so that's why the region's record-breaking leasing activity over the past 12 months is only just beginning to translate into absorption increases and vacancy drops, Matheny said. 

“The reason that absorption appears, and I emphasize appears, soft is because we have seen more demand from those larger users, and they simply take longer to finish out and occupy their space,” he said.

The firm has already raised its absorption forecast for DFW from around 32M SF to about 39M SF because of all the activity that has happened over the last several months, Matheny said. 

"To give you perspective, the previous record in 2022 was like 41.3M SF, and we still have five months left in the year to sign deals and have users move in,” Matheny said. “So we could be looking at a record-breaking year for absorption.”

In addition to the increased activity around big-box space, Clardy said he's heard from brokers across the metro that demand is rising across size ranges, including users from 5K SF to 15K SF.

Matheny said the region may run out of space before industrial leasing activity slows down. He noted that users like Celestica have already opted for build-to-suit options because there are no on-site facilities that meet their requirements.

The Toronto-based electronics manufacturing services company will invest $876M to build a more than 1M SF campus for advanced manufacturing and engineering in Hillwood's AllianceTexas master-planned community. 

Hillwood also started work on a 1.2M SF speculative industrial building in the Alliance Logistics District earlier this summer. Construction of Alliance Westport 16 is expected to finish in July of next year. 

"We'll continue to see big-box development in the periphery — South Dallas, East Dallas suburbs, Kauffman County, Denton, Alliance as well as South Fort Worth and the Mid-Cities,” Matheny said. “Whether that's going to be spec buildings or they decide to go build-to-suit, I think a spec developer is happy to make the money either way.”