2Q 2018 DFW Industrial Market Brief

Market Brief...

Dallas/Fort Worth

INDUSTRIAL

2Q18 Property Pictured Above: Southpointe 20/35, 660,312 SF, 2821 Danieldale Road, Lancaster, Texas

DFW INDUSTRIAL MARKET BRIEF 2Q 2018

TABLE OF CONTENTS 1. DALLAS/FORT WORTH INDUSTRIAL SUBMARKETS & EXPERTS

1 2 3

2. OVERALL DALLAS/FORT WORTH INDUSTRIAL MARKET

A. Industrial Trends & Transactions

B. Facts and Figures

2. SUBMARKET INTELLIGENCE

A. Great Southwest/Arlington

B. C. D. E. F. G.

DFW Airport Northeast Dallas South Dallas Northwest Dallas North Fort Worth South Fort Worth

3

4

HLC SUBMARKET COVERAGE

DFW

HLC DFW INDUSTRIAL MARKET EXPERTS

JIM BRICE

MATT CARTHEY

CANON SHOULTS

JOHN GORMAN

JOSH BARNES

DONNIE ROHDE

ANDREW GILBERT

Partner - Texas Leasing jbrice@hldallas.com 972.280.8306

Partner mcarthey@hlfortworth.com 817.710.1111

Managing Principal cshoults@hldallas.com 972.280.8328

Principal jgorman@hldallas.com 214.920.9800

Principal jbarnes@hldallas.com 972.280.8353

Market Director drohde@hlfortworth.com 817.710.7058

Market Associate agilbert@hldallas.com 972.280.8312

BEN WALLACE

JAKE NEAL

THOMAS GRAFTON

CLAY BALCH

GEORGE JENNINGS

KEATON DUHON

MADDY CANTY

Market Associate bwallace@hldallas.com 972.421.1966

Market Associate jneal@hlfortworth.com 817.284.5555

Market Associate tgrafton@hlfortworth.com 817.632.6152

Brokerage Services Associate cbalch@hldallas.com 972.421.1956

Market Associate gjennings@hlfortworth.com 817.632.6151

Market Associate kduhon@hlfortworth.com 817.284.5555

Market Analyst mcanty@hldallas.com 972.280.8325

5

HLC OUTLOOK Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

5,340,138

2,539,462

4,962,030

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

6.0%

6.1%

6.9%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

6,918,950

9,928,752

17,598,601

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

26,873,965

25,151,091

24,505,242

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

4,611,670

2,914,730

4,686,570

The DFW industrial market continues to be one of the strongest industrial markets in the country and a top four choice for national logistics distribution. Mid-year 2018, CoStar reported YTD absorption of 7.9M SF and the overall industrial market vacancy remains unchanged (albeit stable) at 6.0%. However, YTD absorption of 7.9M SF is notably off pace from previous years annualized absorption. Furthermore, construction is approaching 27M SF and currently outpacing deal velocity.

The majority of this activity encompasses the sub markets of South Dallas (6.8M SF), North Fort Worth (4.4M SF) and DFW Airport (4.3M SF). The DFW Industrial market remains healthy with an overall market vacancy of 6.0%. However, investment capital should observe isolated submarket trends whereby the current construction/absorption ratio is favoring new construction outpacing net absorption. Given the lack of available portfolio dispositions, speculative development will likely remain strong in the coming year for the DFW market as capital sources continue to accept leasing risk to obtain lower basis positions and build to a yield rather than competing for inferior product with record low cap rates. As evidenced by the increased number of forward transactions.

HLC DFW

INDUSTRIAL TRENDS & TRANSACTIONS TRENDS & TRANSACTIONS

Industrial product continues to be in high demand for institutional investment including foreign sources of capital seeking to invest in the US economy. So much so that forward positions are becoming more prevalent.

Additionally, we continue to see new sources of capital competing for deals.

TOP LEASE TRANSACTIONS • Mars Petco has leased 1.5M SF, Build-to-Suit, from Bandera in Passport Park between Market Street and Rochelle • Black & Decker leased 1,214,526 SF at Alliance Northport 3 on Sam Lee lane in Northlake, owned by Hillwood • Living Spaces subleased 858,000 SF from Restoration Hardware at 1303 W Pioneer Parkway/161 Pioneer Distribution Center • PPG Industries has leased for 450,000 SF out of the 636,000 SF building from Duke Realty on Lakeside Parkway in Flower Mound to kick off the development • Texas Instruments leased 409,914 SF at 13601 Independence Parkway owned by Hillwood • VM Innovations leased 416,891 SF with Core 5 at 1200 W. Wintergreen Road off I-45 • Amazon leased 395,099 SF from PortSouth Logistics (PLR) at 1000 SouthPort Parkway off Interstate 45 • Rent The Runway leased 319,200 SF at 1111 W Bardin from Barings • Schumacher Electric leased 358,143 SF from Hillwood at 14200 FAA Boulevard/CentrePort 2

Speculative development remains at a historical peak due to the lack of acquisition opportunities and capital sources seeking alternative basis positions to “retail” pricing resulting from high demand and historically low cap rates.

Due to continued population growth and consumer demand, E-commerce groups and third-party logistics providers continue to be a driving force in the demand of bulk warehouse for fulfillment centers.

Rental abatement has been re-established as a norm in the market as Landlords 1) seek to maximize property valuations through face rate and rent growth 2) second generation space seeks to remain competitive with new development and 3) new development under construction seeks to secure a tenant base prior to additional projects breaking ground. Deal velocity in 2018 has diminished such that rental abatement has intensified as owners seek to secure a limited number of transactions.

Since 2010, depending on the size of the transaction, rental rates have increased 20%-30% with 2%-4% annual escalations accepted by the market. However, leases that have previously experienced substantive rent increases (leases signed in 2015) may have stabilized base rents albeit still subject to annualized rent increases upon expiration.

TOP HLC LEASE TRANSACTIONS HLC Deal

HLC Deal

HLC Deal

HLC Deal

HLC Deal

HLC Deal

6

• At Home Stores, LLC renewed their lease of 555,321 SF at 4030-4040 Forest Lane with Dollar Flowers Realty.

• Taylor Communications renewed and expanded with TA Realty at 8700 Autobahn into a total of 220,110 SF. • Packaging Corporation of America renewed their 92,828 SF lease with Blackstone.

• Arcadia leased 86,731 SF at 7601 Ambassador Row with Frontier Equity.

• The Finial Company, Inc. renewed their lease of 60,300 SF at 4030 La Reunion with AEW. • Raynor Marketing renewed 58,880 SF with TA Realty at Crowley.

HLC DFW FACTS & FIGURES

Market

Existing Inventory

Direct SF

Total SF

Vac. %

DFW Airport

613

73,122,439

3,475,628

3,975,625

5.4%

East Dallas

598

42,524,138

2,380,245

2,387,745

5.6%

1,087

106,854,751

6,267,247

7,350,877

6.9%

17

1,186,131

29,387

29,387

2.5%

North Fort Worth

640

88,170,077

10,000,000 7.0% 8,000,000

6.5%

6,000,000

4,000,000

Total RBA

Henderson County

12,000,000

Vacancy

# Bldgs.

Great SW/Arlington

OVERALL DFW

7.5%

3,156,673

3,212,673

3.6%

6.0% 2,000,000

5.5%

0 Q2 15

Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Absorption

Q1 17

Q2 17

Q3 17

Q4 17

Deliveries

Q1 18

Q2 18

Vacancy

VACANCY - OVERALL DFW

8.0%

6.90%

7.0%

6.00%

6.8%

6.0% 5.5%

Northeast Dallas

1,476

105,307,973

5,579,473

6,252,514

5.9%

Northwest Dallas

1,336

106,487,727

4,147,233

4,510,911

4.2%

27

3,355,095

23,320

23,320

0.7%

669

92,825,333

10,781,481

11,206,032

12.1%

South Fort Worth

1,400

77,813,871

4,298,618

4,407,640

5.7%

South Stemmons

2,096

110,597,422

4,538,111

5,034,559

4.6%

Totals

9,959

808,244,957

44,677,416

48,391,283

6.0%

5.0% 4.0% 3.0% 2.0%

NW Dallas Outlying South Dallas

1.0%

0.50%

0.20%

0.0% Q2 15

Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Direct

Q1 17

Q2 17

Q3 17

Q4 17

Sublet

Q1 18

Q2 18

Total

ABSORPTION - OVERALL DFW 20,000,000 18,000,000 16,000,000

YTD Net Absorption

YTD Deliveries

Under Construction SF

YTD Leasing Activity

14,000,000

270,464

325,795

4,297,932

1,949,990

8,000,000

East Dallas

(255,809)

0

2,440,730

275,212

4,000,000

Great SW/Arlington

3,383,675

1,197,000

2,248,692

4,120,492

Henderson County

0

0

0

0

North Fort Worth

2,376,867

1,308,170

4,442,645

957,535

Northeast Dallas

1,171,623

353,587

2,336,480

1,751,972

Northwest Dallas

486,076

336,494

2,053,709

3,203,103

NW Dallas Outlying

173,214

0

1,224,100

22,400

South Dallas

509,178

2,411,610

6,866,993

1,808,267

South Fort Worth

121,701

325,611

962,684

945,810

South Stemmons

(357,389)

1,268,133

0

1,812,921

Totals

7,879,600

7,526,400

26,873,965

16,847,702

Market DFW Airport

12,000,000 10,000,000

6,000,000

2,000,000 0 Q2 15

Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Total Net

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Leasing Activity

CONSTRUCTION - OVERALL DFW 30,000,000

25,000,000

20,000,000

15,000,000

10,000,000

5,000,000

0 Q2 15

Q3 15

Q4 15

Q1 16

Q2 16

Q3 16

Delivered Inventory

Source: CoStar 2Q 2018 Industrial Report

Q4 16

Q1 17

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Under Construction

7

SUBMARKET INTELLIGENCE GREAT SOUTHWEST/ARLINGTON

14+ YEARS

HLC OUTLOOK

CRE EXPERIENCE

The Great Southwest submarket consists of 107M SF, and per CoStar reporting experienced YTD positive absorption of 3,383,675 SF with 4.1M SF of leasing activity. Significant GSW leases contributing to the leasing activity include Rent The Runway (319K SF), Living Spaces (858K SF) and Schumacher Electric (358K SF). GSW reported new completions of 1.2M SF and an additional 2.2M SF of product currently under construction. The 2Q 2018 vacancy rate improved markedly to 6.9% versus 1Q 2018 at 8.7%. As we continue into 2018, we expect this vacancy rate to tighten even more as tenants absorb additional product and new development begins to taper.

CANON SHOULTS Managing Principal cshoults@hldallas.com 972.280.8328

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

2,588,530

795,145

1,397,334

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

6.9%

8.3%

8.5%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,588,950

2,531,542

3,176,605

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,248,692

3,273,572

4,899,871

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,197,000

-

2,014,172

10.0%

3,000,000

9.0%

2,500,000

8.0%

2,000,000

7.0%

1,500,000

6.0%

1,000,000

5.0%

500,000

0

4.0% Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Deliveries

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Vacancy

Source: CoStar 2Q 2018 Industrial Report

8

Bardin from Barings

• Living Spaces subleased 858,000 SF from Restoration Hardware at 1303 W Pioneer Parkway/161 Pioneer Distribution Center • Schumacher Electric leased 358,143 SF from Hillwood at 14200 FAA Blvd/CentrePort 2 • Packaging Corporation of America renewed their lease of 92,828 SF at 1305 Avenue H from Blackstone

NEW DEVELOPMENTS • 2911 S Great Southwest Parkway - 271,794 SF spec with La Salle/Stream Realty Partners

• Parc Southwest – 5250 Frye Road and 5251 Frye Road – 292,997 SF spec with GID/Jackson Shaw

• Sovereign Road & Amon Carter – CentrePort IV – 494,518 SF spec with Hillwood

• 2525 E Abram Street/General Motors Assembly Plant Expansion – 1,000,000 SF

• 949 W Oakdale Road – 401,557 SF spec with PLR • Liberty Park GSW Building 1 – 172,120 SF spec with Liberty Property Trust

VITAL STATS

Q2 15

TOP LEASE TRANSACTIONS • Rent The Runway leased 319,200 SF at 1111 W

DEALS ON THE MARKET • TA Realty is selling Westpark Distribution Center.

The building is 425,870 SF and under contract to Stonelake.

• Crow Holdings is selling the Texas Urban Logistics Portfolio. The portfolio consists of 2.35M SF and 391,000 SF of the package is in GSW. • KKR/Alpha Industrial Properties purchased Valley View DFW Airport (294,795 SF) from Johnson Development.

LARGE EXISTING VACANCIES • 14900 Frye Road – 494,990 SF • 950 E Ave K/GSW 360 Global Logistics Park – 487,752 SF

• 1011 Isuzu Parkway/Regency II – 470,000 SF • NWQ Conflans Road & Hwy 360/Parc GSW Building A – 450,340 SF

• 3120 N Great Southwest Parkway/GSW Gateway IV – 312,314 SF

• 2710 N Forum Drive – 301,000 SF

SUBMARKET INTELLIGENCE DFW AIRPORT

HLC OUTLOOK

25+ YEARS

The DFW Airport market vacancy rate is 5.4% at the end of 2Q 2018 with absorption of 333,406 SF. Stream, Bandera, Copeland Commercial, Prologis, DCT, Perot development and Weeks Robinson (sale to user) are the developers with the 4.2M under construction. Trammell Crow Company has 144 acres in Passport Park with two buildings totaling 1.8M SF with dirt work to begin at the start of the 3rd quarter. Rental rates have remained strong ranging from $3.85-$8.50 for bulk distribution and shallow bay product. Rental abatements range from 2 months to 8 months depending on renewal versus new deals and the size of the lease transaction. Tenant Improvement costs remain high because increasing tenant demands and construction costs.

CRE EXPERIENCE JIM BRICE

Partner - Texas Leasing jbrice@hldallas.com 972.280.8306

Absorption

vs. Prev. Qtr

DFW Airport market continues to be one of the top three markets for institutional owners to buy or develop in the Metroplex.

Majority the fee simple land has been developed with most of the developments taking place on 40-year ground lease land owned

by DFW Airport.

vs. 12 Mths Ago

333,406

(62,942)

(337,446)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.4%

5.9%

6.8%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

884,928

1,065,062

2,039,508

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

4,297,932

3,546,732

2,120,455

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

325,795

112,283

VITAL STATS

11.0%

2,500,000

10.0%

2,000,000

9.0%

1,500,000

8.0%

1,000,000

7.0%

500,000

6.0%

0

5.0%

(500,000) Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Deliveries

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Vacancy

Source: CoStar 2Q 2018 Industrial Report

TOP LEASE TRANSACTIONS • Mars Petco has leased 1.5M SF, Build-to-Suit, from Bandera in Passport Park between Market Street and Rochelle • PPG Industries has leased for 450,000 SF out of the 636,000 SF building from Duke Realty on Lakeside Parkway in Flower Mound to kick off the development • Crestron Electronics has leased 81,527 SF from Cabot at 3711 S 20th Avenue in Euless • Restoration Hardware leased 49,820 SF at 621 S Royal Lane from Duke Realty • TTC Equipment and Supply leased 29,600 SF at 800 Industrial Boulevard from ProLogis • Next Generation Logistics leased 23,198 SF at 875 W Sandy Lake Road

DEALS ON THE MARKET • Skyway Business Center – 66,504 SF owned by Hartman.

NEW DEVELOPMENTS • Gateway Logistics Center – five (5) building development totaling 1,409,400 SF being developed by Bandera Ventures

• Mars Build-to-Suit- Bandera is building a 1.5 M SF building for Mars in Passport Park between Market Street and Rochelle • Airport South Logistics Center – 562,640 SF building being developed by Robinson Weeks Partners (Sold to a user) • DFW Commerce Center Building 1 – 1,000,584 SF building being developed by Copeland Commercial • International Logistics Center – three (3) building development totaling 646,796 SF to be delivered August 2018. The development is owned by Cabot.

• DCT Freeport West 2 & 3 – two (2) building DCT development totaling 193,935 SF to be delivered June 2018 • Logistics Center 7 – 74,375 SF building being developed by Perot Development

LARGE EXISTING VACANCIES • 944 W Sandy Lake Road – 604,800 SF • 2800 Valley View Lane – 294,795 SF • 2700 Market Street – 309,240 SF • 2600 Market Street – 374,900 SF • 2500 Market Street – 267,254 SF • 2501 W Airport Freeway – 250,312 SF • 2701 W Airport Freeway – 211,316 SF 9

SUBMARKET INTELLIGENCE NORTHEAST & EAST DALLAS

11+ YEARS

HLC OUTLOOK

JOSH BARNES

The Northeast and East Dallas submarkets continued to perform steadily with another consecutive quarter of positive absorption.

We continue to see strong activity and have seen rates push past historical levels and they continue to gradually increase.

Spec warehouse and newer second-generation space between 100 – 200,000 SF is now being quoted between $4.05 – $4.75 NNN. Construction has increased considerably over the last 12 months with more announcements on the way. Activity remains strong throughout the market as landlords of new construction are consistently putting out proposals during the early phases of construction. We expect concessions to remain low and rates to steadily increase throughout these markets.

CRE EXPERIENCE

Principal jbarnes@hldallas.com 972.280.8353

TOP LEASE TRANSACTIONS Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

470,821

444,990

666,545

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.8%

6.0%

6.2%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

HLC Deal

1,259,834

767,350

2,702,140

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

HLC Deal

4,777,210

3,093,958

2,165,390

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

212,000

141,587

461,750

DEALS ON THE MARKET • Kingsley Transit Center being sold by HLC – 218,787 SF building at 3422 Kingsley Road; owned by Clarion • Allen Station is being sold by Cushman & Wakefield – 220,326 SF Class A building project owned by Clarion • Miller Road Business Park is being sold by Exeter Property Company – 382,000 SF owned by CalStrs

HLC Deal

VITAL STATS

8.0%

• Barrett Distributing leased 115,041 SF at 3800 Leon Road with IDI Logistics • Service Lighting renewed their 86,444 SF lease at 2140 Merritt Drive with GLP • Daryl Flood leased 72,722 SF at 10665 Sanden Drive with DCT Industrial • Southern Wood & Flooring leased 39,900 SF at 10425 Plano Road from Prologis • Motion Industries renewed their 37,080 SF lease at 2364 Merritt Drive with Taurus

1,400,000 1,200,000 1,000,000 800,000

7.0%

600,000 400,000 200,000 6.0%

0 (200,000) (400,000)

5.0%

(600,000) Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Deliveries

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Vacancy

Source: CoStar 2Q 2018 Industrial Report

10

NEW DEVELOPMENTS • 1601 South Shiloh Road in Garland – Two building development totaling 248,825 SF by Huntington Industrial Partners; 32’ clear height, cross dock • Exeter Property Company is under construction at S Buckner Road – 4 building project totaling 1,076,300 SF • 1200 South Jupiter Road in Garland – 3 building spec development totaling 764,400 SF by Langford Property Company; cross dock configurations with trailer parking; to be delivered mid-2018

HLC Deal

• 4000 E Scyene Road – Ashley Furniture Building totaling 877,230 SF; to be delivered August 2018 • I-75/Wilmeth in McKinney – 202,270 SF spec building under construction by Hunt Southwest; rear load building with additional land for trailer parking and 32’ clear height; to be delivered mid 2018 • 2200 Trade Center in Mesquite – 487,200 SF spec building under construction by IDI; cross dock configuration with 36’ clear height; to be delivered late 2018

LARGE EXISTING VACANCIES • 5151 Samuell Boulevard – 442,035 SF; space to be vacated by Ashley Furniture • 8901 Forney Road – 419,626 SF; space to be vacated by Shipper’s Warehouse • 1371 S Town East Boulevard – 400,000 SF; sublease from Display Source Alliance • 3800 Leon Road – 378,959 SF • 3000 West Kingsley – 341,840 SF; sublease by Apex Tools • 3310 W Kingsley Road – 218,787 SF

SUBMARKET INTELLIGENCE NORTHWEST DALLAS

7+ YEARS

HLC OUTLOOK

CRE EXPERIENCE

Through the second quarter of 2018, Northwest Dallas continued to prove to be one of the strongest submarkets in Dallas/ Fort Worth Metroplex. The submarket posted a 4.2% vacancy rate which is near the same rate as the end of 1Q 2018 (4.5%). Billingsley recently completed their four-building development at Mercer Business Park which they are now 100% occupied. Building Four at Prologis’ Valwood Corporate Park will be completed in 3Q this year and Core5 recently broke ground on Valwood Crossings at Belt Line and Luna. Those two projects are the development highlights currently under construction in NW Dallas. Panattoni will be breaking ground on their 151,176 SF spec facility in July. Rents have continued to increase due to the market tightening as spaces between 50 – 150,000 SF are diminishing which is the primary size range in Valwood. All indicators point to the market remaining strong throughout 2018.

ANDREW GILBERT Market Associate agilbert@hldallas.com 972.280.8312

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

631,585

(145,509)

665,760

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

4.2%

4.5%

5.4%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,503,158

1,699,945

2,032,984

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,053,709

1,291,863

1,668,352

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

336,494

-

343,223

VITAL STATS

10.0%

purchased the 11-building portfolio totaling 1.6M SF located in DFW and Atlanta. Marsh Business Park East and West are the assets located in Northwest Dallas. Berkeley Capital was the seller.

• Toyota leased 121,188 SF at 1825 Midway Road with MLRP • Style Access leased 81,000 SF at 1615 Hutton Court with ProLogis • Raynor Marketing renewed their 58,880 SF lease at 1215 Crowley Drive with TA Associates • Lone Star Warehouse leased 51,987 SF at 1212 Trend with EastGroup Properties • Assurant leased 31,330 SF at 4550 Excel Parkway with The Luzzatto Company • Transpere leased 23,131 SF at 1103 Trend Drive with Stonelake Capital Partners

HLC Deal

2,000,000

9.0%

TOP LEASE TRANSACTIONS • DFW/Atlanta Portfolio – Circle Industrial

1,500,000

8.0% 1,000,000 7.0% 500,000

HLC Deal

• 2115 Belt Line Road – 355,856 SF building occupied by Rudy’s Tortilla’s and L.E. Klein Company. Rialto Capital is the seller.

• 2908 Commodore Drive – Taylor Communications is selling the 81,435 SF building in the Frankford Trade Center Industrial Park.

NEW DEVELOPMENTS • 1310 Electronics (Valwood Corporate Center) – Building Four totaling 235,900 SF to be completed in 3Q 2018 by Prologis.

• Valwood Crossings – Two buildings project totaling 620,000 SF at the Northeast corner of Belt Line and Luna. Both buildings to be completed by 4Q this year. Core5 is the developer.

• Valwood Logistics Center – Panattoni will break ground on their 151,176 SF rear-load building in July. The site is located at Valley View and Senlac.

6.0%

0

5.0%

4.0%

(500,000) Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Deliveries

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Vacancy

Source: CoStar 2Q 2018 Industrial Report

DEALS ON THE MARKET • Texas Urban Logistics Portfolio – Crow Holdings Capital is selling the 27 buildings totaling 2.3M SF throughout Dallas and Houston. Two of the buildings are located in the Northwest Dallas Submarket on Nicholson and Vantage.

LARGE EXISTING VACANCIES • 14325 Gillis Road – 175,300 SF • 4700-4720 Simonton Road – 152,519 SF • 2099 Valley View Lane – 150,000 SF • 1001 W Crosby Road – 135,950 SF 11

SUBMARKET INTELLIGENCE SOUTH DALLAS

30+ YEARS

HLC OUTLOOK

CRE EXPERIENCE

South Dallas Industrial submarket as surveyed is 116M SF and is now 11.9% vacant which is 0.8% higher than reported in 1Q 2018. New construction continues outpacing absorption. South Dallas reported net absorption of 831,734 SF in 2Q 2018. New construction was mitigated with 811K SF of new transactions from VM Innovations (416K), and Amazon (395K). In 2Q 2018 South Dallas had no new deliveries of new bulk warehouse. South Dallas still has 2.2M SF remaining under construction. As expected, the southern corridors along I-20, I-35, and I-45 will continue to produce new opportunities for development but, the supply of new product by capital sources has far exceeded the submarket demand and deal velocity and subsequently leads the Dallas market vacancy with 15.7% availability. Corridors such as Interstate 45 have nearly 21% vacancy.

JOHN GORMAN Principal jgorman@hldallas.com 214.920.9800

Please note: The area CoStar uses for the South Dallas Submarket differs slightly from the Submarket John covers. Numbers may vary.

TOP LEASE TRANSACTIONS Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

626,320

(117,142)

475,615

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

12.1%

11.5%

10.9%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

205,156

1,603,111

3,001,525

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

6,866,993

7,436,775

6,147,195

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,333,230

1,078,380

1,295,142

2,800,000 11.0%

9.0%

1,800,000

7.0% 800,000 5.0%

(200,000)

3.0% Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Deliveries

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Vacancy Source: CoStar 2Q 2018 Industrial Report

12

TOP SALES TRANSACTIONS • 3535 North Houston School Road from Copeland Commercial (seller) to Liberty Property Trust (buyer) – 900,043 SF

UNDER CONSTRUCTION

VITAL STATS

13.0%

• VM Innovations leased 416,891 SF with Core 5 at 1200 W Wintergreen Road off I-45 • Amazon leased 395,099 SF from PortSouth Logistics (PLR) at 1000 SouthPort Parkway off Interstate 45

• I-35 Logistics Crossing – 1,221,612 SF (2 Buildings 610,806 SF each) by Crow Holdings • SouthLink (Hines) – 1,044,647 SF project (expandable to 1,540,000 SF) at Bonnie View Road and Cleveland Road

LARGE EXISTING VACANCIES • Southport Parkway, Building 1 - 1,075,260 SF spec SouthPort Logistics Park (Interstate 45) • Copeland Commercial – 900,043 SF at 3535 N Houston School Road • SouthPointe 20/35 – 660,312 SF spec with Clarion • LogistiCenter at Dallas – 626,439 SF spec with Dermody Properties at 9890 Bonnie View Road • Park 20 – 468,300 SF with Huntington Industrial Partners on Houston School Road • 1240 Centre Park Boulevard (Eagle Park 20/35)- 454,408 SF spec now with Morgan Stanley

SUBMARKET INTELLIGENCE SOUTH STEMMONS

7+ YEARS

HLC OUTLOOK

CRE EXPERIENCE

At the end of 2Q 2018, the South Stemmons industrial submarket posted a 4.6% vacancy rate and continues to be one of the strongest performing submarkets in Dallas. There is a strong amount of leasing activity throughout the submarket for tenants between 10 – 50,000 SF. Although absorption for 2Q totaled a negative 363,689 SF, this is due to tenants relocating from the Design District with rates continuing to rise quickly in that area. I expect the negative absorption number to reverse in 2018 due to the lack of development sites in the submarket. As we progress in 2018, rental rates are expected to increase as the submarket becomes tighter and tenants are relocating north on I-35 from the spike in rental rates in the Design District. Since 2013, rents in the submarket have increased 30% for space under 50,000 SF. This is a key statistic as this size encompasses the majority of spaces in the submarket. Rental rates for 50,000 SF deals have increased into the high $3/SF range and rates for 10,000 SF are now reaching $5.00/SF start rates. 20-25,000 SF are creeping up into the low $4’s. I expect this trend to continue throughout 2018.

ANDREW GILBERT Market Associate agilbert@hldallas.com 972.280.8312

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(363,689)

6,300

588,630

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

4.6%

3.6%

6.5%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

697,244

1,115,677

1,322,641

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

702,215

903,133

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

702,215

565,918

215,000

TOP LEASE TRANSACTIONS • Circle Industrial purchased the DFW/Atlanta Industrial Portfolio. The portfolio totals 11 buildings throughout the Dallas and Atlanta markets totaling 1.6M SF. Berkeley Capital was the seller.

• Investcorp purchased the National Urban Logistics Portfolio from Greenfield Partners. The assets in South Stemmons included buildings on Lakawana, Quebec and Mockingbird Lane.

• Lone Star Holdings renewed their 48,655 SF lease at Dallas Commerce Center in West Brookhollow.

TA Realty is the landlord.

• Arcadia signed an 86,731 SF lease at 7601 Ambassador Row in Brookhollow. Frontier Equity is the landlord.

• Baik Brands leased 46,535 SF at 2025 Royal Lane in West Hines North.

HLC Deal

VITAL STATS 1,000,000

9.0%

800,000

8.0%

600,000 7.0%

400,000

6.0%

200,000 0

5.0%

(200,000) 4.0%

HLC Deal

• Westwood Business Park – The project consists of twelve flex buildings totaling 227,709 SF located on the Northeast corner of Royal and Luna in West Hines North.

• 10750 Denton Drive – 252,229 SF for sale on 15.08 acres of land. Hollander Sleep Products is the landlord and they recently moved their operations to South Dallas.

LARGE EXISTING VACANCIES • 2606 Brenner Drive – 65,726 SF • 2025 Royal Lane – 50,027 SF • 8500 Sovereign Row – 35,700 SF • 1275-1281 Round Table - 30,839 SF • 10495 Olympic Drive – 30,321 SF • 10405 Shady Trail – 29,634 SF

(400,000)

3.0%

(600,000) Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Deliveries

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Vacancy

Source: CoStar 2Q 2018 Industrial Report

DEALS ON THE MARKET • Texas Urban Logistics Portfolio – Crow Holdings Capital is selling the 27 buildings totaling 2.3M SF throughout Dallas and Houston. Three of the buildings are located in the S Stemmons submarket on Mockingbird and Ambassador Row.

13

SUBMARKET INTELLIGENCE NORTH FORT WORTH

12+ YEARS

HLC OUTLOOK

CRE EXPERIENCE

The North Fort Worth industrial submarket maintained positive momentum through the first three months of 2018 by posting a 2Q vacancy of 3.6%, down even further from the 4.3% posting after 1Q. The second quarter net absorption figure of 996,588 SF again outpaced deliveries by nearly 475,000 SF. This trend has remained constant since 1Q 2017 highlighting developer’s confidence of speculative development with more than 4.5M SF under construction.

DONNIE ROHDE

Market Director drohde@hlfortworth.com 817.710.7058

Absorption

vs. Prev. Qtr

Without question, the most vibrant sector in North Fort Worth remains bulk warehousing. Nearly 98% of the overall, 1Q net absorption in North Fort Worth came from this sector alone. The overall vacancy rate has hit a new 10-year low coming in at 3.6% (only being surpassed by the 3.3% posting of 1Q & 2Q 2014 when the market had 17M less SF than YTD.) As projects such as 35 Eagle, Synergy Crossing, Fossil Creek Crossing and Park 820 come to completion, expect to see continued positive absorption by bulk distribution users that prefer the transit amenities North Fort Worth and Alliance have to offer.

vs. 12 Mths Ago

996,588

1,380,279

1,345,961

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

3.6%

4.2%

6.5%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

HLC Deal

378,400

579,135

2,316,069

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

4,442,645

4,965,315

5,627,243

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

522,670

785,500

TOP SALES TRANSACTIONS

-

• Circle Industrial, Inc. purchased a five building, 116,056 SF flex project at 8200 Northeast Parkway in North Richland Hills, Texas, from Berkeley Partners. The project was part of a larger portfolio sale consisting of seven DFW assets, totaling 1,071,563 SF. Holt Lunsford Commercial, Inc. has been awarded the leasing and management of the DFW portfolio.

• John Hancock Real Estate acquired the property at 300 Gateway Parkway, a 600,000 SF building in Roanoke, Texas, from UBS Realty Investors LLC. • Exeter Property Group completed the sale of a large industrial portfolio to affiliates of Singapore-based Mapletree Investments, Ltd. The large industrial portfolio consists of properties located throughout the United States including a 143,500 SF building located at 186 Intermodal Parkway, Fort Worth, Texas.

TOP LEASE TRANSACTIONS

VITAL STATS 12.0%

3,000,000

10.0%

2,000,000

8.0%

1,000,000

6.0%

0

4.0%

(1,000,000)

2.0%

(2,000,000) Q2 15

Q3 15

Q4 15

Absorption

Q1 16

Q2 16

Q3 16

Q4 16

Q1 17

Deliveries

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Vacancy

Source: CoStar 2Q 2018 Industrial Report

• Black & Decker leased 1,214,526 SF at Alliance Northport 3 on Sam Lee lane in Northlake, owned by Hillwood • Texas Instruments leased 409,914 SF at 13601 Independence Parkway owned by Hillwood • CEVA leased 305,617 SF at 1011 Interstate 35 W owned by TCRG Properties • Alliance Sports Group leased 142,412 SF at 5650 Alliance Gateway Freeway owned by J.P. Morgan • MEI Rigging & Crating leased 56,354 SF at 731 Eight Twenty Boulevard owned by Exeter

DEALS ON THE MARKET • • • • •

3209 Galvez Avenue – 174,798 SF 1801 Riverbend West Drive – 101,500 SF 10705 North Freeway – 101,218 SF 1431 S Cherry Lane (Under Contract) – 100,000 SF Alliance Gateway Data Center 2 – 88,600 SF

NEW DEVELOPMENTS 14

• Hillwood is under construction on Alliance Northport 3 (1,214,526 SF) in Northlake, Texas, pre-leased to Black & Decker with expected 1Q 2019

•

•

•

•

• •

•

•

•

delivery. Alliance Northport is a 260-acre site at I-35W & Hwy 114 which can accommodate more than 3M SF. Hillwood is also poised to break ground on Alliance Center North 3 and Alliance Northport 1. The buildings will be 782,000 SF and 500,000 SF respectively.

DHL is under construction on Buildings A (705,956 SF) & B (493,500 SF) on FM 156 and Hwy 114 in Justin, Texas. Both cross-dock facilities are slated for a 1Q 2019 delivery.

Hunt Southwest is slated to break ground on a 1,023,488 SF facility no later that October 2018. The million SF facility will be located near the NW corner of Loop 820 and Mark IV Parkway.

Trammell Crow is near completion on Buildings A (1,089,642 SF), H (312,733 SF) & J (234,277 SF), in the expansion of 35 Eagle in Alliance. The 3 buildings are expected to deliver beginning of 3Q 2018.

Andrews Distributing is near completion on a 400,000 SF building located in Railhead Industrial Park. The building is to be delivered in 4Q of 2018.

IDI Logistics is under construction on Building C of their Speedway Distribution Center project. The building will total 316,128 SF, and is scheduled to deliver 2Q 2019.

Scannell Properties is underway on a 221,000 SF rear-load facility near the NW corner of Loop 820 and Blue Mound Road. Building 1 is expected to deliver 2Q of 2018. Phase 2 of the project will include a 270,000 SF partial cross-dock building just to the west of Building 1.

Huntington Industrial Partners is currently under construction on a twobuilding, cross-dock project totaling 432,485 SF at the NE corner of I-35 and Loop 820. Delivery is set for beginning of 3Q 2018.

EastGroup Properties, Inc. began mobilizing for construction of Parc North Building 5, a 100,036 SF shallow-bay facility fronting Loop 820.

LARGE EXISTING VACANCIES • • • • • • •

14901 N Beach Street – 1,111,500 SF 2112 Eagle Parkway – 407,800 SF 4801 Westport Parkway – 400,000 SF 5180 Railhead Road – 362,670 SF 5650 Alliance Gateway Freeway – 303,458 SF 3300 Eagle Parkway – 269,494 SF 1101 Interstate 35 W – 202,000 SF

SUBMARKET INTELLIGENCE SOUTH FORT WORTH

16+ YEARS

HLC OUTLOOK

MATT CARTHEY

The South Fort Worth industrial submarket posted a second quarter vacancy of 5.7%. This is up from 5.4% in the 1st quarter of 2018.

As of 2Q 2018, there is upwards of 4,150,000 SF of proposed industrial development, with 750,000 SF currently under construction.

We don’t expect a flood of the 4,150,000 SF to hit at once as Majestic, Mereken Land, Carter Foundation, Hillwood and TCRG control most of the developable tracts. Current lack of supply and increasing demand doesn’t appear to be slowing down, thus fueling a fire under developers and institutional property owners alike to enter the submarket. This is highlighted by south Fort Worth’s 2Q 2018 leasing activity of 945,810 SF. A figure that is up 75% from the previous quarters activity of 540,780 SF.

CRE EXPERIENCE

Partner mcarthey@hlfortworth.com 817.710.1111

Shallow Bay product remains very strong and in high demand posting a vacancy rate of 2.9% up from 2.5% in the first quarter. This marks the lowest of all product types in the South Fort Worth submarket as well as the lowest in all other DFW submarkets with the exception of north Fort Worth. Due to the lack of supply we expect this figure to stay steady until the beginning of 2019 when new shallow bay projects are slated to deliver.

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

31,977

89,724

62,708

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.7%

5.3%

3.6%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

385,480

560,330

991,329

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

962,684

815,661

819,813

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

308,061

17,550

TOP LEASE TRANSACTIONS • RTP leased 135,141 SF at 6633 Oak Grove Rd from Crow Holdings • FlowCo Solutions leased 67,860 SF at 6630 Oak Grove Rd from Crow Holdings • BMS Enterprises leased 63,795 SF at 2020 E 4th St from Fort Capital • Tubing Central leased 24,419 SF at 7889 Will Rogers Boulevard from TA Realty

HLC Deal

HLC Deal

155,000

DEALS ON THE MARKET

VITAL STATS 800,000

7.0%

600,000 400,000

6.0%

200,000 0 5.0% (200,000) (400,000) 4.0%

(600,000) (800,000)

3.0%

(1,000,000) Q2 15

Q3 15

Q4 15

Q1 16

Absorption

Q2 16

Q3 16

Q4 16

Q1 17

Deliveries

Q2 17

Q3 17

Q4 17

Q1 18

Q2 18

Vacancy

HLC Deal

• Cohen Asset Management closed on Midway Business Park which totals 470,559 SF. First Industrial was the seller.

• Circle Industrial closed on a multi-market portfolio with two of the assets residing in Southeast Fort Worth. Berry Business Center is a 223,725 SF five building project, and Village Creek Business Park is a 430,000 SF seven building project. Berkley Capital was the seller. – HLC was awarded the leasing and management • Centra Partners, on behalf of the Bloxom Family Trust, is marketing for sale Bloxom Industrial Park, a 7 building 121,389 SF project located in Kennedale, Texas.

NEW DEVELOPMENTS • Frontier Equity and TA Realty are tilting walls on Everman Trade Center a four-building shallow bay development located at the northwest corner of Everman Parkway and I-35 in South Fort Worth. This project includes four rear load buildings totaling 457,745 SF with buildings ranging from 56,353 SF to 217,537 SF. The project is slated to deliver early 1Q 2019.

• Hunt Southwest has broken ground on a 300,000 SF freezer cooler building just north of Everman Parkway on Will Rogers. Estimated delivery is late 2Q 2019.

LARGE EXISTING VACANCIES • • • • • •

7220-7550 Oak Grove Road – 1,142,147 SF 425 W Everman Parkway – 287,261 SF 6601 Oak Grove Road – 264,125 SF 3209 Galvez Avenue – 174,798 SF 5000 South Freeway – 154,815 SF 1125 Joel East Road – 131,996 SF

Source: CoStar 2Q 2018 Industrial Report

15

DALLAS

5950 Berkshire Lane Suite 900 Dallas, Texas 75225 T 972.241.8300 F 972.241.7955

FORT WORTH

300 Throckmorton Street Suite 550 Fort Worth, Texas 76102 T 817.710.1110 F 817.810.9017

www.holtlunsford.com

HOUSTON

11757 Katy Freeway Suite 250 Houston, Texas 77079 T 713.850.8500 F 713.850.8550