1Q 2019 DFW Industrial Market Brief

Market Brief...

Dallas/Fort Worth

INDUSTRIAL

1Q19 Property Pictured Above: Riverbend Distribution Center | 2101 Reeves Place, Fort Worth, Texas

DFW INDUSTRIAL MARKET BRIEF 1Q 2019

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

BEN WALLACE

Partner - Texas Leasing jbrice@hldallas.com 972.280.8306

Partner - Managing Principal mcarthey@hlfortworth.com 817.710.1111

Managing Principal cshoults@hldallas.com 972.280.8328

Senior Vice President jgorman@hldallas.com 214.920.9800

Senior Vice President jbarnes@hldallas.com 972.280.8353

Market Director drohde@hlfortworth.com 817.710.7058

Market Director agilbert@hldallas.com 972.280.8312

Market Associate bwallace@hldallas.com 972.421.1966

JAKE NEAL

THOMAS GRAFTON

CLAY BALCH

GEORGE JENNINGS

KEATON DUHON

MADDY CANTY

HARRISON PUTT

BO PUCKETT

Market Associate jneal@hlfortworth.com 817.284.5555

Market Associate tgrafton@hlfortworth.com 817.632.6152

Market Associate cbalch@hldallas.com 972.421.1956

Market Associate gjennings@hlfortworth.com 817.632.6151

Market Associate kduhon@hlfortworth.com 817.284.5555

Market Associate mcanty@hldallas.com 972.280.8325

Market Analyst hputt@hldallas.com 972.265.0124

Market Analyst bpuckett@hldallas.com 972.265.0123

5

HLC OUTLOOK Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

4,599,190

7,025,436

2,115,584

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

6.5%

6.4%

6.1%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

10,255,657

14,205,800

15,955,712

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

25,928,258

24,653,136

26,549,177

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

5,769,230

6,498,549

2,277,363

The DFW industrial market continues to be one of the strongest industrial markets in the country. Previously considered fourth among the preferred locations, Dallas has recently overtaken Chicago as the third most sought-after market for both national logistics distribution and institutional capital. As of 1Q 2019, CoStar reported YTD absorption of approximately 4.6M SF. Additionally, the overall DFW industrial market vacancy has remained stabilized at a healthy 6.5% +/- since 1Q 2016.

The 25.9M SF of projects under construction as of 1Q 2019 has also been relatively consistent over the same period of time.

The majority of this construction activity encompasses the sub markets of DFW Airport and GSW (each at 3.6M SF), South Dallas (4M SF), North Fort Worth (4.8M SF), and South Stemmons (3.6M SF). The DFW Industrial market still remains healthy with an overall market vacancy of 6.5%. However, investment capital should observe isolated submarkets (such as South Dallas) whereby the current construction/absorption ratio is favoring 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.

Speculative development remains at a historical peak due to the lack of acquisition opportunities and capital sources seeking lower basis opportunities versus “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 the norm, albeit measured, in the market as Landlords 1) seek to maximize property valuations through face rate and rent growth 2) in submarkets with new construction opportunities, existing second-generation space seeks to remain competitive and 3) new development under construction seeks to secure a tenant base prior to additional projects breaking ground.

Deal velocity in 1Q 2019 has improved relative to the second half of 2018.

Since 2010, depending on the size of the transaction, rental rates experienced growth of 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 LEASE TRANSACTIONS

• Smucker’s leased 1,075,260 SF in SouthPort Logistics Park on I-45 • McLane Foods leased 670,300 SF of cold storage space at Provender Logistics Center at 7550 Oak Grove Road • PetMate leased 468,300 SF from Huntington Partners at 3401 N Houston School Road • Legend Z Way leased 159,379 SF from Morgan Stanley at 1240 E Centre Park Boulevard • Westrock Paper leased 362,670 SF at 5180 N Railhead Road from Morgan Stanley • Technology Container Corporation renewed 200,450 SF with Clarion at 1221 E Centre Park Boulevard • Hayes Retail leased 208,750 SF at 1201 Big Town Boulevard from Huntington Industrial Partners • Cherryman leased 189,000 SF in Grand Lakes (I-30 corridor) from Duke Realty Advisors • Traulsen leased 183,832 SF at 4601 Gold Spike Drive from Mapletree

TOP HLC LEASE TRANSACTIONS • Texas Star Warehouse expanded their lease by 78,447 SF at 5200 E Grand Avenue with Frontier Equity • LPC TX Visual renewed their lease of 75,249 SF at 4040-4130 Lindbergh with TA Realty • Fleetpride renewed their 45,895 SF lease at 601 Mockingbird Lane in West Brookhollow with Alpha Industrial • E4D leased 42,362 SF at Parc Northeast (2920 Telecom Parkway) from Jackson Shaw • Jormac Aerospace, Inc. leased 40,538 SF at 820 W Sandy Lake Road with LaSalle

HLC Deal

HLC Deal

HLC Deal

HLC Deal

HLC Deal

6

HLC DFW FACTS & FIGURES

Market

Existing Inventory

Vacancy

# Bldgs.

Total RBA

Direct SF

Total SF

Vac. %

DFW Airport

629

77,429,688

5,822,602

6,223,623

8.0%

East Dallas

596

43,921,400

2,244,588

2,261,404

5.1%

1,095

109,157,548

4,891,525

4,997,378

4.6%

18

1,204,851

39,387

39,387

3.3%

Great SW/Arlington Henderson County North Fort Worth

669

95,591,138

6,958,654

7,206,874

7.5%

Northeast Dallas

1,480

107,450,006

6,034,411

6,702,837

6.2%

Northwest Dallas

1,348

107,433,372

4,408,277

4,832,137

4.5%

21

2,074,255

39,753

39,753

1.9%

South Dallas

680

98,725,928

12,574,726

12,574,726

12.7%

South Fort Worth

1,420

77,994,028

2,987,456

3,066,310

3.9%

South Stemmons

2,085

110,068,492

5,339,266

5,781,357

5.3%

Totals

10,041

831,050,706

51,340,645

53,725,786

6.5%

OVERALL DFW

12.0%

3,000,000

10.0%

2,500,000

8.0%

2,000,000

6.0%

1,500,000

4.0%

1,000,000

2.0%

500,000

0.0%

0 1Q 16

2Q 16

3Q 16

4Q 16

1Q 17

2Q 17

Absorption

3Q 17

4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

Deliveries

1Q 19

Vacancy

VACANCY - OVERALL DFW 6.60%

7.0%

6.50%

6.4%

8.0%

6.0%

6.20%

5.0% 4.0%

NW Dallas Outlying

3.0% 2.0% 1.0% 0.30%

0.2%

0.0% 1Q 16

2Q 16

3Q 16

4Q 16

1Q

17

2Q 17

3Q 17

Direct

4Q 17

1Q

18

2Q 18

3Q 18

4Q 18

Sublet

1Q

19

Total

ABSORPTION - OVERALL DFW 22,500,000

20,000,000 17,500,000

YTD Net Absorption

YTD Deliveries

Under Construction SF

YTD Leasing Activity

161,996

542,887

4,118,175

1,142,827

East Dallas

1,054,153

877,230

995,779

380,175

Great SW/Arlington

1,502,456

1,552,617

3,594,171

858,206

Henderson County

(6,800)

0

0

0

North Fort Worth

1,528,361

1,852,555

4,811,902

1,819,278

Northeast Dallas

134,799

497,681

2,048,554

863,144

Northwest Dallas

479,948

151,176

2,121,462

1,494,230

NW Dallas Outlying

(15,553)

0

25,000

4,700

South Dallas

99,754

0

4,097,898

2,267,285

South Fort Worth

131,862

295,084

533,603

451,631

South Stemmons

(471,786)

0

3,581,714

974,181

Totals

4,599,190

5,769,230

25,928,258

10,255,657

Market

15,000,000 12,500,000 10,000,000

DFW Airport

7,500,000 5,000,000 2,500,000 0 1Q 16

2Q 16

3Q 16

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

Total Net

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Leasing Activity

CONSTRUCTION - OVERALL DFW 30,000,000

25,000,000

20,000,000

15,000,000

10,000,000

5,000,000

0

Source: CoStar 1Q 2019 Industrial Report

1Q 16

2Q 16

3Q 16

4Q 16

1Q 17

2Q 17

Delivered Inventory

3Q 17

4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Under Construction

7

SUBMARKET INTELLIGENCE GREAT SOUTHWEST/ARLINGTON

HLC OUTLOOK

14+ YEARS CRE EXPERIENCE

The Great Southwest submarket consists of approximately 109M SF, and per CoStar reporting experienced 1Q 2019 positive absorption of 1,502,456 SF with 858K SF of leasing activity. This ranks GSW as the second leading submarket for 1Q 2019 absorption and leasing activity (just slightly behind North Fort Worth). GSW reported new completions of 1.5M SF and an additional 3.6M SF of product currently under construction. The 1Q 2019 vacancy rate improved slightly to 4.6% versus 4Q 2018 at 4.8%. As we continue into 2019, we expect this vacancy rate to remain stable as absorption is keeping pace with construction.

CANON SHOULTS Managing Principal cshoults@hldallas.com 972.280.8328

TOP LEASE TRANSACTIONS Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

1,502,456

1,603,711

714,713

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

4.6%

4.6%

8.2%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

858,206

2,771,226

4,339,645

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

3,594,171

5,070,788

4,344,612

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,552,617

494,518

25,536

VITAL STATS

10.0%

3,000,000

9.0% 2,500,000

8.0% 7.0%

2,000,000

6.0% 5.0%

• Hollingsworth Logistics leased 494,990 SF at 14900 Frye Road from ProLogis • Varsity Sports leased 324,480 SF at 950 E Avenue K from Black Creek Group • Project Fonzie preleased 524,635 SF at 741 Refuge Way/ Wildlife 10 from Crow Holdings Industrial • Elevate Windows leased 152,365 SF at 1750 Westpark from Stonelake • Liquid Metal Sports leased 128,173 SF at 313 N Great Southwest Parkway with ProLogis

DEALS ON THE MARKET • Cabot Properties is selling RiverPark 1000. The building is 145,579 SF and is under contract with LaSalle.

• LaSalle is selling Pioneer 360. The three (3) building project contains 1.2M SF, is located at Pioneer Parkway and Highway 360 and is under contract with Black Greek Group.

• Barings is selling Cooper I-20, a two (2) building project consisting of 841,899 SF.

1,500,000

4.0% 1,000,000

3.0% 2.0%

500,000

1.0% 0.0%

0 1Q 16

2Q 16

3Q 16

Absorption

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

Deliveries

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Vacancy Source: CoStar 1Q 2019 Industrial Report

8

NEW DEVELOPMENTS • Wildlife 7, 9, 10 and 11 – 2401 N Belt Line Road – Four (4) buildings totaling 1,026,350 SF with Crow Holdings Industrial. (Buildings 11 and 12 – 836,630 SF are preleased) • 1131 W Bardin Road – 420,000 SF spec development with Flaherty Development / Barings • 949 W Oakdale Road – 401,557 SF spec with PLR • 313 N Great Southwest Parkway – 128,173 SF development with ProLogis and preleased to Liquid Metal Motor Sports • Arlington Tech Centre - Buildings 1 & 2 – 152,000 SF spec development with Tritten Corporation

• Park Twenty Three-Sixty – Buildings 2,6,7 and 8 – Four (4) buildings totaling 361,431 SF with Invesco / Ridge Development

LARGE EXISTING VACANCIES • 951 Valley View Lane – 341,442 SF • 1102 State Highway 161 – 322,824 SF (Home Depot Vacating) • 3254 W Trinity Boulevard – 305,000 SF (Discount Tire Vacating) • 2911 S Great Southwest Parkway – 271,794 SF • 4925 New York Avenue – 242,370 SF • 14601 Sovereign Road – CentrePort 4 – 232,700 SF

SUBMARKET INTELLIGENCE DFW AIRPORT

HLC OUTLOOK

25+ YEARS

The DFW Airport market vacancy rate is 8% at the end of 1Q 2019 with absorption of 161,996 SF. DFW International Airport ranks as one of the largest cargo airports in the country. It boasts a high proportion of newer buildings since 2000, and as a result, the submarket has a high concentration of efficient product with clear heights and dock configurations suitable for modern distribution. The submarket consists of large big box users including Amazon, Uline, PPG, Bed Bath & Beyond, and Fresenius Medical.

CRE EXPERIENCE JIM BRICE

Partner - Texas Leasing jbrice@hldallas.com 972.280.8306

Rental rates have remained strong ranging from $3.85–$8.50 for bulk distribution and shallow bay product. Rental abatements range from 2 to 8 months depending on renewal versus new deals and the size of the lease transaction. Tenant Improvement costs remain high because of increasing tenant demands and construction costs.

DFW Airport market continues to be one of the top three markets for institutional owners to buy or develop in the Metroplex. With fee simple land built out, most of the development is currently taking place on 40-year ground lease land owned by DFW Airport.

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

161,996

896,338

2,331

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

8.0%

7.6%

6.1%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

TOP LEASE TRANSACTIONS • Pegasus Logistics leased 102,588 SF at 4265 Trade Center from Nuveen

• Nippon Express leased 88,200 SF at 2510 Esters

1,142,827

2,338,256

1,956,173

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

from Invesco

4,118,175

1,476,128

70,193

• Supply Network renewed their 42,500 SF lease at

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

1011 N 28th Avenue with GLP • STCG, Inc. renewed their lease of 41,764 SF at 1201 S Belt Line Road with TA Realty • Jormac Aerospace, Inc. leased 40,538 SF at 820 W Sandy Lake from LaSalle

542,887

2,347,175

399,892

HLC Deal

VITAL STATS

10.0%

LARGE EXISTING VACANCIES • 2601 S Airfield Drive – 1,000,584 SF • 1717 W Airfield Drive – 498,800 SF • 240 Dividend Drive – 469,502 SF • 2700 Market Street – 375,400 SF • 2828 W Airfield Drive – 498,800 SF • 2800 Valley View Lane – 294,795 SF • 2600 Market Street – 267,254 SF

2,500,000

9.0% 8.0%

2,000,000

7.0% 6.0%

1,500,000

5.0% 4.0%

1,000,000

3.0% 2.0%

500,000

1.0% 0.0%

0 1Q 16

2Q 16

3Q 16

Absorption

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

Deliveries

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Vacancy

Source: CoStar 1Q 2019 Industrial Report

NEW DEVELOPMENTS • Passport Park Buildings 1–4 (2600 Rental Car Drive) – four (4) building spec development totaling 2,019,015 SF with Trammell Crow/CBREI • Duke Realty is developing a 383,000 SF building on Lakeside Parkway in Flower Mound • Passport Park – three (3) building spec development totaling 1,231,316 SF with Dalfen

9

SUBMARKET INTELLIGENCE NORTHEAST & EAST DALLAS

HLC OUTLOOK

11+ YEARS

With another quarter of positive absorption and historically low vacancy rates, the development wave is alive and well in the Northeast and East Dallas submarkets. With limited land sites available in the more mature submarkets, developers are reaching as far north as McKinney to the eastern boundaries of Mesquite. New BTS activity including Ashley Furniture, Lollicup and Goodyear have also reached as far out as Rockwall and Terrel due to the availability of land and labor. Leasing activity has continued to remain strong and slightly outpace deliveries submarket-wide. However, new frontier markets, such as McKinney, are worth keeping an eye on as tenant demand is not yet proven.

CRE EXPERIENCE JOSH BARNES

Principal jbarnes@hldallas.com 972.280.8353

TOP LEASE TRANSACTIONS

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

1,188,952

1,042,949

736,325

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.9%

5.9%

6.0%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,243,319

1,298,855

1,995,329

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

3,044,333

3,657,192

3,189,917

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,374,911

697,319

286,587

DEALS ON THE MARKET

VITAL STATS

7.0%

• Hayes Retail leased 208,750 SF at 1201 Big Town Boulevard from Huntington Industrial Partners • Carousel leased 100,000 SF at 1801 10th Street from GLP HLC • Texas Star Warehouse expanded their lease by 78,447 SF at Deal 5200 E Grand Avenue with Frontier Equity • Don Miguel Mexican Foods renewed their lease of 56,256 SF at 11404 Pagemill with TX GFW • Consolidated Electrical Distributors expanded into 54,141 SF at 11567 Hillguard Road with GLP • Stealth Finishing leased 45,540 SF at 3101 Marquis Drive from Duke Realty HLC • E4D leased 42,362 SF at Parc Northeast (2920 Telecom Deal Parkway) from Jackson Shaw

1,800,000 1,600,000 1,400,000

6.5%

1,200,000 1,000,000 6.0% 800,000 600,000 5.5%

400,000

• HFF is selling 1201 Big Town Boulevard, a 508,500 SF fully leased building. It is currently owned by Huntington Industrial Partners.

• DFW Infill Light Industrial Portfolio is for sale. It consists of nine (9) buildings total, with five (5) buildings in NE Dallas and four (4) in South Stemmons, and is currently owned by Avistone.

HLC • HLC is selling 3414 Herrmann Drive. The flex/industrial building Deal is 124,800 SF and is owned by Frontier Equity.

HLC • CBRE is marketing Northgate Distribution Center alongside Deal Pioneer 360. It consists of two (2) fully leased industrial buildings totaling 269,350 SF, which are currently owned by LaSalle.

200,000 5.0%

0 1Q

16

2Q 16

3Q 16

Absorption

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

Deliveries

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Vacancy

Source: CoStar 1Q 2019 Industrial Report

10

NEW DEVELOPMENTS • 1601 & 1801 South Shiloh Road in Garland – Two (2) building spec development totaling 248,825 SF by Huntington Industrial Partners; 32’ clear height, cross dock configuration HLC • Parc Northeast in Richardson – Four (4) building spec Deal development totaling 434,640 SF by Jackson Shaw; 28’ clear height, 3 Rear Load buildings, 1 Front Load building HLC Deal

• I-30/Highway 80 in Mesquite – Spec development totaling 237,473 SF by Prologis; 32’ clear height, cross dock • S Buckner Boulevard in Mesquite - Two (2) building spec project totaling 813,500 SF by Exeter; 32’ clear 584,089 SF cross dock and 32’ clear 248,890 SF front load • Core 5 Plano – Two (2) building development totaling 167,048 SF

by Core 5; 26’ clear height, rear load configuration in RT zoning • 15800 Executive Drive in Frisco – Single building development totaling 141,960 SF by Blue Star Land, 32’ clear height, rear load configuration • McKinney National Business Park – Two (2) building spec development totaling 150,500 SF by Sentinel Capital, 32’ clear height, rear load configuration • 4000 E Scyene Road - Ashley Furniture BTS – Single building development totaling 877,230 SF • ANNOUNCED: Goodyear BTS in Forney – 1.2M SF BTS on Gateway Boulevard by HIllwood • ANNOUNCED: Two (2) building spec development totaling 355,071 SF by Huntington Industrial Partners; 32’ clear height, cross dock configuration

HLC Deal

LARGE EXISTING VACANCIES • 5151 Samuell Boulevard – 442,035 SF; being vacated by Ashley Furniture • 8901 Forney Road – 419,626 SF; being vacated by Shippers Warehouse • 3000 West Kingsley Road – 341,840 SF; sublease by Apex Tools • 3800 Leon Road – 329,091 SF • 1600 S Jupiter Road – 218,400 SF • US-75 & Wilmeth Road – 202,270

SUBMARKET INTELLIGENCE NORTHWEST DALLAS

HLC OUTLOOK

7+ YEARS

Through 1Q 2019, Northwest Dallas continues to prove to be one of the strongest submarkets in the Dallas/Fort Worth Metroplex.

The submarket posted a 4.5% vacancy rate at the end of 1Q which decreased from the 4.9% rate posted at the end of 2018.

Billingsley completed their four (4) building development at Mercer Business Park which are now 100% occupied, and they are planning to break ground in May for a fifth building in the park which will total 175,000 SF. Building Four at Prologis’ Valwood Corporate Park was completed just prior to the end of the 3Q 2018 which totals 235,900 SF and is currently vacant.

The other three buildings are 100% leased. Core5 recently broke ground on Valwood Crossroads at Belt Line and Luna for two (2) buildings totaling 620,000 SF and Smith Systems has already signed a lease to occupy both buildings. Panattoni has also completed their 151,176 SF development in Valwood which completes the development highlights. There has been strong leasing activity between 20,000 and 150,000 SF in the submarket and rental rates have continued to increase as the market continues to tighten. All indicators point to the NW Dallas submarket to remain strong throughout 2019.

CRE EXPERIENCE ANDREW GILBERT Market Director agilbert@hldallas.com 972.280.8312

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

479,948

885,277

241,140

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

4.5%

4.8%

4.7%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,494,230

2,365,242

2,050,878

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,121,462

1,656,776

1,391,863

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

151,176

676,969

-

TOP TRANSACTIONS • LPC TX Visual renewed their lease of 75,249 SF at HLC Deal

4040-4130 Lindbergh with TA Realty

• Stockbridge purchased the 259,900 SF distribution

HLC Deal

building at 1900 N Josey Lane in Carrollton

• Don Smith & Associates leased 46,104 SF at 14275 Welch Road from Exeter Property Group

• Design Expediting Services International leased

HLC Deal

30,000 SF at 4535 Simonton Road from TA Realty

• Titan Chair purchased 135,950 SF located at 1001 W Crosby Road in Carrollton

• Terrastone purchased the 56,132 SF facility at 1540

VITAL STATS

8.0%

2,000,000 1,800,000

7.0%

1,600,000 6.0% 1,400,000 5.0%

1,200,000

4.0%

1,000,000 800,000

3.0%

600,000 2.0% 400,000 1.0%

200,000

0.0%

0 1Q 16

2Q 16

3Q 16

Absorption

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

Deliveries

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Vacancy

Source: CoStar 1Q 2019 Industrial Report

Champion Drive in Carrollton

DEALS ON THE MARKET • TA Realty is selling the Infill Portfolio. The portfolio consists of fourteen (14) buildings across DFW and San Antonio totaling 1.4M SF. There are three (3) buildings located in Northwest Dallas: 4415–4585 Simonton Road, 4040–4130 Lindbergh and 1135– 1215 Crowley Drive. The projects are 100% leased.

• 11929–12015 Denton Drive is for sale. The project consists of three (3) buildings totaling 125,000 SF located on Denton Drive in Farmers Branch. The buildings are 100% leased.

NEW DEVELOPMENTS • First Park 121 – First Industrial is under construction on Phase I of their four (4) building project. Phase I includes two (2) buildings totaling 282,267 SF • Valwood Crossroads – Core5 is underway on their two (2) building development at Belt Line Road and Luna Road in totaling 620,000 SF. Estimated completion date is October 2019. Smith Systems signed a lease at the end of 2018 to occupy both buildings • Mercer Business Park - Billingsley is planning to break ground in May for Building 5 which will total 175,000 SF. The other four (4) buildings are 100% occupied

LARGE EXISTING VACANCIES • 1625 Hutton Drive – 235,900 SF • 14325 Gillis Road – 175,300 SF • 4700 Simonton Road – 152,519 SF • 13330 Senlac Drive – 151,176 SF • 2099 Valley View Lane – 150,000 SF

11

SUBMARKET INTELLIGENCE SOUTH DALLAS

30+ YEARS

HLC OUTLOOK

CRE EXPERIENCE

South Dallas Industrial submarket as surveyed is 120M SF and remains at 12.7% vacant as was reported in 4Q 2018.

Although not reported by CoStar, South Dallas signed new leases of 1,981,579 SF in 1Q 2019 along with another 2.0M SF in Build-to-Suits (HD Supply & Georgia Pacific). South Dallas has 8.65M SF under construction in the I-30 & I-20 corridors combined, and it continues to outpace absorption. However, 65% or 5.62M SF of the new construction is for Build-to-Suit or Design Build assignments. The remaining 35% or 3.0M SF under construction is speculative development. The southern corridors along I-20, I-35, and I-45 continue to produce new opportunities for development. Unfortunately, the supply of new product by capital sources far exceeded the submarket demand and deal velocity causing South Dallas to lead the Dallas market as the only submarket with double digit vacancy of 12.7%.

JOHN GORMAN Senior Vice President 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

99,754

1,529,776

117,442

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

12.7%

12.8%

11.6%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

2,267,285

1,866,519

2,233,289

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

4,097,898

3,907,822

7,617,314

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

0

499,678

1,078,380

VITAL STATS

16.0%

3,500,000

14.0%

• Smucker’s leased 1,075,260 SF in SouthPort Logistics Park on I-45 • PetMate leased 468,300 SF at 3401 N Houston School Road from Huntington Partners • Legend Z Way leased 159,379 SF at 1240 E Centre Park Boulevard from Morgan Stanley • Cherryman leased 189,000 SF in Grand Lakes (I-30 corridor) from Duke Realty Advisors • Technology Container Corporation renewed 200,450 SF at 1221 E Centre Park Boulevard with Hillwood/Clarion • USTC expanded by 89,440 SF at 3601 Pinnacle Point Drive (I-30 corridor) with Clarion • Georgia Pacific Build-to-Suit of 1,138,787 SF on E Cleveland Road with USAA and Seefried Development

3,000,000

12.0%

2,500,000

10.0% 2,000,000 8.0% 1,500,000 6.0% 1,000,000

4.0%

500,000

2.0% 0.0%

0 1Q 16

2Q 16

3Q 16

Absorption

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

Deliveries

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Vacancy

Source: CoStar 1Q 2019 Industrial Report

12

DEALS IN THE MARKET • Barings Real Estate is selling CrossPoint 20/30 at 3737 Duncanville Road. The building is 510,400 SF and is leased to Owens Corning.

• Trammell Crow is selling Penn Distribution Center. The building is 823,379 SF. • CBREI is selling I-30 Distribution Center. The building totals 725,000 SF.

NEW DEVELOPMENTS • 1401 & 1501 Chalk Hill Road – 672,775 SF & 608,939 SF

by Hillwood & Trammell Crow • E Cleveland Road – 800,854 SF by USAA and Seefried Development (spec) • 3130 N Longhorn Drive – 404,175 SF Build-to-Suit for Global Fulfillment • 4025 E I-30 – 296,615 SF (forward to Heitman by Stream Realty) • 4000 I-30 – 193,000 SF by USAA/Ironwood Realty Partners

LARGE EXISTING VACANCIES • SouthLink (Hines) - 1,044,647 SF at Bonnie View Road and Cleveland Road • Crossroads Trade at 2119 N I-35E – 948,392 SF with Clarion • Liberty Property Trust – 900,043 SF at 3535 N Houston School Road • 3300 Cedardale Road, Building 1 – 776,630 SF with Morgan Stanley • SouthPointe 20/35 – 660,312 SF spec (Building 2) with UBS • LogistiCenter at Dallas – 626,439 SF spec with Dermody Properties at 9890 Bonnie View Road • I-35 Logistics Crossing at 2801 N Houston School Road – 1,221,612 SF (two (2) buildings @ 610,086 SF each) with Crow Holding

SUBMARKET INTELLIGENCE SOUTH STEMMONS

HLC OUTLOOK

7+ YEARS

At the end of 1Q 2019, the South Stemmons industrial submarket posted a 3.3% vacancy rate compared to 3.7% vacant at the end of 2018 and the submarket 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 1Q totaled a negative 200,000 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 as we move into 2019 due to the lack of development sites in the submarket. Throughout 2019, 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 35% 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 mid $4/ SF range and rates for 10,000 SF are now reaching high $5/SF start rates. 20-25,000 SF are creeping up into the high $4’s. I expect this trend to continue through 2019.

CRE EXPERIENCE ANDREW GILBERT Market Director agilbert@hldallas.com 972.280.8312

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

-200,000

-219,016

185,600

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

3.3%

3.7%

3.6%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

974,181

2,063,665

1,321,278

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,581,714

1,581,714

702,215

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

376,718

VITAL STATS

10.0%

675,000

8.0%

600,000

7.0%

525,000

6.0%

450,000

5.0%

375,000

4.0%

300,000

3.0%

225,000

2.0%

150,000

1.0%

75,000

0.0%

0 16

2Q 16

3Q 16

Absorption

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

Deliveries

1Q 18

at 4811 Lakawana in West Brookhollow from ETC Commercial • Greenfield Partners purchased 252,229 SF at the former Hollander Home Fashion facility at 10750 Denton Drive in East Hines North • Fleetpride renewed their 45,895 SF lease at 601 Mockingbird Lane in West Brookhollow with Alpha Industrial • Kit Composites signed a 32,400 SF lease at 4560 Leston Avenue in Brookhollow

HLC Deal

750,000

9.0%

1Q

TOP TRANSACTIONS • Stonelake Capital Partners purchased 50,000 SF

2Q 18

3Q 18

4Q 18

1Q 19

Vacancy

Source: CoStar 1Q 2019 Industrial Report

NEW DEVELOPMENTS • Crow Industrial is developing Core Logistics Center. This project is two (2) buildings totaling 388,822 SF located off I-35 and Walnut Hill. Both buildings are expected to be completed November 2019.

LARGE EXISTING VACANCIES • 8801 Ambassador Row – 200,066 SF • 10155 E Technology Boulevard – 62,000 SF • 1111 Regal Row – 60,010 SF • 9100 John Carpenter Freeway – 48,250 SF

DEALS ON THE MARKET • TA Realty is selling the Infill Portfolio. The portfolio consists of fourteen (14) buildings across DFW and San Antonio totaling 1.4M SF. Dallas Commerce Center is the park located in South Stemmons and totals 554,444 SF. • Brennan Investment Group is selling 8220 Ambassador Row. The 129,061 SF building is located in the heart of Brookhollow and currently 100% occupied.

• 5151 Norwood is for sale. The 31,827 SF building is located in West Brookhollow and 100% leased.

13

SUBMARKET INTELLIGENCE NORTH FORT WORTH

HLC OUTLOOK

12+ YEARS

The North Fort Worth industrial submarket remains strong through 1Q 2019 highlighted by the 1,528,361 SF of positive net absorption, falling just short of the 1,852,555 SF of year-to-date deliveries. The market’s overall leasing activity of 1,819,278 SF during this span surpassed the two previous quarters combined, hitting its highest mark since 2Q 2017. Although market activity remains vibrant, expect to see the vacancy rate rise slightly throughout 2019 as bulk warehousing developments such as Northwest Commerce Park, Westport Logistics Park, Alliance Northport 1, 4, & 5, and Interstate Crossing reach completion.

CRE EXPERIENCE DONNIE ROHDE

Market Director drohde@hlfortworth.com 817.710.7058

TOP LEASE TRANSACTIONS

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

1,528,361

742,040

1,193,229

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

7.5%

7.3%

3.7%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,819,278

655,415

861,560

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

4,811,902

3,368,110

4,907,497

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,852,555

1,737,124

92,700

VITAL STATS

12.0%

3,000,000

10.0%

2,500,000

8.0%

2,000,000

6.0%

1,500,000

4.0%

1,000,000

2.0%

500,000

0.0%

0 1Q

16

2Q 16

3Q 16

Absorption

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

Deliveries

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Vacancy

Source: CoStar 1Q 2019 Industrial Report

14

• Westrock Paper leased 362,670 SF at 5180 N Railhead Road from Morgan Stanley • Traulsen leased 183,832 SF at 4601 Gold Spike Drive from Mapletree • Ryder Integrated Logistics leased 164,721 SF at 4800 N Sylvania Road from Pure Industrial • UTC Goodrich leased 117,160 SF at 4630 N Beach Street from Mercantile Partners • RPM leased 80,680 SF at 5501 Sandshell Drive from Alpha Industrial • KT&G leased 72,800 SF at 5501 Sandshell Drive from Alpha Industrial

DEALS ON THE MARKET • Scannell Properties is selling Cantrell 1 & 2. The buildings total 491,000 SF. • G & W Ventures is selling 4901 N Beach Street. The building is 124,658 SF. • G T Industrial Properties is selling 1701 Pharr Street. The building is 109,884 SF.

NEW DEVELOPMENTS • Hillwood is under construction on Alliance Northport 1, a 500,555 SF cross-dock; Northport 5, a 225,930 SF rear loader and Alliance Center North 3, a 783,465 SF crossdock facility. Additionally, Hillwood has commenced site work on Westport 11, a 1,200,536 SF cross-dock scheduled to deliver December 2019.

• TCRG Properties is under construction on Building 100 of their Synergy Crossing project, a 700,000 SF facility. The building is to be delivered 2Q 2019.

• Hunt Southwest is underway on Interstate Crossing, a 1,023,488 SF cross-dock facility scheduled to deliver July 2019.

• Stream has broken ground on a three (3) building – 1,051,240 SF project at Northwest Commerce Park expected to deliver 4Q 2019.

• CT Realty has broken ground on Westport Logistics Park, a two (2) building – 882,565 SF project expected to deliver 4Q 2019.

• Crow Industrial has broken ground on a 581,000 SF cross-dock at the NWC of Mark IV Parkway and Great Southwest Parkway.

• Huntington is under construction on two (2) cross-dock facilities for Phase II of Fossil Creek Crossing. The buildings will be 179,183 SF and 132,821 SF respectively.

• First Industrial Realty Trust, Inc. has started site work on a 198,589 SF, cross-dock facility in the NEQ of I-35 and Loop 820 in Fort Worth.

LARGE EXISTING VACANCIES • • • • • • •

15245 Heritage Parkway – 1,089,642 SF 15453 Wolff Crossing – 494,041 SF 2112 Eagle Parkway – 407,800 SF 4801 Westport Parkway – 400,000 SF 16200 Three Wide Drive – 316,128 SF 5650 Alliance Gateway Freeway – 303,458 SF 1201 NE Loop 820 – 270,000 SF

SUBMARKET INTELLIGENCE SOUTH FORT WORTH

HLC OUTLOOK

16+ YEARS CRE EXPERIENCE

The South Fort Worth industrial submarket posted a first quarter vacancy of 3.9%. A figure that is up from the 3.7% vacancy rate that south Fort Worth had 4Q of 2018. This is due to the 295,084 SF that the submarket delivered this quarter. South Fort Worth’s largest quarter for deliveries since 4Q of 2017. As of the end 1Q 2019, there is upwards of 4,716,000 SF of proposed industrial development, with 757,745 SF currently under construction and another 1,058,844 kicking off in the next few weeks. While Crow Holdings and Black Creek Group are kicking off developments later this year, we don’t expect groundbreaking on the majority of the remaining 3M SF to hit at once as Majestic, Mereken Land, Carter Foundation, Hillwood and TCRG control most of the developable tracts.

MATT CARTHEY

Partner mcarthey@hlfortworth.com 817.710.1111

TOP LEASE TRANSACTIONS • McLane Foods leased 670,300 SF of cold storage Absorption

vs. Prev. Qtr 848,811

63,590

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

3.9%

3.7%

4.9%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

451,631

848,811

63,590

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

533,603

768,687

347,777

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

295,084

45,766

DEALS ON THE MARKET • Peloton Commercial is selling Benbrook Corners, a four (4) building 171,948 SF flex portfolio.

17,550

• Prattco made a 72,746 SF three (3) building

VITAL STATS

6.0%

space at Provender Logistics Center at 7550 Oak Grove Road • Ball Corp leased 50,000 SF at Majestic’s Fort Worth South Business Park at 425 W Everman Parkway; this was the first deal completed in the park

vs. 12 Mths Ago

131,862

900,000

acquisition at Corporation Parkway in west Fort Worth. This was their second acquisition in the area this year.

800,000 5.0% 700,000 4.0%

600,000 500,000

3.0% 400,000 2.0%

300,000 200,000

1.0% 100,000 0.0%

0 1Q

16

2Q 16

3Q 16

4Q 16

Absorption

1Q 17

2Q 17

3Q 17

4Q 17

Deliveries

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Vacancy

Source: CoStar 1Q 2019 Industrial Report

NEW DEVELOPMENTS • Hunt Southwest is underway on DFW Coldspot, which marks Hunt’s entry into the South Fort Worth submarket. The speculative 300,000 SF Food Processing building is set to deliver at the end of May 2019, and is located at 8600 Will Rogers Boulevard.

• Frontier Equity and TA Realty are wrapping up construction at Everman Trade Center, a four (4) building shallow bay development located at the northwest corner of Everman Parkway and I-35 in south Fort Worth. This project includes four (4) rear

load buildings totaling 457,745 SF with buildings ranging from 56,353 SF to 217,537 SF. The project is slated to deliver at the beginning of May 2019.

• Crow Holdings announced its four (4) building development at the corners of Oak Grove and Joel East Road in Carter Industrial Park. The entire 1,058,844 SF project will be delivering 1Q 2020 and will include two identical rear load 186,577 SF buildings as well as a 293,705 SF cross dock and a 391,985 SF cross dock. Rob Riner is the developer of the project, which is known as Carter Distribution F-E-D.

LARGE EXISTING VACANCIES • 7550 Oak Grove Road – 498,475 SF • 6601 Oak Grove Road – 264,125 SF • 425 W Everman Parkway – 237,261 SF • 5000 South Freeway – 212,764 SF • 3209 Galvez Avenue – 174,798 • 301 E Risinger Road – 148,450 SF

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

11451 Katy Freeway Suite 300 Houston, Texas 77079 T 713.850.8500 F 713.850.8550