Industrial construction, rents on upswing

As office projects stagnate, and the resi market continues to yo-yo, the DFW industrial market is seeing record-breaking construction and increasing rents.

The Metroplex leads the nation in industrial construction, with over 60 million square feet in the pipeline, according to a JLL report. Some firms caution that too much industrial/warehouse space is being built, but so far, incoming inventory hasn’t affected rent increases. Average industrial rent prices in North Texas have nearly doubled in the last decade from under $4 per square foot to nearly $8 now and continue to steadily climb. Some submarkets, specifically in the northern suburbs, have reached double digits for average rent costs.

Rise in online shopping is driving demand for storage and logistics facilities. In 2023 the market will likely continue to stay consistent and keep growing, even as inventory climbs higher, the JLL reports said.

“For every 1 million people, we require about 100 million square feet of industrial space,” said Tyler Tillery of Whitebox Real Estate. “We are projected to be at 10 million people in the next 10 years. So we are going to have to catch up on space, because we are running out in a hurry.”

Whitebox recently hired Tillery to lead its industrial division, and the firm is looking to triple its broker count to 50 employees in the next two years. 

The demand for market specific brokers is at an all time high, as brokerages invest more people and resources into industrial sales, he said.

“When you talk to brokers in some of these tertiary markets, guys will do 25 percent of their business industrial, 25 residential, 25 office, they have to be multifaceted in order to make a living,” he said. “Our brokers hyper focus on one vertical market.”

Industrial construction is being driven south and north of Dallas and Fort Worth and into the suburbs, just like the residential and office markets. Alliance Airport, developed by Ross Perot Jr. in northern Fort Worth, and the planned Mckinney airport expansion are driving business. 

“In the next 10 years, Burleson is basically going to be a suburb of Fort Worth,” Tillery said. “We’re still trying to figure out what the impact of Universal Studios is going to have in Frisco. That’s going to drive more jobs and more need for industrial space.”

While many DFW companies are increasing their industrial footprint, rising rents have others looking to downsize or move into cheaper areas, Tillery said. 

A new wrinkle is the rise in industrial property amenities, Tillery said. The days of four walls and a roof on a dirt lot are becoming more scarce, he said.

“Most of that is being driven by municipalities setting a higher bar and saying, ‘buildings need to be attractive and meet certain specs,’” he said. “Are groups out there putting in pickleball courts? We haven’t seen that … yet.”

While industrial tenants may not be pushing for hot tubs, Tillery said the cost of landscaping, higher quality building materials and bigger parking lots are pushing rents higher on new builds and forcing landlords to upgrade their properties.

“When it comes to amenities, whatever tenants ask for is going to cost money, and that is going to get amortized back into rates,” he said. “I think the simpler you can keep it, as an industrial user, the better off you’ll be.”