North Texas’ Healthy Industrial Market Stands Out During the Pandemic

Since the start of the pandemic back in March 2020, the economy has suffered millions of lost jobs. Of course, this has had a direct impact on the commercial real estate market. But compared to the office and retail sectors, the industrial market has been much more resilient. In fact, there is some evidence showing that Covid-19 has fueled warehouse demand in Dallas-Fort Worth. We spoke with Dan Spika, SIOR, Executive Vice President and Principal of the Office and Industrial Division for Henry S. Miller Brokerage, to get his take on North Texas’ healthy industrial market.

What is your overall perspective on the DFW industrial market since the pandemic started and looking toward the future?

The industrial market was in and is still in great shape. Even before the pandemic and the resulting economic downturn, the industrial real estate market in North Texas was booming. Not long ago, The Dallas Morning News reported that some 30 million square feet of new warehouse space is planned around DFW. As a CRE asset, an industrial building is very stable. All indications are that will not change.

How has the increase in e-commerce shopping impacted the need for industrial space in the DFW area?

Consumers are finding ways to purchase goods that do not require in-store shopping. One method that was popular before coronavirus and even more so now is e-commerce. People buying online expect to receive their merchandise immediately, which requires retailers to have a so-called ‘last mile’ location for inventory. You only have to look at Amazon’s new distribution center near DFW International Airport that is more than one million square feet to understand the importance of that last mile.

What makes DFW the preferred location for warehouse and distribution centers?

First of all, Dallas-Fort Worth is easily accessible to and from any part of the country, including both coasts. Our central location as well as convenient transportation and distribution networks make the region a logistical hot spot. Labor costs here are less than they are on the east and west coast, too. DFW also offers a lower cost of living, great school systems and an overall good quality of life. So right now we’re seeing an influx of many different types of companies, especially from the west coast.

What are developers doing vis-à-vis the industrial market?

Developers are looking for land! North Tarrant County, Denton, Forney and Terrell are all good locations. South of I-20 is still relevant, too, because land is a bit cheaper there. But it’s difficult to find anything near DFW, Flower Mound, Carrollton or Lewisville.

What has been the impact on tenant leasing and rents?

Leasing activity has been keeping up with new supply as indicated by a vacancy rate of only four or five percent. And rents are going up as fast as landlords can get to the new sites.

And how do investors feel about DFW’s industrial market?

They are very bullish on DFW. I haven’t noticed investors being scared off by the pandemic. In fact, I think they’re recognizing the industrial market’s stability, which will likely increase interest for the foreseeable future.