2Q 2019 DFW Industrial Market Brief

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Market Brief...

Dallas/Fort Worth

INDUSTRIAL

2Q19 Property Pictured Above: Stoneridge



DFW INDUSTRIAL MARKET BRIEF 2Q 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

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 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

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HLC OUTLOOK Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

5,823,040

5,425,478

6,489,690

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

6.3%

6.3%

6.0%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

8,708,726

12,140,634

14,029,054

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

26,254,974

27,226,682

27,823,819

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

6,108,700

5,960,181

7,294,038

The Dallas-Fort Worth 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 2Q 2019, CoStar reported YTD absorption of approximately 11.2M SF. Additionally, the overall Dallas-Fort Worth industrial market vacancy has remained stabilized at a healthy 6.5% +/- since 1Q 2016. The 26.3M SF of projects under construction, as of 2Q 2019, have also been relatively consistent over the same period of time. The majority of this construction activity encompasses the sub markets of DFW Airport and Great Southwest (each at 2.5M SF), South Dallas (4M SF), North Fort Worth (7.7M SF), and South Stemmons (3.6M SF). The Dallas-Fort Worth industrial market still remains healthy with an overall market vacancy of 6.3%. However, investment capital should observe isolated submarkets, such as South Dallas, whereby the current construction to absorption ratio favors construction to net absorption. Given the lack of available portfolio dispositions, speculative development will likely remain strong in the coming year for the Dallas-Fort Worth industrial 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.

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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 United States 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 normality, 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 2Q 2019 remains strong despite the typical summer-time slow down. 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

• ICU Medical has signed a 610,806 SF lease in I-35 Logistics Crossing/2801 Houston School Road with Crow Holdings. • Sally’s Beauty has signed a 494,041 SF lease in 15453 Wolff Crossing with Transwestern Investments. • Noble Cotton has signed a 470K SF lease in 1011 Isuzu Parkway with State Teachers Retirement System of Ohio. • FNA has signed a 400K SF lease in 1371 S Town East Boulevard with Cabot. • Samsung has signed a 325K SF lease in 2800 Market Street with Bandera. • NTW Inc signed a 312K SF lease in Wildlife 11/747 Refuge Way with Crow Holdings Industrial. • PVI has signed a 238K SF lease in 425 W Everman Parkway with Majestic Realty. • U.S. Auto Force has signed a 151,176 SF lease in 13330 Senlac Drive with Panattoni. • Rehrig Pacific Company has signed a 127,789 SF renewal in 613-625 Mockingbird Lane with Alpha Industrial Properties. • LPC TX Visual has signed a 75,249 SF renewal in 40404130 Lindbergh with TA Associates. • Jeff Hardage Inc. has signed a 70,400 SF lease in 3650 W Miller Road with TA Associates. • VPX has signed a 38,463 SF lease in Everman Trade Center Building B with TA Realty.

HLC Deal

HLC Deal

HLC Deal

HLC Deal


HLC DFW FACTS & FIGURES

Market

Existing Inventory

Vacancy

12,000,000

9.0% 10,000,000

8.0% 7.0%

8,000,000

6.0% 5.0%

6,000,000

4.0% 4,000,000

3.0%

# Bldgs.

Total RBA

Direct SF

Total SF

Vac. %

2.0%

DFW Airport

629

79,421,523

6,390,552

6,602,165

8.3%

0.0%

East Dallas

595

43,835,935

2,096,353

2,173,183

5.0%

1,098

110,488,406

4,925,162

5,015,162

4.5%

Henderson County

18

1,204,851

29,387

29,387

2.4%

North Fort Worth

678

96,323,407

6,549,886

6,775,551

7.0%

Northeast Dallas

1,487

108,437,881

5,851,025

6,822,668

6.3%

Northwest Dallas

1,347

108,237,451

4,286,709

4,606,432

4.3%

21

2,070,305

17,863

17,863

0.9%

Great SW/Arlington

OVERALL DFW

10.0%

2,000,000

1.0% 0 2Q 16

3Q 16

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

Absorption

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Deliveries

2Q 19

Vacancy

VACANCY - OVERALL DFW

10.0% 9.0% 8.0%

6.90%

6.30%

7.0%

6.7%

6.0%

6.0%

5.0% 4.0% 3.0%

NW Dallas Outlying

2.0%

0.2%

South Dallas

682

99,152,098

12,104,707

12,104,707

12.2%

South Fort Worth

1,423

78,625,532

3,349,631

3,374,012

4.3%

South Stemmons

2,074

109,975,791

4,944,323

5,051,425

4.6%

Totals

10,052

837,773,180

50,545,598

52,573,304

6.3%

1.0%

0.20%

0.0% 2Q 16

3Q 16

4Q 16

1Q

17

2Q 17

3Q 17

4Q 17

Direct

1Q

18

2Q 18

3Q 18

4Q 18

Sublet

1Q

19

2Q 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

DFW Airport

2,024,871

2,642,047

2,338,465

2,788,471

East Dallas

1,292,720

1,022,130

2,032,979

809,309

Great SW/Arlington

2,921,808

2,991,854

2,604,273

1,710,498

Henderson County

3,200

0

0

0

North Fort Worth

2,363,896

2,277,555

7,705,044

2,795,941

Northeast Dallas

640,784

1,165,097

1,831,388

1,982,601

Northwest Dallas

1,351,681

955,209

1,486,898

3,319,275

6,337

0

25,000

4,700

South Dallas

373,998

404,175

South Fort Worth

143,960

611,084

Market

15,000,000 12,500,000 10,000,000 7,500,000 5,000,000 2,500,000 0 2Q 16

3Q 16

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

1Q 18

2Q 18

Total Net

3Q 18

4Q 18

1Q 19

2Q 19

Leasing Activity

CONSTRUCTION - OVERALL DFW 30,000,000

25,000,000

NW Dallas Outlying

4,215,610

s

20,000,000

15,000,000

10,000,000

4,172,043

5,000,000

South Stemmons Totals

433,603

950,131

125,263

0

3,581,714

2,316,391

11,248,518

12,068,881

26,254,974

20,849,360 Source: CoStar 2Q 2019 Industrial Report

0 2Q 16

3Q 16

4Q 16

1Q 17

2Q 17

3Q 17

Delivered Inventory

4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

2Q 19

Under Construction

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SUBMARKET INTELLIGENCE GREAT SOUTHWEST/ARLINGTON

HLC OUTLOOK

14+ YEARS CRE EXPERIENCE

The Great Southwest (GSW) submarket consists of approximately 110M SF and, per CoStar reporting, experienced positive absorption of 2,921,808 SF with 1.7M SF of leasing activity in 2Q 2019. This ranks GSW as the leading submarket for 2Q 2019 absorption. GSW reported new completions of 3M SF and an additional 2.6M SF of product currently under construction. The 2Q 2019 vacancy rate improved slightly to 4.5% versus at 4.6% in 1Q 2019. 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

650,151

2,271,657

2,165,572

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

4.5%

4.1%

7.1%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

799,579

910,919

2,694,818

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,604,273

3,567,836

3,720,486

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,167,173

1,824,411

1,068,040

VITAL STATS

10.0%

3,500,000

9.0%

3,000,000

8.0% 2,500,000

7.0% 6.0%

2,000,000

5.0% 1,500,000

4.0% 3.0%

1,000,000

2.0% 500,000

1.0% 0.0%

0 2Q 16

3Q 16

4Q 16

Absorption

1Q 17

2Q 17

3Q 17

4Q 17

1Q 18

Deliveries

2Q 18

3Q 18

4Q 18

1Q 19

2Q 19

Vacancy Source: CoStar 2Q 2019 Industrial Report

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• Noble Cotton has signed a 470K SF lease in 1011 Isuzu Parkway with State Teachers Retirement System of Ohio. • NTW Inc signed a 312,000 SF lease in Wildlife 11/747 Refuge Way with Crow Holdings Industrial. • Bixby Land Company purchased 271,794 SF in 2911 S Great Southwest Parkway from LaSalle. • Expeditor signed a 180,895 SF lease in Liberty Park GSW North/951 Valley View Lane with Liberty Property Trust.

DEALS IN THE MARKET • Park 20/360 – a 1.5M SF seven (7) building project • Cooper I-20 – an 841,899 SF two (2) building project • DFW Logistics Portfolio – a 584,492 SF seven (7) building project

NEW DEVELOPMENTS • Wildlife 7, 9, 10 and 11/2401 N Belt Line Road – a 1,126,180 SF four (4) building project with Crow Holdings Industrial • Cooper I-20 Building C/1131 W Bardin Road – a 420K SF spec development with Flaherty Development/Barings • Oakdale Logistics Center/949 W Oakdale Road – a 401,557 SF spec development with PLR • Park Twenty-Three-Sixty Buildings 2, 6, 7 and 8 – a 361,431 SF four (4) building project with Invesco/Ridge Development • 3301 E Park Row Drive – a 155,730 SF spec development with LaSalle/Stream Realty • Arlington Tech Centre Buildings 1 & 2/2000-2030 E Arbrook Boulevard – a 152K SF two (2) building project with Triten Corporation

LARGE EXISTING VACANCIES • • • • • •

1102 State Highway 161 – 322,824 SF 14900 Trinity Boulevard – 310,000 SF 3254 W Trinity Boulevard – 305,000 SF 2911 S Great Southwest Parkway – 271,794 SF 1011 Isuzu Parkway – 250,000 SF CentrePort 4/14601 Sovereign Road –232,700 SF


SUBMARKET INTELLIGENCE DFW AIRPORT

HLC OUTLOOK

25+ YEARS

The Dallas-Fort Worth (DFW) Airport industrial submarket vacancy rate is 8.3% at the end of 2Q 2019 with absorption of 2,024,871 SF. DFW International Airport is ranked 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

Absorption

vs. Prev. Qtr

Rental rates have remained strong ranging from $4.25 -$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.

vs. 12 Mths Ago

1,858,804

166,067

714,306

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

8.3%

7.9%

5.7%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,787,872

1,912,136

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

Market Street with Bandera.

1750 Hurd Drive with Mapletree Investments.

• Fabulous Floors has signed a 43,782 SF lease in

2,338,465

4,687,937

4,110,622

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

292,575

TOP LEASE TRANSACTIONS • Samsung has signed a 325K SF lease in 2800 • Figueroa has signed a 80,851 SF lease in 1720-

1,000,599

2,349,472

The DFW Airport submarket 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 currently taking place is on 40-year ground lease land owned by DFW Airport. The developers have banded together and hired Ernst & Young to assist them in obtaining the Triple Freeport Tax Exemption for all buildings south of the airport, located in Passport Park. The goal is to have the exemption in place by the end of 2020 which will dramatically increase the deal flow for bulk product in southern portion DFW Airport.

600 S Royal Lane with Duke Realty.

• Tazmanian Freight has signed a 37,780 SF lease in

500,000

1065 Texan Trail with Prologis.

VITAL STATS

10.0%

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 2Q 16

3Q 16

4Q 16

Absorption

1Q 17

2Q 17

3Q 17

4Q 17

1Q 18

Deliveries

2Q 18

3Q 18

4Q 18

1Q 19

2Q 19

LARGE EXISTING VACANCIES • 2601 S Airfield Drive – 1,000,584 SF • 4051 N Street Highway 121 – 548,100 SF • 1717 W Airfield Drive – 498,800 SF • 240 Dividend Drive – 469,502 SF • 2700 Market Street – 375,400 SF • 2450 Esters Boulevard – 213,392 SF • 2800 Valley View Lane – 221,895 SF • 2600 Market Street – 267,254 SF

NEW DEVELOPMENTS • Passport Park Buildings 1 and 2/2600-2650 Rental Car Drive – a 1,816,015 SF two (2) building spec development with Trammel Crow/CBRE • 3400 E Airfield Drive – a 562,640 SF building with Lake Washington Partners • 2900 Genesis Way – a 319,450 SF building with The Trade Group

Vacancy

Source: CoStar 2Q 2019 Industrial Report

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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 industrial submarkets. With limited land sites available in the more mature submarkets, developers are reaching as far north as McKinney and to the eastern boundaries of Mesquite. New BTS activity including Ashley Furniture, Lollicup, and Goodyear have also reached as far out as Rockwall and Terrell due to the availability of land and labor. Leasing activity has remained strong and slightly outpaces 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 • FNA has signed a 400K SF lease in 1371 S Town East Boulevard with Cabot.

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

695,002

1,238,502

372,246

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.7%

5.7%

5.5%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,361,191

1,430,719

3,432,504

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

3,864,367

3,101,683

4,812,376

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

812,316

1,374,911

212,326

• EcoLab has signed a 218,400 SF lease in 1600 S Jupiter Road with Langford Property Company/ Barings. • DMI has signed a 200K SF lease in S Buckner Boulevard with Exeter. • Tubelight has signed a 126,178 SF lease in 5181 Samuell Boulevard with Prologis. • DSA has signed a 125K SF lease in 4010 Distribution Drive with Primera. • Home Depot has signed a 88,597 SF lease in Frisco Park 25 with Stream. • Jeff Hardage Incorporated has signed a 70,400 SF lease in 3650 W Miller Road with TA Associates.

HLC Deal

VITAL STATS

7.0%

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%

400,000 200,000

5.0%

0 2Q 16

3Q 16

4Q 16

Absorption

1Q 17

2Q 17

3Q 17

4Q 17

1Q 18

Deliveries

2Q 18

3Q 18

4Q 18

1Q 19

2Q 19

Vacancy

Source: CoStar 2Q 2019 Industrial Report

10

DEALS IN THE MARKET • DFW Logistics Portfolio – a seven (7) building project currently owned by Prologis

• Dallas Infill Industrial – a 1.56M SF seven (7) building project currently owned by Rialto

• Jupiter Business Park – a 141,200 SF five (5) building project currently owned by Berkeley

NEW DEVELOPMENTS • S Buckner Boulevard – a 813,500 SF two (2) building spec development with Exeter

• I-30/Hwy 80 – a 237,473 SF spec development

HLC Deal

with Prologis

• Core 5 Plano – a 167,048 SF two (2) building project with Core 5

• McKinney National Business Park – a 150,500 SF two (2) building spec development with Sentinel Capital • 15800 Executive Drive – a 141,960 SF building with Blue Star Land

LARGE EXISTING VACANCIES • 5151 Samuell Boulevard – 442,035 SF • 8901 Forney Road – 419,626 SF • 3000 West Kingsley – 341,840 SF • 3800 Leon Road – 329,091 SF


SUBMARKET INTELLIGENCE NORTHWEST DALLAS

HLC OUTLOOK

7+ YEARS

Through 2Q 2019, Northwest Dallas industrial submarket continues to be one of the strongest submarkets in the Dallas-Fort Worth metroplex. The submarket posted a 4.3% vacancy rate at the end of 2Q which decreased from the 4.5% rate posted at the end of 1Q. Billingsley completed their four (4) building development at Mercer Business Park and are planning to break ground in 3Q for a fifth building in the park which will total 175K SF. Building four at Prologis’ Valwood Corporate Park was completed just prior to the end of 3Q 2018 which totals 235,900 SF and has leased half of the building, leaving 118K SF available. All other buildings in Prologis’ development are 100% leased. Core5 broke ground on Valwood Crossroads at Belt Line and Luna for two (2) buildings totaling 620K 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 was leased in 2Q to United States Auto Force. There has been strong leasing activity between 20K and 150K SF in the submarket, and rental rates have continued to increase as the market continues to tighten. All indicators point to the Northwest Dallas industrial 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

840,232

511,449

438,328

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

4.3%

4.5%

4.6%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,470,544

1,848,731

1,815,934

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,486,898

2,121,462

2,434,773

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

634,564

320,645

257,591

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 2Q 16

3Q 16

4Q 16

Absorption

1Q 17

2Q 17

3Q 17

4Q 17

1Q 18

Deliveries

2Q 18

3Q 18

4Q 18

1Q 19

2Q 19

Vacancy Source: CoStar 2Q 1Q 2019 Industrial Report

TOP TRANSACTIONS • Staton Wholesale has signed a 200,042 SF renewal in 4530 Simonton with Gillis Thomas Company.

• U.S. Auto Force has signed a 151,176 SF lease in 13330 Senlac Drive with Panattoni.

• LPC TX Visual has signed a 75,249 SF renewal in

HLC Deal

4040-4130 Lindbergh with TA Associates Realty.

• Elkay Plastics has signed a 55,728 SF renewal and expansion in 2833 Eisenhower Street with Duke Realty. • Texas Twist has signed a 48K SF renewal in 2305 Belt Line Road with Ivanhoe Cambridge

DEALS IN THE MARKET • TA Realty Infill Portfolio – a 1.4M SF fourteen

NEW DEVELOPMENTS • Valwood Crossroads – a 620K SF two (2) building project with Core5

• First Park 121/Phase 1 – a 345,280 SF two (2) building project with First Industrial

• Mercer Business Park – a 175K SF fifth building addition with Billingsley

LARGE EXISTING VACANCIES • 1900 N Josey Lane – 259,900 SF • 14325 Gillis Road – 175,300 SF • 2099 Valley View Lane – 150K SF • 1625 Hutton Drive – 118,195 SF

HLC Deal

(14) building project which includes 4415-4585 Simonton Road, 4040-4130 Lindbergh, and 11351215 Crowley Drive with TA Realty in Northwest Dallas • Dallas Infill Industrial Portfolio: a 1.6M SF nineteen (19) building project which includes 2115 W Valley View – a 264,209 SF project with Rialto Capital

HLC Deal

11


SUBMARKET INTELLIGENCE SOUTH DALLAS

HLC OUTLOOK

30+ YEARS

The South Dallas Industrial submarket, as surveyed, is 122M SF and is now 11.3% vacant which is 1.4% lower than reported in 1Q 2019. Although not reported by CoStar, South Dallas signed new leases of 1,725,757 SF in 2Q 2019. South Dallas has 7.87M SF under construction in the I-30 and I-20 Corridors combined and it continues to outpace absorption. However, 75% or 5.9M SF of the new construction is for build-to-suit or design build assignments. The remaining 25% or 1.96 Million SF under construction is speculative development and 1.7 Million SF. 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 11.4%.

CRE EXPERIENCE 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.

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

274,244

99,754

1,953,521

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

12.2%

12.1%

12.7%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,694,170

2,477,873

1,083,975

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

4,215,610

4,213,785

5,359,469

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

404,175

0

3,358,851

VITAL STATS

16.0%

TOP LEASE TRANSACTIONS • ICU Medical has signed a 610,806 SF lease in I-35

3,500,000

14.0%

3,000,000

12.0%

2,500,000

10.0%

Logistics Crossing/2801 Houston School Road with Crow Holdings. • Global Industrial has signed a 489K SF lease in 2119 N Interstate 35E with Hillwood. • Inmar/Medturn has signed a 355,042 SF lease in 3845 Gifford Street with Principal. • Book Squared has signed a 178,200 SF lease in 4445 Rock Quarry with Nuveen. • Mars & Armatures has signed a 92,709 SF lease in 3400 Houston School Road with CalStrs. • United Natural Foods has signed a 471,889 SF renewal in at 2100 Danieldale Road with CalStrs. • Portacool has signed a 287,196 SF renewal in 201 S Interstate 45 with Pure Industrial.

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

4.0%

500,000

2.0% 0.0%

0 2Q 16

3Q 16

4Q 16

Absorption

1Q 17

2Q 17

3Q 17

4Q 17

1Q 18

Deliveries

2Q 18

3Q 18

4Q 18

1Q 19

2Q 19

Vacancy Source: CoStar 2Q 2019 Industrial Report

12

DEALS IN THE MARKET • 2821 Danieldale Road – a 1,003,733 SF two (2) building project • Penn Distribution Center – a 823,379 SF building project • I-30 Distribution Center – a 725K SF building project • LogistiCenter at Dallas/9890 Bonnie View Road – a 626,439 SF building project

NEW DEVELOPMENTS • 1401 Chalk Hill Road – a 672,775 SF building project with Clarion Partners • 1501 Chalk Hill Road – a 608,939 SF building project with Clarion Partners • 4025 E Interstate 30 – a 296,615 SF building project with Heitman • 4000 Interstate 30 – a 193K SF building project with USAA/Ironwood Realty Partners

LARGE EXISTING VACANCIES • Bonnie View Road and Cleveland Road – 1,044,647 SF

• 3535 N Houston School Road – 900,043 SF • 3300 Cedardale Road Building 1 – 776,630 SF • SouthPointe 20/35 – 660,312 SF spec • 2801 N Houston School Road – 610,086 SF


SUBMARKET INTELLIGENCE SOUTH STEMMONS

HLC OUTLOOK

7+ YEARS

At the end of 2Q 2019, the South Stemmons industrial submarket posted a 3.4% vacancy rate compared to 3.3% vacancy rate at the end of 1Q 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 10K-40K SF. Although absorption for 2Q totaled a negative 350K SF, this is due to the demand slowing down for some of the larger suites, more than 40K SF in the Brookhollow submarket. However, tenants under 40K SF are continuing to relocate into Brookhollow from the Design District and there is still massive demand for 5K-30K SF in the submarket. I expect the negative absorption number to reverse as we move further into 2019 due to the lack of development sites in the submarket. Since 2013, rental rates in the submarket have increased 40% for space under 50K SF and in some cases, renewals have increased more than 50%. This is a key statistic as this size encompasses the majority of spaces in the submarket. Rental rates for 50K SF deals have increased into the high $4 per SF range and rates for 10K SF are now reaching high $5 per SF start rates. 20K-25K SF are creeping up into the $5 per SF range. 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

647,562

522,299

338,191

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

4.6%

5.2%

4.4%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

HLC Deal

1,288,378

1,028,013

1,825,021

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

3,581,714

3,581,714

-

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

702,215

VITAL STATS

10.0%

TOP TRANSACTIONS • Rehrig Pacific Company has signed a 127,789 SF

750,000

9.0%

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%

renewal in 613- 625 Mockingbird Lane with Alpha Industrial Properties. • Imlach Collins has signed a 82,357 SF renewal in 4653 Leston Street with Monit Investments. • Euro Logistics has signed a 48K SF lease in 2650 Manana with Gillis Thomas Company. • Music & Arts Center has signed a 30,041 SF renewal in 4949 Sharp Street and 520 Mockingbird with TA Associates.

• Dallas Infill Industrial Portfolio – a 1.6M SF nineteen (19) building project which includes 2727 Airport Freeway – a 91,800 SF project with Rialto Capital

NEW DEVELOPMENTS • Core Logistics Center – a 388,822 SF two (2) building project with Crow Industrial

HLC Deal

DEALS IN THE MARKET • Texas Infill Portfolio – a 1.4M SF fourteen (14) building project which includes Dallas Commerce Center – a 554,444 SF project with TA Realty

LARGE EXISTING VACANCIES • 4025 E I-30 – 296,615 SF • 10880 Goodnight Lane – 199,070 SF • 10900 Goodnight Lane – 189,752 SF

75,000

0.0%

0 2Q 16

3Q 16

4Q 16

Absorption

1Q 17

2Q 17

3Q 17

4Q 17

1Q 18

Deliveries

2Q 18

3Q 18

4Q 18

1Q 19

2Q 19

Vacancy

Source: CoStar 2Q 2019 Industrial Report

13


SUBMARKET INTELLIGENCE NORTH FORT WORTH

HLC OUTLOOK

7 YEARS

The North Fort Worth industrial submarket continues to perform at a high level through 2Q 2019. While getting close during 1Q, the year-to-date net absorption of 2,363,896 SF finally outpaced year-to-date deliveries of 2,277,555 SF, dropping the vacancy rate slightly from 7.5% down to 7.0% by the end of 2Q. Overall absorption in the Alliance submarket through the end of 2019 and into early 2020 will be something to keep an eye on moving forward. With nearly 6M SF currently under construction in that market alone, expect to see the overall vacancy rate increase significantly as projects come online. In North Fort Worth proper, at the intersection of I-35 and Loop 820, expect to see rental rates continue to trend upward as land constraints tighten even further.

CRE EXPERIENCE GEORGE JENNINGS Market Associate gjennings@hlfortworth.com 817.632.6151

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

829,188

1,534,708

911,698

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

7.0%

7.5%

3.5%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

738,030

2,057,911

674,719

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

7,705,044

5,177,662

7,029,243

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

425,000

1,852,555

907,754

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 2Q 16

3Q 16

4Q 16

Absorption

1Q 17

2Q 17

3Q 17

4Q 17

1Q 18

Deliveries

2Q 18

3Q 18

4Q 18

1Q 19

2Q 19

Vacancy Source: CoStar 2Q 2019 Industrial Report

TOP LEASE TRANSACTIONS • Sally’s Beauty has signed a 494,041 SF lease in 15453 Wolff Crossing with Transwestern Investments. • Rush Trucking has signed a 109,092 SF lease in 1051 Republic Drive with Hillwood. • Ferguson has signed a 58,026 SF lease in 2700 NE Loop 820 with EastGroup.

DEALS IN THE MARKET • Cantrell 1 and 2 – a 491K SF building • Clorox Distribution Center – a 540K SF building • 120 Intermodal Parkway – 369,530 SF of a 579,530 SF portfolio

NEW DEVELOPMENTS • Speedway Logistics Crossing – a 1,594,020 SF three (3) building project with Scannell

• Westport 11 – a 1,200,536 SF building project with Hillwood

• Northwest Commerce Park – a 1,051,240 SF three (3) building project with Stream

• Loop 820 & Mark IV – 1,025,500 SF three (3) building project with Crow Industrial

• Hunt Southwest – a 1,023,488 SF building project • 2 Haslet County Road – a 1,007,000 SF building 14

project with NorthPoint Development

• Westport Logistics Park – a 882,565 SF two (2) building project with CT Realty

• Alliance Center North 3 – a 783,465 SF building project with Hillwood

• Alliance Northport 1 – a 500,555 SF building project with Hillwood

• 1101 I-35 W – a 403K SF building project with TCRG Properties

• Southlake/Grapevine project – a 327,219 SF four (4) building project with Frontier Equity and Rialto

• Fossil Creek Crossing 3 and 4 – a 312,004 SF

building addition with Alpha Industrial Properties (KKR) • Northport 5 – a 225,930 SF building project with Hillwood • I-35 and Loop 820 – a 198,589 SF building project with First Industrial Realty Trust, Inc.

LARGE EXISTING VACANCIES • 15245 Heritage Parkway – 1,089,642 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 The South Fort Worth industrial submarket posted a mid-year vacancy of 4.3%, a figure that is down from the 5.7% vacancy rate that it had 2Q 2018. This is an interesting statistic as this submarket had only delivered 325K SF at the midpoint of 2018, compared to the 611K SF that has been delivered YTD. Also, the submarket experienced a nearly identical mid-year total industrial leasing activity in 2019 as it did mid-year 2018. As of the end of 2Q 2019, there is upward of 4,452,000 SF proposed or under construction. Crow Holdings and Rob Riner Companies have broken ground on a four (4) building spec project totaling 1,058,844 SF while Black Creek Group has closed on its site located on the southwest corner of Joel East and Oakgrove and will break ground on approximately 566K SF in three (3) buildings late 4Q. We don’t expect groundbreaking on the majority of the remaining 3M SF to hit at once, as Majestic, Mereken Land, Jackson Shaw, Carter Foundation, Hillwood, and TCRG control most of the developable tracts. That said, two (2) large build-to-suits in the market could make by years-end, landing on these controlled sites.

16+ YEARS CRE EXPERIENCE MATT CARTHEY

Partner mcarthey@hlfortworth.com 817.710.1111

TOP LEASE TRANSACTIONS • PVI has signed a 238K SF lease in 425 W Everman Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

4,033

147,993

247,610

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

4.3%

3.9%

4.9%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

HLC Deal

356,235

593,896

574,147

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

433,603

749,603

356,850

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

316,000

295,084

287,261

900,000

4.0%

700,000 600,000

3.0%

500,000 400,000

2.0%

300,000 200,000

1.0%

100,000 0.0%

0 3Q 16

4Q 16

1Q 17

Absorption

2Q 17

3Q 17

4Q 17

1Q 18

Deliveries

2Q 18

building

LARGE EXISTING VACANCIES • 7550 Oak Grove Road – 471K SF • 8600 Will Rogers Boulevard – 300K SF • 6601 Oak Grove Road – 264,125 SF • 160 W Everman Parkway – 217,537 SF • 5000 South Freeway – 153,938 SF • 301 E Risinger Road – 148,450 SF

building • 5301 Sun Valley Drive – a 31,900 SF building 800,000

2Q 16

DEALS IN THE MARKET • 7400 Jack Newell Boulevard S – a 79,800 SF

Tools

• 5328 E Lancaster Avenue – a 69,836 SF class B

VITAL STATS

5.0%

Parkway with Majestic Realty. • Lone Star Packaging Solutions has signed a 42,000 SF in 911 S 5th Street with Randall Stepp. • VPX has signed a 38,463 SF lease in Everman Trade Center Building B with TA Realty.

• 501 Easy Drive – a 173,603 SF building with Klein

3Q 18

4Q 18

1Q 19

2Q 19

Vacancy

Source: CoStar 2Q 2019 Industrial Report

NEW DEVELOPMENTS • Carter Distribution Center FED – A new 4 building HLC Deal

speculative project totaling 1,058,844 SF being developed by Rob Riner Companies and Crow Holdings Capital. • Black Creek Group will break ground on its 566,000 SF speculative development located on the southwest corner Joel East and Oak Grove Road 4Q 2019 • 6000 Cirrus Drive – a 200K SF building with Golden State Foods 15


DALLAS

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

FORT WORTH

1200 Summit Avenue Suite 300 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