Future Cities
2023 North America Industrial Big Box Review & Outlook: Dallas/Ft. Worth
April 4, 2023 5 Minute Read
Unprecedented demand continues across most Dallas/Ft. Worth (DFW) submarkets. But most activity is in under 500,000 sq. ft. requirements. Currently, there are twenty 900,000 sq. ft. or larger speculative buildings either under construction or recently delivered. Demand for this building size is expected to continue increasing over the next 6-12 months. CBRE projects continued strong rent appreciation. Despite record demand, development starts will slow due to debt constraints and cap rate expansion.
Demographics
Nearly 8 million people live within 50 miles of the DFW urban core, with 5.4% projected growth over the next five years. This is the second-highest growth rate covered in this report. Over 28 million people live within 250 miles of the urban core, with 4.4% projected growth over the next five years. Nearly a quarter of the population within 50 miles of DFW is age 18-34.
Figure 1: Dallas/Ft. Worth Population Analysis
Source: CBRE Location Intelligence, Q4 2022.
The region’s warehouse labor force of 157,283 workers is expected to grow by 4.5% by 2032, according to CBRE Labor Analytics. The average salary of a non-supervisory employee is $17.34 per hour, 2.6% above the U.S. average.
Figure 2: Dallas/Ft. Worth Warehouse & Storage Labor Fundamentals
Source: CBRE Labor Analytics, Q4 2022.
*Median wage (1 year experience); non-supervisory warehouse material handlers.
Location Incentives
Over the past five years, there have been 137 publicly known economic incentives deals totaling more than $733 million for an average of $14,827 per new job in metro DFW, according to Wavteq.
CBRE’s Location Incentives Group reports that top incentive programs offered in DFW include the Texas Enterprise Fund (TEF), commonly referred to as a “deal-closing” grant. TEF awards discretionary cash grants to companies considering a new project for which a Texas site is competing against other viable out-of-state options. Award amounts are determined based on an analytical model that factors in the average new employee wage, hiring timeline and total capital investment.
Another incentive program is the Skills Development Fund, which provides grants to community and technical colleges for customized training programs that support Texas businesses. This is designed to upskill new or existing employees and increase wages.
Figure 3: Dallas/Ft. Worth Top Incentive Programs
Source: CBRE Location Incentives Group, Q4 2022.
Note: The extent, if any, of state and local incentive offerings depends on location and scope of the operation.
Logistics Driver
DFW’s central location is a significant advantage in reaching a large consumer base. The region is home to two major inland ports: Alliance Global Logistics Hub and the International Inland Port of Dallas.
The confluence of three major railroad networks (Union Pacific, Burlington Northern-Santa Fe and Kansas City Southern) puts 98% of the U.S. market within 48 hours by train. DFW International Airport is the nation's ninth-largest cargo airport and the only one with capacity to double operations in its existing footprint. All major U.S. markets can be reached by air in less than four hours.
The confluence of three major railroad networks puts 98% of the U.S. market within 48 hours by train.
Capital Markets
DFW is one of the U.S.’s top big-box markets, outpacing the country average in net absorption and new construction. DFW continues its long-standing position as a top target market for industrial & logistics investors. Sales activity in 2022 was muted by the global capital markets disruption (and associated cap rate expansion). Prospective sellers delayed divestiture plans in H2 2022. However, with inflationary pressures easing and market forces stabilizing, H2 2022 saw a more balanced trading market.
Supply & Demand
With 463 million sq. ft. of total inventory, DFW is the third-largest big-box market in North America. Occupiers continue to move in and expand: net absorption increased by 7.1% to 31 million sq. ft. DFW’s direct vacancy dropped to a decade-low 5.3%, after last year’s 34.4 million sq. ft. of lease transaction volume. General retailers, wholesalers and 3PLs were the most active tenants in the market, with 85% of all leases.
Robust demand led to increased development in 2022. A record 29.5 million sq. ft. of construction was completed, and 68.4 million sq. ft. is under construction, with 18% pre-leased. Available under-construction inventory is twice that of existing vacant space, so the market will experience higher vacancy in 2023. Rent growth will slow in this scenario, especially in the over 750,000 sq. ft. size range. Delays in starts will give the market a reprieve from more vacant construction in upcoming quarters. Despite higher vacancies, DFW will remain a top in-demand big-box market for leasing activity and net absorption in 2023.
Figure 4: Share of 2022 Leasing by Occupier Type
Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research, 2022.
Figure 5: Lease Transaction Volume by Size Range
Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research, 2022.
Figure 6: 2022 Construction Completions vs. Overall Net Absorption by Size Range
Source: CBRE Research, 2022.
Figure 7: Direct Vacancy Rate by Size Range
Source: CBRE Research, 2022.
Figure 8: Under Construction & Percentage Preleased
Source: CBRE Research, 2022.
Figure 9: First Year Taking Rents (psf/yr)
Note: Includes first year taking rents for leases 200,000 sq. ft. and above.
Source: CBRE Research, 2022.
Explore Big Box Insights by Market
More than 7 million people live within 50 miles of the market core, with five-year growth of 5.1% expected, second to only DFW.
Kansas City’s biggest draw is its easy reach to a large portion of the country. More than 2.4 million people live within 50 miles of the market core.
Memphis has over 1.4 million people within 50 miles of its core, and 23.4% are aged 18-34.
