3Q 2019 DFW Industrial Market Brief

Market Brief...

Dallas/Fort Worth

INDUSTRIAL

3Q19 Property Pictured Above: Carter Distribution Center

DFW INDUSTRIAL MARKET BRIEF 3Q 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

THOMAS GRAFTON

GEORGE JENNINGS

KEATON DUHON

MADDY CANTY

HARRISON PUTT

BO PUCKETT

BLAKE TROIANI

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

Market Analyst btroiani@hldallas.com 972.265.0126

5

HLC OUTLOOK Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

3,504,660

6,754,936

5,164,541

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

6.2%

6.4%

6.4%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

11,961,903

9,625,844

20,219,457

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

35,675,128

29,473,763

27,816,123

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,279,292

6,825,963

8,163,031

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.

HLC DFW

INDUSTRIAL TRENDS & TRANSACTIONS TRENDS & TRANSACTIONS • Need for speed -- More spec offices

• Callaway Golf Company has signed an 810,908 SF lease in 15221 N beach Street with Hillwood.

• Desire for flexibility -- Requested expansion options and/or phased in occupancy

• Schluter Systems has signed a 500,555 SF lease in Alliance Northport 1 with Hillwood.

• Drive to increase efficiency -- Increased parking requirements -- Increased demand for high quality 2nd generation options vs rising rates for new construction • Increased attention on workforce -- Where are they coming from?

-- Better work environment (Ex. HVAC warehouse)

As of 3Q 2019, CoStar reported year-to-date absorption of approximately 15.8M SF which is on pace when compared to the trailing four years. Subsequently, the overall market vacancy has remained stabilized at a healthy 6.2% +/- since 1Q 2016.

• Foreign companies look to avoid tariffs

Construction activity has reached a new peak with 35.7M SF under construction. While this appears to be a significant increase when compared to previous quarters, it is worth noting that 8.2M SF is preleased or a build-to-suit project.

• TI requests and costs continue to increase

Leasing activity in South Dallas is on the rise. With construction activity in South Dallas slowing considerably, we expect the South Dallas vacancy rate to return to a healthy balance. Attention is now shifting toward the 12.1M SF of new construction in North Fort Worth. Given the lack of available portfolio opportunities and continued interest from the capital markets, speculative development will remain strong in the coming year.

TOP LEASE TRANSACTIONS

• Concessions are still prevalent yet measured -- 2 to 4 months free for 10-year deals

• Pre-leasing – 8.2M SF of counted 35.7M SF is preleased or build-to-suit projects

• Ericsson has signed a 306,280 SF lease in Majestic Airport Center with Majestic.

• XPO Logistics has signed a 298,341 SF renewal in 2425 Esters Road.

• Almo Distribution has signed a 288,052 SF renewal in 201 S Interstate 45 with Pure Industrial.

• Rooms to Go has signed a 242,370 SF lease in 4925 New York Avenue with Exeter.

• BRP has signed a 234,277 SF lease in 15301 Heritage Parkway with Trammel Crow.

TOP HLC LEASE TRANSACTIONS • Office Furniture Distributors has signed a 120,360 SF lease in 2901 Trade Center Drive with Prologis.

HLC Deal

• Elong International USA has signed a 97,446 SF renewal in 1200 W Crosby Road with Frontier Equity.

HLC Deal

• Maevn has signed a 68K SF renewal in 13950 Senlac Drive with Principal.

HLC Deal

• Keystone Tape & Supply of Texas has signed a 20K SF lease in 3333 Quorum Drive with Mercantile Partners.

HLC Deal

• Fluor has signed a 67,128 SF lease in 6633 Oak

HLC Deal

Grove Road with Cabot Properties.

6

HLC DFW FACTS & FIGURES

Market

Existing Inventory

# Bldgs.

Total RBA

Vacancy

Direct SF

OVERALL DFW

10.0%

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%

Total SF

Vac. %

DFW Airport

631

79,503,787

5,671,028

5,931,658

7.5%

East Dallas

609

45,918,468

2,321,688

2,418,902

5.3%

Great SW/Arlington

1,105

111,166,722

6,160,422

6,310,961

5.7%

Henderson County

18

1,204,851

29,387

29,387

2.4%

North Fort Worth

683

97,138,431

5,614,475

5,654,975

5.8%

2.0%

2,000,000

1.0% 0.0%

0 3Q 16

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

1Q 18

Absorption

2Q 18

3Q 18

4Q 18

1Q 19

2Q 19

Deliveries

3Q 19

Vacancy

VACANCY - OVERALL DFW

10.0% 9.0%

Northeast Dallas

1,503

110,083,725

6,690,752

7,567,133

6.9%

Northwest Dallas

1,345

108,313,745

4,217,145

4,619,170

4.3%

22

2,118,205

48,311

48,311

2.3%

8.0% 6.20%

6.20%

6.0%

5.9%

7.0% 6.0% 5.0%

NW Dallas Outlying

4.0% 3.0% 2.0% 0.2%

South Dallas

685

100,308,867

10,846,324

10,846,324

10.8%

South Fort Worth

1,423

79,140,131

3,349,976

3,701,629

4.7%

South Stemmons

2,071

109,865,359

5,082,639

5,229,380

4.8%

10,095

844,762,291

50,032,147

52,357,830

6.2%

Totals

0.3%

1.0% 0.0%

3Q 16

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

1Q 18

Direct

2Q 18

3Q 18

4Q 18

1Q 19

Sublet

2Q 19

3Q 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

2,726,617

3,228,537

4,954,997

4,499,197

East Dallas

1,077,826

1,022,130

2,270,452

1,684,495

Great SW/Arlington

2,150,627

3,438,485

2,179,203

3,081,737

Henderson County

3,200

0

0

0

North Fort Worth

4,214,478

2,950,010

12,184,154

4,757,653

Northeast Dallas

637,697

1,891,978

2,817,341

3,395,602

Northwest Dallas

1,515,197

1,295,489

1,493,478

5,177,805

23,789

47,900

73,000

16,763

3,285,620

1,424,853

4,129,992

5,591,192

37,924

911,084

1,495,047

1,717,405

Market

15,000,000 12,500,000 10,000,000 7,500,000 5,000,000 2,500,000 0 3Q 16

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

1Q 18

2Q 18

Total Net

NW Dallas Outlying

3Q 18

4Q 18

1Q 19

2Q 19

3Q 19

Leasing Activity

CONSTRUCTION - OVERALL DFW 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000

South Dallas South Fort Worth South Stemmons Totals

84,246

0

4,077,464

4,088,495

15,757,221

16,210,466

35,675,128

34,010,344 Source: CoStar 3Q 2019 Industrial Report

10,000,000 5,000,000 0 3Q 16

4Q 16

1Q 17

2Q 17

3Q 17

4Q 17

Delivered Inventory

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

2Q 19

3Q 19

Under Construction

7

SUBMARKET INTELLIGENCE GREAT SOUTHWEST/ARLINGTON

HLC OUTLOOK

14+ YEARS CRE EXPERIENCE

The Great Southwest (GSW) industrial submarket consists of approximately 111M SF and, per CoStar reporting, experienced positive absorption of 2,150,627 SF with 3.1M SF of leasing activity as of 3Q 2019. GSW reported year-to-date new construction completions of 3.4M SF (74% preleased with GM accounting for 1.2M SF) and an additional 2.2M SF of product currently under construction (43% preleased). The 3Q 2019 vacancy rate increased to 5.7% versus 4.5% at midyear 2019. This is primarily due to the delivery of new construction. As we enter 4Q, we expect this vacancy rate to remain stable as leasing activity remains strong and the development pipeline is beginning to taper.

CANON SHOULTS Managing Principal cshoults@hldallas.com 972.280.8328

TOP LEASE TRANSACTIONS Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

793,181

672,151

1,440,432

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.7%

4.5%

5.6%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,229,101

873,612

3,274,639

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,179,203

2,665,104

5,020,509

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

485,901

1,128,173

-

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 3Q 16

4Q 16

1Q 17

Absorption

2Q 17

3Q 17

4Q 17

1Q 18

2Q 18

Deliveries

3Q 18

4Q 18

1Q 19

2Q 19

3Q 19

Vacancy

Source: CoStar 3Q 2019 Industrial Report

8

• Rooms To Go has signed a 242K SF lease in 4925 New York Avenue with Exeter.

• Dometic has signed a 121K SF expansion in 2710 Forum Drive with Cabot Properties.

• Hafele America Co. has signed a 72K SF lease at 4565 CentrePort Drive with GLP. • PRG signed a 105K SF lease at 3100 Roy Orr Boulevard with Link Industrial.

• Flat World signed a 43K SF lease at 5251 Frye Road with Jackson Shaw.

DEALS IN THE MARKET • Park 20/360 – Invesco is selling a 1.5M SF seven (7) building project and is currently under contract with Heitman.

• Dallas Infill Industrial Portfolio – Rialto is selling a 1.5M SF package with three (3) buildings in the GSW submarket and is currently under contract with Sealy.

• Oakdale Logistics Center – PLR is selling a 400K SF shell building.

• Industrial Crossing – TS Partners is selling a 320K SF one (1) building project and is currently under contract with MDH Partners.

• Frontier Industrial Portfolio – Frontier is selling a portfolio of five (5) assets totaling 303,080 SF

NEW DEVELOPMENTS • Wildlife - Buildings 7, 9, 10, 11 /741 Refuge Way – a 1,126,180 SF multi-building project with Crow Holdings Industrial (Building 10 - 524,460 SF Preleased to Project Fonzie. Building 11 – 312,000 SF Preleased to NTW, Inc.) • 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 • 3301 E Park Row Drive – a 155,730 SF spec development with LaSalle/Stream Realty • Park Twenty/Three-Sixty Building 7 – a 42,445 SF building with Invesco/Ridge Development

LARGE EXISTING VACANCIES • 1102 State Highway 161 – 322,824 SF (Home Depot vacating) • 14900 Trinity Boulevard – 310K SF • 3254 W Trinity Boulevard – 305K SF • 2911 S Great Southwest Parkway – 271,794 SF • CentrePort 4/14601 Sovereign Road –232,700 SF

SUBMARKET INTELLIGENCE DFW AIRPORT

HLC OUTLOOK

7+ YEARS

HLC’s Dallas-Fort Worth (DFW) Airport industrial submarket vacancy rate is 7.5% at the end of 3Q 2019 with year-to-date absorption totaling 1,794,980 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 ANDREW GILBERT Market Director agilbert@hldallas.com 972.280.8312

Absorption

vs. Prev. Qtr

Rental rates have remained strong ranging from $4.50 to $8.50 for bulk distribution and shallow bay product. Rental abatements range from 2 to 4 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

688,045

1,900,554

536,176

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

7.5%

8.3%

5.8%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,647,717

1,044,121

3,924,135

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

4,954,997

2,578,936

4,988,894

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

2,349,472

657,920

VITAL STATS

9.0%

2,500,000

The DFW Airport industrial 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.

TOP LEASE TRANSACTIONS • Ericsson has signed a 306,280 SF lease in Majestic Airport Center with Majestic.

• XPO Logistics has signed a 298,341 SF renewal in 2425 Esters Road.

• Fleetpride has signed a 200K SF lease in 4050 Corporate Drive with LaSalle.

• Alphabroder has signed a 169,050 SF lease in 1040 Trade Avenue with Link Industrial.

• Heritage Auctions has signed a 162K SF lease in Passport Park on DFW Airport land with Bandera.

• Premier Solutions & Services has signed a 71,084 SF lease in 511 S Royal Lane with Prologis.

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 3Q 16

4Q 16

1Q 17

Absorption

2Q 17

3Q 17

4Q 17

1Q 18

2Q 18

Deliveries

3Q 18

4Q 18

1Q 19

2Q 19

3Q 19

Vacancy

Source: CoStar 3Q 2019 Industrial Report

DEALS IN THE MARKET • Colony Industrial Portfolio – Colony is selling their industrial assets across the nation. The Dallas portion of the portfolio totals nearly 7.5M SF and 1.2M SF is located in the DFW Airport submarket; currently under contract with Link Industrial.

• Sealy Industrial and Logistics Portfolio – Sealy & Company is selling a portfolio of twelve (12) assets totaling more than 1M SF. There are four (4) flex buildings located in the DFW Airport submarket at 121 Corporate Park which totals 175K SF. • Dalfen Infill Logistics Portfolio – a portfolio of five

(5) assets totaling more than 800K SF. There is one (1) building located in the DFW Airport submarket at Skyway Circle which totals 66,504 SF.

NEW DEVELOPMENTS • Passport Park – a 2M SF four (4) building project with Trammell Crow set for completion by January 2020 • Passport Logistics Center – a 1.2M SF three (3) building project with Dalfen Industrial set for completion by 1Q 2020 • Mustang Park – a 1M SF three (3) building project with Prologis • DFW Airfield Logistics Center – a 350K SF two (2) building project with Clarion Partners • Lakeside Ranch Business Park – a 274,994 SF building with Duke Realty set for completion by November 2019 • Prologis Park 121 – a 250K SF two (2) building project with Prologis, each demisable to 19K SF

LARGE EXISTING VACANCIES • • • •

2601 S Airfield Drive – 1,000,584 SF 2700 Market Street – 375,400 SF 2600 Market Street – 267,254 SF 1717 W Airfield Drive – 252,400 SF

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 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. Leasing activity submarket-wide has remained strong and has continued to slightly outpace new deliveries. Second generation vacancies have continued to do well as a lower cost alternative to the premium new developments. With minimal new deliveries and second generation options available, we expect a new wave of development to be on the horizon for 4Q 2019.

CRE EXPERIENCE JOSH BARNES

Principal jbarnes@hldallas.com 972.280.8353

TOP LEASE TRANSACTIONS • Inogen signed a 154,097 SF lease in 600 Shiloh Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

457,431

780,432

1,800,787

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

6.4%

6.0%

5.4%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

2,057,083

1,518,388

2,759,894

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

5,087,793

4,537,668

4,431,000

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

236,656

867,901

1,511,508

VITAL STATS

7.0%

2,040,000 1,790,000 1,540,000

6.5%

1,290,000 1,040,000

6.0%

790,000 540,000 290,000

5.5%

40,000 (210,000) 5.0%

(460,000) 3Q 16

4Q 16

1Q 17

Absorption

2Q 17

3Q 17

4Q 17

1Q 18

2Q 18

Deliveries

3Q 18

4Q 18

1Q 19

2Q 19

3Q 19

Vacancy

Source: CoStar 3Q 2019 Industrial Report

10

Road with Trident.

• Elliott Electrical signed a 114,024 SF lease in 3737 Grader Street with Prologis.

• Lexor signed a 108,570 SF lease in 1330 S. Jupiter Road with Langford Property Company.

• JW Nutritional renewed a 69,500 SF lease in 601 Century Parkway with Inter-Commercial Business Systems.

• LeSaint Logistics signed a 57,286 SF lease in 802 Nicholson Road with Prologis.

• WM Coffman renewed a 55,904 SF lease in Jupiter Resource Center with Exeter Property Group.

DEALS IN THE MARKET • Dallas Infill Industrial Portfolio – Rialto is selling a portfolio of nine (9) assets totaling 1.56M SF • Colony Industrial Portfolio – Colony Capital, Inc. is selling a portfolio of fifteen (15) assets totaling 1.14M SF; currently under contract with Link Industrial • Frontier Industrial Portfolio – Frontier is selling a portfolio of five (5) assets totaling 303,080 SF

NEW DEVELOPMENTS • S Buckner Boulevard – a 813,500 SF two (2) building project with Exeter in Mesquite

• CORE5 Logistics at McKinney (Phase 1) – a 431,234 SF two (2) building project with Core5 Industrial Partners in McKinney • Marquis Distribution Center – a 355,071 SF two (2) building project with Huntington in Garland • I-30/Hwy 80 – a 237,473 SF building with Prologis in Mesquite • 2900 E Plano Parkway – a 176,854 SF two (2) building project with Provident Realty in Plano • McKinney National Business Park (Phase 1)– a 150,500 SF two (2) building project with Sentinel Capital in McKinney • Core 5 Business Center – a 67,570 SF building with Core5 Industrial Partners in Plano • Urban District 30 – a 980,700 SF five (5) building project in Mesquite with Urban Logistics Realty

HLC Deal

LARGE EXISTING VACANCIES • 3000 West Kingsley – 341,840 SF • 3800 Leon Road – 329,091 SF • 915 Enterprise Blvd – 195,743 SF • 2610 McCree Rd – 152,139 SF

SUBMARKET INTELLIGENCE NORTHWEST DALLAS

HLC OUTLOOK

7+ YEARS

CRE EXPERIENCE

Through 3Q 2019, the 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 3Q which is the same rate as 2Q 2019 end. The last few smaller land sites are tied up as Billingsley, Panattoni, and Longpoint all plan to break ground this year. All three of the new developments will range from 159K to 178K SF. The size that generates the most demand in Northwest Dallas is between 25K and 100K SF which the three aforementioned developments can be demised to accommodate this ideal range. Eastgroup and First Industrial are currently under construction on the next phase of their developments in Lewisville on Highway 121.

ANDREW GILBERT Market Director agilbert@hldallas.com 972.280.8312

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

252,895

884,172

85,700

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

4.2%

4.8%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,480,990

1,805,545

3,011,210

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,493,478

1,743,858

1,868,989

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

634,564

HLC Deal

SF lease in 2901 Trade Center Drive with Prologis.

• Elong International USA has signed a 97,446 SF

HLC Deal

4.3%

340,280

TOP TRANSACTIONS • Office Furniture Distributors has signed a 120,360

636,960

VITAL STATS 7.0%

2,000,000 1,800,000

6.0%

renewal in 1200 W Crosby Road with Frontier Equity.

• Maevn has signed a 68K SF renewal in 13950 Senlac Drive with Principal.

• Procraft Cabinetry has signed a 57,692 SF lease in 2330 Alberta Drive with Prologis.

• Earl Owen Co. has signed a 57K SF lease in 2101 Hutton Drive with Cabot Properties.

• C&C North America has signed a 48,092 SF lease in 11639 Emerald Street with Prologis.

HLC Deal

1,600,000 5.0%

1,400,000 1,200,000

4.0%

1,000,000 3.0%

800,000 600,000

2.0%

400,000 1.0%

200,000

0.0%

0 3Q 16

4Q 16

1Q 17

Absorption

2Q 17

3Q 17

4Q 17

1Q 18

2Q 18

Deliveries

3Q 18

4Q 18

1Q 19

2Q 19

3Q 19

Vacancy

Source: CoStar 3Q 1Q 2019 Industrial Report

DEALS IN THE MARKET • Colony Industrial Portfolio – Colony is selling their industrial assets across the nation. The Dallas portion of the portfolio totals nearly 7.5M SF in which 3M SF is located in Northwest Dallas; currently under contract with Link Industrial.

• Dallas Infill Industrial Portfolio – Rialto Capital is selling a portfolio of fifteen (15) assets totaling 1.6M SF. There is one (1) building located in Northwest Dallas at 2115 Valley View which totals 264,209 SF and is fully occupied.

HLC Deal

• Sealy Industrial and Logistics Portfolio – Sealy & Company is selling a portfolio of twelve (12) assets totaling more than 1M SF. There are two (2) buildings located in Northwest Dallas at 1720 and 1725 Hayden Drive.

• Frontier Industrial Portfolio – Frontier is selling a portfolio of five (5) assets totaling 303,080 SF

NEW DEVELOPMENTS • First Park 121 – a five (5) building project with First Industrial

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

• Point 35/190 – a 178,500 SF building with Longpoint, set to break ground in 4Q 2019

• Mercer Business Park – a 175,000 SF building in a five (5) building project with Billingsley, set for completion by July 2020 • Valley View – a 159,405 SF building with Panattoni • Creekview 121 – a 140K SF two (2) building project with Eastgroup, each demisable to 15K SF

LARGE EXISTING VACANCIES • 1900 N Josey Lane – 259,900 SF • 2040 McKenzie – 129,611 SF • 1625 Hutton – 118,195 SF • 14325 Gillis Road – 98,500 SF

11

SUBMARKET INTELLIGENCE SOUTH DALLAS

HLC OUTLOOK

30+ YEARS

HLC’s South Dallas industrial submarket is 124M SF and is 10.2% vacant which is 1.1% lower than reported in 2Q 2019.

In accordance with the area surveyed, CoStar is reporting 2.2M SF of net absorption for South Dallas in 3Q 2019. South Dallas has 7.1M SF under construction in the I-30 & I-20 corridors combined and it continues to outpace absorption.

However, 75%, or 5.3M SF, of the new construction is for build-to-suit or design build assignments. The remaining 25%, or 1.96M SF, under construction is speculative development and 1.7 Million SF is located on Interstate 30. The southern corridors along I-20, I-35, and I-45 continue to produce new opportunities for development. Unfortunately, the existing supply of new product by capital sources along I-20 and I-45 well exceeds the submarket demand and deal velocity, causing South Dallas to lead the Dallas market as the only submarket with double digit vacancy of 10.2%.

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

2,205,996

979,870

2,126,311

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

10.8%

12.7%

14.3%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,228,434

1,884,885

3,764,916

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

4,129,992

4,449,992

3,722,533

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

320,000

1,104,853

3,195,425

VITAL STATS

10.0%

TOP LEASE TRANSACTIONS • Almo Distribution has signed a 288,052 SF renewal

3,500,000

9.0%

3,000,000

8.0% 2,500,000

7.0% 6.0%

in 201 S. Interstate 45 with Pure Industrial.

• Experior Global has signed a 153,151 SF lease in 3800 N Interstate 45 with Skyhawk Partners.

• Mauser Packaging Solutions has signed a 120,960 SF lease in 1704 S. Interstate 45 with Bradford.

• Go Plus has signed a 106,795 SF lease in 3951 Corporate Drive with Clarion.

• JDS Industries has signed a 93,703 SF lease in 2535 Gifford Street with Liberty Property Trust.

• Kodiak Robotics has signed a 75,892 SF lease in 3901 Corporate Drive with Clarion.

• Tire Partners of Texas has signed a 59,995 SF lease in 4900 Langdon Road with Texas Industrial Development.

2,000,000

5.0% 1,500,000

4.0% 3.0%

1,000,000

2.0% 500,000

1.0% 0.0%

0 3Q 16

4Q 16

1Q 17

Absorption

2Q 17

3Q 17

4Q 17

1Q 18

2Q 18

Deliveries

3Q 18

4Q 18

1Q 19

2Q 19

3Q 19

Vacancy Source: CoStar 3Q 2019 Industrial Report

12

DEALS IN THE MARKET • SouthPointe 20/35 – UBS is selling a portfolio of two (2) assets totaling 1,003,733 SF • LogistiCenter at Dallas – 626,439 SF • Executive Distribution Center – 345,600 SF

NEW DEVELOPMENTS • 1230 E Cleveland Road – a 1,004,674 SF project with Seefried Properties • 5300 Mountain Creek Parkway – a 863,328 SF project with First Industrial • 1401 Chalk Hill Road – a 672,775 SF project with Clarion Partners • 820 E. Wintergreen Road – 615,060 SF project with Jones Development Company • 1501 Chalk Hill Road – a 608,939 SF project with Clarion Partners • 4025 E. Interstate 30 – a 296,615 SF project with Stream Realty

LARGE EXISTING VACANCIES • SouthLink – 1,044,647 SF • Liberty Property Trust – 900,043 SF • 3300 Cedardale Road – 776,630 SF • SouthPointe 20/35 – 660,312 SF • I-35 Logistics Crossing – 610,086 SF

SUBMARKET INTELLIGENCE SOUTH STEMMONS

HLC OUTLOOK

14+ YEARS

At the end of 3Q 2019, HLC’s South Stemmons industrial submarket posted a 3.8% vacancy rate and continues to be one of the strongest performing submarkets in Dallas. Leasing activity is strong throughout the submarket for tenants between 10K and 50K SF. This is due to these tenants relocating to Brookhollow from the Design District. Absorption for 3Q totaled a negative 400K SF. This is because demand is not as strong for over 50K SF in the Brookhollow submarket. It is expected that the negative absorption number will reverse as we move into 4Q 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.

CRE EXPERIENCE

CANON SHOULTS Managing Principal cshoults@hldallas.com 972.280.8328

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

4,000

588,131

820,336

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

3.8%

3.8%

5.2%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,536,259

1,379,778

1,307,741

U/C SF

HLC Deal

vs. Prev. Qtr

vs. 12 Mths Ago

525,000

525,000

0

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

-

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 4Q 16

1Q 17

Absorption

2Q 17

3Q 17

4Q 17

1Q 18

2Q 18

Deliveries

3Q 18

renewal in 613- 625 Mockingbird Lane with Alpha Industrial Properties.

• Stonelake Capital Partners has purchased a 129,061 SF building in Brookhollow at 8220 Ambassador Row from Brennan Investment Group.

• Lonestar Electric has signed a 136,362 SF lease in 1242 Regal Row from Keating Resources.

• Restoration Specialists, Inc. has signed a 40,081 SF lease in 1211 Regal Row with Stonelake Capital Partners.

750,000

9.0%

3Q 16

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

4Q 18

1Q 19

2Q 19

3Q 16

Vacancy

Source: CoStar 3Q 2019 Industrial Report

DEALS IN THE MARKET • Colony Industrial Portfolio – Colony is selling a portfolio totaling 7.5M SF and 350K SF is located in the South Stemmons submarket. There is also one (1) building located in South Stemmons that will break ground in 4Q 2019 totaling 109K SF; currently under contract with Link Industrial.

• Dallas Infill Industrial Portfolio – Rialto Capital is selling a portfolio of fifteen (15) assets totaling 1.6M SF. There is one (1) building located in the South Stemmons submarket at 2727 Airport Freeway.

• Sealy Industrial and Logistics Portfolio – Sealy & Company is selling a portfolio of twelve (12) assets.

There are two (2) buildings located in the South Stemmons submarket totaling 148,190 SF.

NEW DEVELOPMENTS • Core 35 Logistics Center – a 388,822 SF two (2) building project with Crow Holdings

• Colony Crossing – a 109,200 SF building with Colony

LARGE EXISTING VACANCIES • 8801 Ambassador Row – 183,443 SF • 7600 Ambassador Row – 66,915 SF • 1111 Regal Row – 60,010 SF • 8908 Ambassador Row – 49,025 SF

HLC Deal

13

SUBMARKET INTELLIGENCE NORTH FORT WORTH

HLC OUTLOOK

7 YEARS

HLC’S North Fort Worth industrial submarket had its best quarter of the calendar year in 3Q with the vacancy rate dropping from its 2Q mark of 7.0% to 5.8%. This significant drop in vacancy stemmed from an astounding 1,730,602 SF of net absorption during 3Q which was impressively 41% of the total year-to-date absorption. Although the 3Q vacancy statistics seems promising, watch for a negative spike through the end of the year as anticipated 4Q deliveries are northward of 5.3M SF. This will nearly double the total year-to-date deliveries of 2,950,010 SF. The 596,455 SF posted for 3Q deliveries only accounted for 20% of the year-to-date total. Regardless of an anticipated spike in the vacancy rate, the 4,214,478 SF of year-to-date net absorption, outpacing the year-to-date deliveries of 2,950,010 SF, continues to prove up the market’s vitality and has subsequently prompted an additional 3.2M SF of developments to break ground during 3Q.

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

TOP LEASE TRANSACTIONS Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

1,730,602

922,368

152,246

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.8%

7.0%

6.0%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,957,925

741,817

903,122

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

12,184,154

8,902,138

5,533,734

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

596,455

425,000

2,145,218

VITAL STATS

10.0%

3,000,000

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 3Q 16

4Q 16

1Q 17

Absorption

2Q 17

3Q 17

4Q 17

1Q 18

2Q 18

Deliveries

3Q 18

4Q 18

1Q 19

2Q 19

3Q 19

Vacancy Source: CoStar 3Q 2019 Industrial Report

14

• Callaway Golf Company has signed an 810,908 SF lease in 15221 N beach Street with Hillwood.

• Schluter Systems has signed a 500,555 SF lease in Alliance Northport 1 with Hillwood.

• BRP has signed a 234,277 SF lease in 15301 Heritage Parkway with Trammel Crow.

HLC • Keystone Tape & Supply of Texas has signed a 20K SF lease Deal in 3333 Quorum Drive with Mercantile Partners.

DEALS IN THE MARKET • • • • •

Stanley Black & Decker Hub – 1,214,526 SF Clorox Distribution Center – 540K SF Cantrell 1 & 2 – a 491K SF two (2) building project GM Distribution Center –404,450 SF 120 Intermodal Parkway – 369,530 SF of a 579,530 SF portfolio

• 3200 Northern Cross Boulevard –118,749 SF

NEW DEVELOPMENTS • Northlink A, B & C – a 1,685,781 SF three (3) building project with Hines • Speedway Logistics Crossing – a 1,594,020 SF three (3) building project with Scannell • Westport 11 – a 1,200,536 SF building with Hillwood • Northwest Commerce Park – a 1,051,240 SF three (3) building project with Stream • Mark IV Commerce Park – a 1,025,500 SF three (3) building project with Crow Industrial • Interstate Crossing – a 1,023,488 SF building with Hunt Southwest

• Intermodal Logistics Crossing – a 1,007,000 SF building with NorthPoint Development • Westport Logistics Park – a 882,565 SF two (2) building project with CT Realty • Alliance Center North 7 – a 810,908 SF building with Hillwood • Alliance Center North 3 – a 810,908 SF building with Hillwood • Alliance Northport 2 – a 460,248 SF building with Hillwood • Stanley Black & Decker – a 425K SF building • Southlake/Grapevine project – a 327,219 SF four (4) building project with Frontier Equity • Fossil Creek Crossing 3 and 4 – a 312,004 SF building with Alpha Industrial Properties • Alliance Northport 5 – a 225,930 SF building with Hillwood • Alliance Northport 4 – a 225,472 SF building with Hillwood • First Fossil Creek Commerce Center – a 198,589 SF building with First Industrial

LARGE EXISTING VACANCIES • • • • • • •

15245 Heritage Parkway – 1,089,642 SF 2112 Eagle Parkway – 407,800 SF 4801 Westport Parkway – 400K SF 700-724 Henrietta Creek Boulevard – 384K SF 16200 Three Wide Drive – 316,128 SF 5650 Alliance Gateway Freeway – 303,458 SF 1201 NE Loop 820 – 270K SF

SUBMARKET INTELLIGENCE SOUTH FORT WORTH

HLC OUTLOOK The South Fort Worth industrial submarket posted a 3Q vacancy of 4.7%, a figure up from 4.3% in 2Q 2019. This is an interesting statistic as the submarket had a large portion of its new construction leased. Spec developments owned by Cabot, Majestic, and Hunt Southwest are all 100% leased. Everman Trade Center, a four (4) building 457K SF project, is only 8% leased but has prospects at leases or close which should bring it to 60%+ leased by year-end. 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 Oak Grove and has plans to break ground on approximately 566K SF in three (3) buildings late 4Q. The newest development announcement is Industrial Realty Group’s 212,175 spec front loader that is expected to break ground in December of this year. As of the end of 3Q 2019, there is upward of 4,180,000 SF of proposed development in the pipeline. We don’t expect groundbreaking on the majority of these projects to hit at once as Majestic, Mereken Land, Jackson Shaw, Carter Foundation, Hillwood, and TCRG control most of the developable tracts. That said, multiple build-to-suits currently in the market could make within the next six (6) months, landing on these controlled sites.

16+ YEARS CRE EXPERIENCE MATT CARTHEY

Partner mcarthey@hlfortworth.com 817.710.1111

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

101,487

6,632

146,097

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

4.7%

4.2%

4.7%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

752,331

375,698

1,267,320

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,495,047

493,603

920,850

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

300,000

316,000

16,000

VITAL STATS

5.0%

900,000 800,000

4.0%

TOP LEASE TRANSACTIONS • Emergent Cold has signed a 300K SF lease at 8200 Will Rogers Boulevard with Hunt Southwest.

• Fluor has signed a 67,128 SF lease in 6633 Oak Grove

HLC Deal

Road with Cabot Properties.

• Trinity Drywall has signed a 15,600 SF lease in 601 W Ripy with Builders Equipment & Supply.

DEALS IN THE MARKET • 3209 Galvez Avenue – a 174,798 SF building • 5703 Crawford Lane – a 74,210 SF building • 9300 Forum Way – a 20K SF building

NEW DEVELOPMENTS • Carter Distribution Center FED – a 1,058,844 SF HLC Deal

four (4) building project with Rob Riner Companies and Crow Holdings Capital • Carter Logistics Center – a 569,450 SF three (3) building project with Black Creek Group • Southwest Crossing Logistics Center – a 212,175 SF single building project with Industrial Realty Group

LARGE EXISTING VACANCIES • 7550 Oak Grove Road – 471K SF • 160 W Everman Parkway – 217,537 SF • 8300 South Freeway – 106,308 SF

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

2Q 17

Absorption

3Q 17

4Q 17

1Q 18

2Q 18

Deliveries

3Q 18

4Q 18

1Q 19

2Q 19

3Q 19

Vacancy

Source: CoStar 3Q 2019 Industrial Report

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