2Q 2020 DFW Industrial Market Brief

Market Brief...

Dallas/Fort Worth

INDUSTRIAL

2Q2020 Property Pictured Above: Stoneridge 11 | 2425 West Danieldale Road, Dallas, Texas 75237

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. H. I.

DFW Airport Northeast/East Dallas Far Northeast Dallas Northwest Dallas South Dallas South Stemmons North Fort Worth South Fort Worth

3

5 5

HLC SUBMARKET COVERAGE

DFW

HLC DFW INDUSTRIAL MARKET EXPERTS

JIM BRICE

MATT CARTHEY

CANON SHOULTS

JOHN GORMAN

JOSH BARNES

ANDREW GILBERT

BEN WALLACE

GEORGE JENNINGS

Partner - Texas Leasing jbrice@holtlunsford.com 972.280.8306

Partner - Managing Principal mcarthey@holtlunsford.com 817.710.1111

Managing Principal cshoults@holtlunsford.com 972.280.8328

Senior Vice President jgorman@holtlunsford.com 214.920.9800

Senior Vice President jbarnes@holtlunsford.com 972.280.8353

Market Director agilbert@holtlunsford.com 972.280.8312

Market Director bwallace@holtlunsford.com 972.421.1966

Market Director gjennings@holtlunsford.com 817.632.6151

THOMAS GRAFTON

KEATON DUHON

MADDY CANTY

HOGAN HARRISON

HARRISON PUTT

BO PUCKETT

BLAKE TROIANI

Market Associate tgrafton@holtlunsford.com 817.632.6152

Market Associate kduhon@holtlunsford.com 817.284.5555

Market Associate mcanty@holtlunsford.com 972.280.8325

Market Associate hharrison@holtlunsford.com 817.710.7058

Market Associate hputt@holtlunsford.com 972.265.0124

Market Analyst bpuckett@holtlunsford.com 972.265.0123

Market Analyst btroiani@holtlunsford.com 972.265.0126

7

HLC DFW

HLC OUTLOOK Absorption

vs. Prev. Qtr

4,230,401

8,756,922

6,495,010

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

6.8%

6.3%

6.9%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

12,289,159

14,597,722

13,422,031

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

26,103,452

32,621,533

34,504,908

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

7,892,183

7,161,999

INDUSTRIAL TRENDS & TRANSACTIONS

vs. 12 Mths Ago

6,591,936

While the long-term effects of COVID-19 remain to be seen, the DFW industrial market finished 2Q 2020 on track after following up a record-setting start in 1Q 2020. CoStar reported net positive absorption of nearly 13M SF which is on pace as compared to annualized 2019 absorption. Overall, DallasFort Worth industrial construction ended the quarter with 15M SF of new product delivered and 26.1M SF currently under construction (down from 34.1M SF at 1Q 2020). Significant leasing activity in South Dallas and DFW Airport have led the charge to allow the overall market vacancy to remain stable at a healthy +/- 6.5%.

COVID-19 will continue to cause short-term uncertainty as landlords and tenants continue to navigate the changing business climate. The effects of PPP funding and the possibility of more will be closely monitored. However, overall tenant demand and deal flow has picked up since 1Q 2020 across all sectors including those with primarily small businesses.

We believe that the overall industrial market will weather the storm better than other asset classes as many of the large 3PL and e-commerce tenants are hiring as opposed to laying off employees. Additionally, we expect DFW to outperform other parts of the U.S. as it continues to be the biggest benefactor of large-scale relocation efforts and population growth.

TRENDS DUE TO COVID-19

While rent relief requests are present, they are not prevalent.

In some cases, landlords are offering increased concessions to secure deals.

We have seen an increase in tenant requests for short term deals and some landlords are increasing willing.

While capital markets are proceeding with caution, developers are still scouting new land positions.

TRENDS Need For Speed • More spec offices Desire For Flexibility • Requested expansion options and/or phased in occupancy Drive To Increase Efficiency • Increased parking requirements • Increased demand for high-quality second generation options vs rising rates for new construction Increased Attention On Workforce • Where are they coming from?

• Better work environment (Ex. HVAC Warehouse) Foreign Companies Look To Avoid Tariffs TI Requests And Costs Continue To Increase Pre-Leasing activity remains strong

8

TOP LEASE TRANSACTIONS

• Ariat Boots has signed a 1,069,818 SF lease in 2 Haslet Country Road with NorthPoint Development.

• Amazon has signed a 1,023,488 SF lease in 15511 NE Loop 820 with Hunt Southwest.

• Federal Express has signed a 776,629 SF lease in 3800 Cedardale Road with TCC/Morgan Stanley.

• Mars Petco has signed a 610,806 SF lease in 2801 Houston School Road with Crow Holdings.

• Amazon has signed a 428K SF renewal in 2700 Regent Boulevard with Invesco.

• AmeriPac has signed a 401,580 SF lease in 951 Mustang Drive with Prologis.

• Union Supply has signed a 311K SF lease in 2500 Regent Boulevard with Invesco.

• Midwest Air Technologies has signed a 259,200 SF renewal in 2300 Skyline Drive with IDI Logistics.

• U.S. Auto Parts has signed a 210K SF lease in 1301 Avenue T with ProLogis.

• Ta Chen International, Inc has signed a 160K SF lease in 957 Heinz Way with LINK Industrial.

• Essilor Labs has signed a 159K SF renewal in 501 E Corporate Ridge with Duke Realty.

• Intrapack Industries has signed a 131,436 SF renewal in 10560-10650 Markison Road with Taurus.

• HAECO has signed a 118,195 SF lease in 1625 Hutton with Prologis.

• Lebco has signed a 65,234 SF lease in 10676 King William Drive with EastGroup Properties • Airbus has signed a 58,402 SF lease in 2920 E Plano Parkway with Provident Realty Partners.

• Newline Interactive has signed a 48,160 SF lease in 2930 Telecom Parkway with Jackson Shaw.

HLC Deal

HLC Deal

HLC Deal

HLC DFW FACTS & FIGURES

Market

Existing Inventory

Vacancy

Total RBA

Direct SF

Total SF

Vac. %

DFW Airport

639

81,906,146

6,641,693

6,931,556

8.5%

East Dallas

607

46,964,041

3,167,974

3,240,568

6.9%

Great SW/Arlington

1,118

116,291,412

6,878,596

7,171,908

6.2%

Henderson County

18

1,219,296

29,968

29,968

2.5%

North Fort Worth

724

107,972,410

11,017,850

11,608,150

10.8%

Northeast Dallas

1,521

112,361,659

6,683,919

7,633,771

6.8%

Northwest Dallas

1,364

111,199,707

5,492,723

5,903,228

5.3%

24

2,185,084

74,296

74,296

3.4%

12,000,000

6.0%

10,000,000

5.0% 8,000,000 4.0% 6,000,000 4,000,000

2.0%

2,000,000

1.0% 0.0%

0 2Q 17

3Q 17

4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

Absorption

1Q 19

2Q 19

3Q 19

4Q 19

Deliveries

1Q 20

2Q 20

Vacancy

VACANCY - OVERALL DFW

10.0%

9.0% 8.0% 6.9%

6.80%

6.6%

6.5%

7.0% 6.0% 5.0% 4.0% 3.0% 2.0%

695

104,047,954

8,429,819

8,507,384

8.2%

0.3%

South Fort Worth

1,440

81,703,463

3,205,409

3,263,759

4.0%

17

South Stemmons

2,077

114,988,340

5,402,606

5,601,395

4.9%

Totals

10,227

880,839,512

57,024,853

59,965,983

6.8%

South Dallas

14,000,000

7.0%

3.0%

# Bldgs.

NW Dallas Outlying

OVERALL DFW

8.0%

0.3%

1.0% 0.0%

2Q

3Q 17

4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

Direct

1Q 19

2Q 19

3Q 19

4Q 19

Sublet

1Q 20

2Q 20

Total

ABSORPTION - OVERALL DFW 22,500,000 20,000,000

YTD Net Absorption

YTD Deliveries

Under Construction SF

YTD Leasing Activity

DFW Airport

530,626

1,857,276

5,568,533

4,652,680

East Dallas

333,791

0

944,106

628,408

1,410,328

2,469,782

576,123

3,015,407

Henderson County

(581)

0

0

0

North Fort Worth

2,317,269

5,330,331

7,298,337

4,412,083

Northeast Dallas

1,492,629

678,854

3,632,832

1,891,355

Northwest Dallas

(26,803)

355,421

2,505,891

2,937,445

NW Dallas Outlying

(5,575)

0

86,000

24,364

3,186,906

1,696,088

1,708,237

4,466,745

878,042

22,800

3,202,171

2,534,852

Market

17,500,000 15,000,000 12,500,000 10,000,000

Great SW/Arlington

7,500,000 5,000,000 2,500,000 0 2Q 17

3Q 17

4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Total Net

2Q 19

3Q 19

4Q 19

1Q 20

2Q 20

Leasing Activity

CONSTRUCTION - OVERALL DFW 40,000,000 35,000,000

South Dallas South Fort Worth South Stemmons

2,870,691

2,643,630

581,222

2,323,542

Totals

12,987,323

15,054,182

26,103,452

26,886,881

30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 2Q 17

3Q 17

4Q 17

1Q 18

2Q 18

3Q 18

Delivered Inventory

4Q 18

1Q 19

2Q 19

3Q 19

4Q 19

1Q 20

2Q 20

Under Construction

9 Source: CoStar 2Q 2020 Industrial Report

SUBMARKET INTELLIGENCE GREAT SOUTHWEST/ARLINGTON

HLC OUTLOOK

CANON SHOULTS

MADDY CANTY

Managing Principal cshoults@holtlunsford.com 972.280.8328

Absorption

While the long-term effects of COVID-19 remain to be seen, the Great Southwest (GSW) industrial submarket finished 2Q 2020 in a relatively stable condition. At the mid-year, GSW reports overall positive absorption of 1,410,328 SF with 3M SF of leasing activity. GSW reported 2Q 2020 new construction completions of 2.5M SF (81% pre-leased with Home Depot accounting for 1.5M SF). New construction has slowed significantly with only Crow Holdings Industrial’s 576,123 SF bulk building still under construction. The 2Q 2020 GSW vacancy rate rose slightly to 6.2% versus 5.6% at 1Q 2020.

However, the vacancy rate remains in healthy territory when compared with the overall DFW Industrial vacancy rate of 6.8%. As we continue 2020, we expect short-term uncertainty as the country continues to navigate the business climate due to COVID-19.

Market Associate mcanty@holtlunsford.com 972.280.8325

vs. Prev. Qtr

TOP LEASE TRANSACTIONS

vs. 12 Mths Ago

(608,005)

2,018,333

571,291

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

6.2%

5.3%

8.8%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,425,468

1,589,939

1,023,563

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

576,123

977,680

3,969,225

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

401,557

2,068,225

1,240,673

• U.S. Auto Parts has signed a 210K SF lease in 1301 Avenue T with ProLogis.

• Ta Chen International, Inc has signed a 160K SF lease in 957 Heinz Way with LINK Industrial.

• Mochila Fulfillment has signed a 155,425 SF lease in 3301 E. Park Row with LaSalle.

• LaSalle Bristol has signed a 99,510 SF renewal in 1000 West Freeway with Heller Industrial Parks.

• Tellworks has signed an 83,890 SF lease in 2310 E Arbrook Boulevard with Heitman.

• LMT Imports, LLC has signed a 51K SF renewal in 2920 N. State Highway 360 with Sealy.

HLC Deal

HLC Deal

DEALS IN THE MARKET VITAL STATS

10.0%

4,100,000

9.0% 8.0%

3,100,000

7.0% 6.0%

2,100,000

5.0% 4.0%

1,100,000

3.0% 2.0%

100,000

1.0% 0.0%

(900,000) 2Q 17

3Q 17

4Q 17

Absorption

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Deliveries

2Q 19

3Q 19

4Q 19

1Q 20

2Q 20

Vacancy Source: CoStar 2Q 2020 Industrial Report

10

• Dallas Global Industrial Center | 9314 W Jefferson Boulevard – NorthPoint Development is selling a 1.5M build-to-suit building

NEW DEVELOPMENTS • 1113 W Oakdale Road – a 576,123 SF spec development with Crow Holdings Industrial

LARGE EXISTING VACANCIES • 1113 W Oaklade Road – 576,123 SF • Oakdale Logistics Center | 949 W Oakdale Road – 401K SF • Cooper I-20 Building C | 1131 W Bardin Road – 401K SF • Centerport Distribution Centre | 14900 Trinity Boulevard – 310K SF • Trinity Overlook Business Center | 3254 W Trinity Boulevard – 305K SF • Parkway Logistics Center | 2911 S Great Southwest Parkway – 271K SF • Empire Distribution Center | 4125-4332 Empire Road – 251,599 SF

SUBMARKET INTELLIGENCE DFW AIRPORT

HLC OUTLOOK The Dallas-Fort Worth (DFW) Airport industrial submarket vacancy rate is 8.5% at the end of 2Q 2020 with YTD absorption totaling 530,626 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, Fresenius Medical and many others.

ANDREW GILBERT

JIM BRICE

Market Director agilbert@holtlunsford.com 972.280.8312

Absorption

Partner - Business Development jbrice@holtlunsford.com 972.280.8306

vs. Prev. Qtr

vs. 12 Mths Ago

342,287

188,339

1,983,337

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

8.5%

7.0%

7.4%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,707,063

2,945,617

2,137,595

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

5,568,533

6,914,348

2,980,209

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,616,815

240,461

2,349,472

VITAL STATS

9.0%

2,400,000

8.0% 1,900,000 7.0%

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

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 the southern portion of the submarket.

TOP LEASE TRANSACTIONS • Amazon has signed a 428K SF renewal in 2700 Regent Boulevard with Invesco.

• AmeriPac has signed a 401,580 SF lease in 951 Mustang Drive with Prologis.

• Union Supply has signed a 311K SF lease in 2500 Regent Boulevard with Invesco.

• LegendzWay Distribution has signed a 267,575 SF lease in 2600 Market Street with Bandera.

• GE Aviation Systems has signed a 180,417 SF lease in 3001 & 3051 W Airfield Drive with Clarion Partners.

• Furniture of America has signed a 101,149 SF lease in 2601 W Airport Freeway with Bandera.

• Arizona Tile has signed a 100,389 SF renewal in 2701 Regent Boulevard with Blackstone.

• 2900 Genesis Way – a 404K SF build-to-suit development with 85K SF available for lease • Majestic Airport Center DFW – a 285K SF two (2) building project with Majestic • Lakeport 2499 – a three (3) building project with EastGroup

LARGE EXISTING VACANCIES • • • • •

2700 Market Street – 374,812 SF 180 N Freeport Parkway – 142,080 SF 709 Enterprise Drive – 125,975 SF 4050 N State Highway 121 – 120K SF 217 Wrangler Drive – 115,200 SF

1,400,000

6.0% 5.0%

900,000

4.0%

400,000

3.0% (100,000) 2.0% (600,000)

1.0% 0.0%

(1,100,000) 2Q 17

3Q 17

4Q 17

Absorption

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Deliveries

2Q 19

3Q 19

4Q 19

1Q 20

2Q 20

Vacancy

Source: CoStar 2Q 2020 Industrial Report

NEW DEVELOPMENTS • DFW Park 161 – a 2.5M SF four (4) building project with Perot Development Company • Passport Park – a 2M SF four (4) building project with Trammell Crow, set for completion in 3Q 2020 • Passport Logistics Center – a 1.2M SF three (3) building project with Dalfen Industrial, set for delivery in 3Q 2020 • Mustang Park – a 1M SF three (3) building project with Prologis, set for completion in 4Q 2020

11

SUBMARKET INTELLIGENCE NORTHEAST/EAST DALLAS

HLC OUTLOOK

JOSH BARNES

Although COVID-19 has had its effect, the Northeast/East Dallas submarket has continued to perform well through 2Q 2020.

Several large renewals have been good news throughout the market as they committed long-term with rent increases to levels expected prior to COVID19. Activity in the smaller incubator spaces has remained strong with several new leases being signed while other “non essential” businesses continue to struggle. All eyes should be on the significant amount of inventory coming online in East Dallas. It will be important to watch the pre-leasing activity throughout these numerous projects as the draw for quality labor continues to be its primary calling card. With the increased competition in this area we have a close eye on concessions as developers race to capture the highest quality tenants.

BEN WALLACE

Senior Vice President jbarnes@holtlunsford.com 972.280.8353

Market Director bwallace@holtlunsford.com 972.421.1966

TOP LEASE TRANSACTIONS • Midwest Air Technologies has signed a 259,200 SF renewal in 2300 Skyline Drive with IDI Logistics.

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

158,938

254,193

(354,281)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

7.2%

6.9%

5.3%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

renewal in 3801 Regency Crest with Barings.

• Whitestar Logistics has signed a 137,800 SF lease in 2750 N Miller Park Drive with Primera.

555,074

822,621

625,066

vs. Prev. Qtr

vs. 12 Mths Ago

• Intrapack Industries has signed a 131,436 SF

HLC Deal

renewal in 10560-10650 Markison Road with Taurus.

1,923,362

1,261,000

469,326

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

259,150

• Parker Hannifin has signed a 144,750 SF lease in 510 N Peachtree Road with Clarion.

U/C SF

351,498

• Anderson Windows has signed a 223,569 SF

• Texas Wholesale Computers has signed a 81,263

HLC Deal

SF lease in 2755 N Miller Park with TA Realty.

97,326

• Kapstone Container has signed a 62,158 SF lease

HLC Deal

VITAL STATS

8.0%

950,000

7.0%

800,000

6.0%

650,000

5.0%

500,000 350,000

4.0%

200,000 3.0% 50,000 2.0%

(100,000)

1.0%

(250,000)

0.0%

(400,000) 2Q 17

3Q 17

4Q 17

Absorption

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Deliveries

2Q 19

3Q 19

4Q 19

1Q 20

2Q 20

Vacancy

Source: CoStar 2Q 2020 Industrial Report

12

in 5181 Samuel with Prologis

• DAC Vision has signed a 47,006 SF renewal in 3630

HLC Deal

W Miller Road with TA Realty

DEALS IN THE MARKET • 4040 Forest Lane – Fort Capital is selling a 649,361 SF building that is currently occupied primarily by At Home.

NEW DEVELOPMENTS • Urban District 30 – a 980,700 SF five (5) building spec project with Urban Logistics Realty

• East Dallas Logistics Center – a 545,547 SF two (2) building spec project with Dalfen

• Marquis Distribution Center – a 355,071 SF two (2) building spec project with Huntington/Link Industrial • 5351 Samuell Boulevard – a 198,109 SF two (2) building spec project with Conor Commercial • Shiloh Business Center – a 131,960 SF cross-dock spec development with TA Realty

LARGE EXISTING VACANCIES • 3000 Skyline Drive – 753K SF • 4624 Clover Haven Street – 584,089 SF • 5151 Samuell Boulevard – 442,035 SF • 2901 W Kingsley Road – 390,650 SF • 3800 Leon Road – 183,124 SF

SUBMARKET INTELLIGENCE FAR NORTHEAST DALLAS

HLC OUTLOOK Far Northeast Dallas has continued to perform extremely well in the midst of COVID-19. With nearly 2M SF under construction from Richardson to McKinney, activity has remained strong on both existing and under construction assets. Far Northeast Dallas was able to close a number of larger-size deals in 2Q 2020 with increased activity from manufacturing companies. Additionally, activity larger than 50K SF has remained strong, thus we expect another solid quarter of absorption. As some local credit tenants struggle, we have seen a rise in entrepreneurial spirits looking to take this as an opportunity, creating an absorption equilibrium in the smaller incubator space assets. Larger activity (north of 150K) is increasing across Far Northeast Dallas, creating an increase in pent up demand for an area that is set to experience some of the largest population growth for the next decade.

JOSH BARNES

BEN WALLACE

Senior Vice President jbarnes@holtlunsford.com 972.280.8353

Market Director bwallace@holtlunsford.com 972.421.1966

TOP LEASE TRANSACTIONS • Airbus has signed a 58,402 SF lease in 2920 E Plano Parkway with Provident Realty Partners.

• Newline Interactive has signed a 48,160 SF lease in 2930 Telecom Parkway with Jackson Shaw.

• Coats Natural Technology has signed a 38,025 SF lease in 640 International with DSP Partners.

• BNY Mellon has signed a 31,040 SF lease in 1501 Plano Road with Prattco Creekway.

• CEGS has signed a 27,900 SF lease in 2920 E Plano Parkway with Provident Realty Partners.

HLC Deal

Absorption

vs. Prev. Qtr

703,807

395,580

vs. 12 Mths Ago 718,801

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

6.6%

7.5%

7.1%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

HLC Deal

388,947

780,222

1,971,344

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,075,790

900,668

679,890

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

230,000

VITAL STATS

9.0%

1,500,000 8.0%

1,350,000 1,200,000

7.0%

1,050,000 6.0%

900,000 750,000

5.0%

600,000

4.0%

45 0,000 300,000

3.0%

150,000

2.0%

0 (150,000)

1.0%

(300,000)

0.0%

(450,000) 2Q 17

3Q 17

4Q 17

Absorption

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Deliveries

2Q 19

3Q 19

4Q 19

1Q 20

2Q 20

Vacancy

Source: CoStar 2Q 2020 Industrial Report

NEW DEVELOPMENTS • Encore Wire McKinney – a 720K SF development • CORE5 Logistics at McKinney | Phase 1 – a 431,234 SF two (2) building spec project with Core5 Industrial Partners • Cowboys Merchandising Distribution Center – a 407,918 SF build-to-suit development with Blue Star Land • McKinney Trade Center – a 367,455 SF three (3) building spec project with ML Realty Partners • Amazon Build To Suit – a 248K SF build-to-suit development with Stonemont Financial Group • McKinney Airport Center – a 231,192 SF two (2) building spec project with Stonemont Financial Group • 2900 E Plano Parkway – a 176,854 SF two (2) building spec project with Provident • Star Commerce Center II – a 141K SF rear-load spec development with Blue Star Land • Shiloh Business Center – a 131,960 SF cross-dock spec development with TA Realty

• University Business Park – a 120K SF build-to-suit development with Heady Investments • Prestige Circle – a 27,956 SF spec development with Gillett Commercial

DEALS IN THE MARKET • Shutterfly BTS – Core5 is selling a 237K SF build-to-suit building

LARGE EXISTING VACANCIES • • • • • • •

915 Enterprise Boulevard – 195,743 SF 15815 Executive Drive – 187,108 SF 105 W Bethany Drive – 150K SF 16005 Gateway Drive – 141K SF 2910 Telecom Parkway – 136,216 SF 3000 E Plano Parkway – 105,880 SF 3605 E Plano Parkway – 100,320 SF

13

SUBMARKET INTELLIGENCE NORTHWEST DALLAS

HLC OUTLOOK

ANDREW GILBERT

JIM BRICE

Market Director agilbert@holtlunsford.com 972.280.8312

Absorption

Partner - Business Development jbrice@holtlunsford.com 972.280.8306

vs. Prev. Qtr

vs. 12 Mths Ago

8,300

(35,103)

888,184

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

5.3%

5.3%

5.5%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,152,703

1,784,742

3,004,569

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,505,891

2,553,374

2,680,211

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

47,483

307,938

634,564

Through 2Q 2020, the Northwest Dallas industrial submarket continues to be one of the strongest submarkets in the DallasFort Worth metroplex. The submarket posted a 5.3% vacancy rate at the end of 2Q 2020 which is equal to the vacancy rate at the end of 1Q 2020. The last few smaller land sites are tied up as Billingsley and Panattoni have broken ground and will be complete in 3Q 2020. Billingsley’s new developments can accommodate users between 20K to 175K SF and Panattoni is finishing its 159K SF building which can be a single or two tenant building. The size that generates the most demand in Northwest Dallas is between 25K and 150K SF, so each of the aforementioned developments are expected to succeed. Eastgroup and First Industrial are currently under construction on the next phase of their developments in Lewisville on Highway 121. Scannell and Exeter have broken ground on their new buildings in Denton on I-35 just south of Highway 380.

TOP TRANSACTIONS • Essilor Labs has signed a 159K SF renewal in 501 E Corporate Ridge with Duke Realty.

• HAECO has signed a 118,195 SF lease in 1625 Hutton with Prologis.

• Ruskin Rooftop Systems has signed a 106,140 SF renewal in 1625 Diplomat with DRA Advisors.

• Duro-Last Roofing has signed a 89,442 SF renewal in 2940 Eisenhower with Duke Realty.

• Image Micro Spare Parts has signed a 42,415 SF lease in 2100 Luna Road.

VITAL STATS

6.0%

1,250,000

5.0%

1,000,000

4.0%

750,000

3.0%

500,000

2.0%

250,000

1.0%

0

0.0%

(250,000) 2Q 17

3Q 17

4Q 17

Absorption

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Deliveries

2Q 19

3Q 19

4Q 19

1Q 20

2Q 20

Vacancy

Source: CoStar 2Q 2020 Industrial Report

NEW DEVELOPMENTS • Denton Crossing @ I-35 – a 1.2M SF four (4) building project with Scannell

• Exeter Westpark 1 – a 648,725 SF development with Exeter

• First Park 121 – a 434,200 SF development with First Industrial

• Mercer Business Park – a 246K SF two (2) building project with Billinglsey

• Valley View Crossing – a 159,405 SF development with Panattoni, set for completion in 3Q 2020

• Creekview 121 – a 136K SF two (2) building project with EastGroup

14

LARGE EXISTING VACANCIES • 1910 N Josey Lane – 259,900 SF • 2150 Midway Road – 219,808 SF • 2040 McKenzie Drive – 129,611 SF • 14325 Gillis Road – 98,500 SF • 1445 W Belt Line Road – 66K SF

SUBMARKET INTELLIGENCE SOUTH DALLAS

HLC OUTLOOK

JOHN GORMAN

The South Dallas industrial submarket, as surveyed, is 130M SF and is now 7.5% vacant which is 0.6% lower than reported in 1Q 2020. In accordance with the area surveyed, CoStar has reported 2.9M SF of net absorption for South Dallas in 2Q 2020. South Dallas has 1.9M SF under construction in the I-30, I-20, & I-45 corridors combined. Of that construction, 48%, or 923K SF, of the new construction is for build-to-suit or design build assignments. The remaining 52%, or 1M SF, under construction is speculative development. The southern corridors along I-20, I-30, and I-45 continue to produce new opportunities for development. Fortunately, the previous halt of construction by capital sources along I-20 and I-45 assisted the South Dallas submarket these past 9 months to join the remaining Dallas submarkets with single digit vacancy of 7.5%.

CANON SHOULTS

Senior Vice President jgorman@holtlunsford.com 214.920.9800

Managing Principal cshoults@holtlunsford.com 972.280.8328

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(226,655)

3,413,561

1,187,971

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

8.2%

8.0%

11.0%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

2,485,951

1,980,794

2,476,705

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

1,708,237

1,708,237

4,010,138

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

0

1,696,088

753,200

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

TOP LEASE TRANSACTIONS • Federal Express has signed a 776,629 SF lease in 3800 Cedardale Road with TCC/Morgan Stanley.

• Mars Petco has signed a 610,806 SF lease in 2801 Houston School Road with Crow Holdings.

• Optimized Logistics has signed a 121,766 SF lease in 3940 Pipestone Road with AEW. • DXP Enterprises has signed a 104,902 SF lease in 3631 W. Davis with Heitman.

• Weatherization Partners (Tyvek) has signed a 58,097 SF lease in 4001 Adler Circle with Brookfield.

VITAL STATS 14.0%

3,600,000

12.0%

3,100,000

10.0%

2,600,000 2,100,000

8.0%

1,600,000 6.0% 1,100,000 4.0%

600,000

2.0%

100,000

0.0%

(400,000) 2Q 17

3Q 17

4Q 17

Absorption

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Deliveries

2Q 19

3Q 19

4Q 19

1Q 20

2Q 20

Vacancy Source: CoStar 2Q 2020 Industrial Report

15

DEALS IN THE MARKET • 4900 Singleton Boulevard – Koch-Glitsch is selling

NEW DEVELOPMENTS • 9186, 9190, & 9280 Van Horn Drive – a 616,043 SF three (3) building project with Trammell Crow Company • 1101 E Pleasant Run – a 450K SF building • I-30 MacArthur Boulevard – a 392,220 SF spec development with Trammell Crow Company

LARGE EXISTING VACANCIES • 3535 N Houston School Road – 900,043 SF • SouthPointe 20/35 | Building 2 – a 660,312 SF spec vacancy

• 4775 Tinsley Road – 608,939 SF • 2200 Danieldale Road – 500K SF

a 30.64 acre development site.

• Turnpike Distribution Center | Urban Logistics Portfolio – Stonelake is selling a 1,272,837 SF multibuilding portfolio.

• I-35 Logistics Crossing | 2801 N Houston School Road – Crow Holdings is selling a 1.2M SF two (2) building portfolio in conjunction with Carter Distribution Center | 6633 Oak Grove Road – 1M SF building • 9314 W Jefferson Boulevard – NorthPoint Development is selling the Home Depot build-tosuit building.

15

SUBMARKET INTELLIGENCE SOUTH STEMMONS

HLC OUTLOOK

CANON SHOULTS

At the end of 2Q 2020, HLC’s South Stemmons industrial submarket posted a 4.7% 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 and more tenants taking advantage of the infill nature of the submarket. Absorption for 2Q 2020 totaled a negative 150,130 SF. This is because demand is not as strong for more than 50K SF in the submarket as it is for the smaller spaces. 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%. Regarding the smaller spaces, renewals have increased up to 100% in some cases. The massive demand for the 10K and 20K SF users in this market is steadily increasing as the need for accessibility and convenience increases. This is a key statistic as this size encompasses the majority of spaces in the submarket.

HARRISON PUTT

Managing Principal cshoults@holtlunsford.com 972.280.8328

Market Associate hputt@holtlunsford.com 972.265.0124

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(150,130)

(179,230)

(250,541)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

4.7%

4.2%

3.2%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

716,766

693,203

1,116,577

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

189,752

533,382

7,670

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

343,630

-

387,215

VITAL STATS

5.0%

650,000

4.0%

400,000

3.0%

150,000

2.0%

(100,000)

1.0%

(350,000)

0.0%

(600,000) 2Q 17

3Q 17

4Q 17

Absorption

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Deliveries

2Q 19

3Q 19

4Q 19

1Q 20

2Q 20

Vacancy

Source: CoStar 2Q 2020 Industrial Report

16

TOP TRANSACTIONS • Jenny Beauty Supply Co. has signed a 124,043 SF lease in 2527 Willowbrook Road with Ace Manor Property Management.

• Carcon Industries has purchased a 30,030 SF building at 535 Regal Row. • Stonelake has purchased a 22,402 SF building at 9224 King Arthur Drive.

• Oro Verde has signed a 19,791 SF lease in 5145 Norwood Road with Stonelake.

• Lebco has signed a 65,234 SF lease in 10676 King William Drive with EastGroup Properties.

• Stone Avenue has signed a 20,940 SF lesse in 8400 Ambassador Row with Prattco Creekway.

• SCL Cold Chain has signed a 15,885 SF lease in 2833 W Airport Freeway with Sealy.

• Total Quality Labels has signed a 13,724 SF lease in 4851 Cash Road with Boyd Earp.

• Nextgen Marketing LLC has signed a 11,940 SF lease in 1257 Security Dr with Hines.

• 4900 Singleton Boulevard – Koch-Glitsch is selling a 30.64 acre tract of land • 1330 Regal Row – a 250,770 SF building • 901 Regal Row – a 46K SF building

HLC Deal

HLC Deal

HLC Deal

NEW DEVELOPMENTS • Core 35 Logistics Center – a 388,822 SF two (2) building project with Crow Holdings, set for completion in 3Q 2020

LARGE EXISTING VACANCIES • 1330 Regal Row – 250,770 SF • 8801 Ambassador Row – 183,443 SF • 3200 Irving Boulevard – 112K SF • 9203 Chancellor Row – 95,549 SF • 7600 Ambassador Row – 66,915 SF • 10155 E Technology Row – 62K SF

SUBMARKET INTELLIGENCE NORTH FORT WORTH

HLC OUTLOOK

HOGAN HARRISON

GEORGE JENNINGS

Market Director gjennings@holtlunsford.com 817.632.6151

MATT CARTHEY

Partner mcarthey@holtlunsford.com 817.710.1111

Market Associate hharrison@holtlunsford.com 817.710.7058

As expected, the North Fort Worth submarket vacancy rate continued to trend upward, for the third quarter in a row, to a high water mark of 10.8% which is being skewed by the addition of another 2.7M SF delivered during 2Q 2020. Although the vacancy rate looks grim on paper, investors should not chalk this trend up to COVID-19 related hysteria. In fact, deal velocity remains strong with HLC having tracked 2Q 2020 absorption to be around 2.9M SF, as opposed to the 415K SF that CoStar has reported.

This continued positive absorption should stabilize the vacancy rate back to single digits as the market awaits the delivery of another 7.2M SF of speculative projects currently under construction, most of which are in the greater Alliance area. Shallow bay product also continues to perform at a high level in the Mercantile/Railhead market with a vacancy rate of 5%, most stemming from first generation space waiting to be absorbed. As a whole, the North Fort Worth submarket remains one of the most active markets in Dallas-Fort Worth with no major signs of a drop in leasing activity even through the global pandemic.

TOP LEASE TRANSACTIONS Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

415,340

1,901,929

828,312

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

10.8%

7.9%

6.8%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,471,857

2,940,226

774,713

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

7,298,337

11,103,515

11,922,194

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

2,718,044

2,612,287

400,000

VITAL STATS

12.0%

4,350,000 3,850,000

10.0% 3,350,000 8.0%

2,850,000 2,350,000

6.0% 1,850,000 4.0%

1,350,000 850,000

2.0% 350,000 0.0%

(150,000) 2Q 17

3Q 17

4Q 17

Absorption

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Deliveries

2Q 19

3Q 19

4Q 19

1Q 20

2Q 20

Vacancy Source: CoStar 2Q 2020 Industrial Report

• Ariat Boots has signed a 1,069,818 SF lease in 2 Haslet Country Road with NorthPoint Development.

• Amazon has signed a 1,023,488 SF lease in 15511 NE Loop 820 with Hunt Southwest.

• NFI Logistics has signed a 472,500 SF renewal in Alliance Gateway 72 with JP Morgan.

• A&R Logistics has signed a 299,810 SF lease in 400 E. Industrial Avenue with Morgan Stanley.

• WABTEC has signed a 265K SF lease in 2660 Petty Place with Scannell.

• WBC Group, LLC has signed a 91K SF lease in 15277 Heritage Parkway with Tramell Crow.

HLC • Mastertronics has signed a 50K SF lease in 2901 Northern Cross Deal Boulevard with GID Investment Advisors.

DEALS IN THE MARKET

• Speedway Logistics Crossing – Scannell is selling a 798,246 SF two (2) building portfolio in Alliance.

• 5501 Alliance Gateway – St. Croix Capital is selling a 215K SF building.

• Farmer Brothers Corporate Headquarters – Farmer Brothers is marketing its 535,585 SF corporate headquarters, distribution and manufacturing facility in Alliance for a 15-year saleleaseback.

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 • Intermodal Commerce Park – a 1.4M SF three (3) building project with Gruene Real Estate Partners • Synergy Crossing – a 1,098,487 SF two (2) building project with TCRG Properties • 820 ExChange – a 951,316 SF four (4) building project with Creation Equity/Walton Street • Alliance Center North 7 – a 810,908 SF development with Hillwood • Alliance Center North 3 – a 783,465 SF development with Hillwood • North Quarter 35 – a 644,989 SF four (4) building project with M2G Ventures • Highway 114 Distribution Center – a 570K SF development with Provident Realty Advisors • Alliance Northport 2 – a 460,248 SF development with Hillwood • Stanley Black & Decker – a 425K SF development with Hillwood

LARGE EXISTING VACANCIES • • • • • • • •

Alliance Westport 11 – 2M SF Trammell Crow at Eagle 35 | Building A – 1,089,642 SF Interstate Crossing – 1,023,488 SF Sunset Trade Center 2 – 677,429 SF Mark IV Commerce Park | Building 1 – 581K SF Northwest Commerce Park | Building 1 – 473,894 SF 2112 Eagle Parkway – 407,800 SF Alliance Gateway 2 – 303,458 SF

17

SUBMARKET INTELLIGENCE SOUTH FORT WORTH

HLC OUTLOOK

MATT CARTHEY

The South Fort Worth industrial submarket posted a 2Q 2020 vacancy of 4.0%, a figure down from 4.4% in 1Q 2020 which is the lowest 2Q vacancy rate out of all major industrial DFW submarkets. This decrease in vacancy is due to no new deliveries in the first two quarters coupled with the fact that 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 457K SF four (4) building project, is 60% leased. However, we expect to see this vacancy rate increase in 3Q and 4Q 2020 due to the delivery of projects like Crow Holdings and Rob Riner Companies 1,058,844 SF four (4) building spec project, which will be complete early 3Q 2020. Black Creek Group has panels tilted on its 569K SF three (3) building project located on the southwest corner of Joel East and Oak Grove and is slated for completion in 4Q 2020. Also in the mix with panels tilted and anticipated 4Q 2020 delivery is Majestic’s 489,150 SF two (2) building project at its Fort Worth South Business Park. If these projects are completed according to schedule the submarket will have more than 2.1M SF of spec development delivered in the next six months.

THOMAS GRAFTON

Partner mcarthey@holtlunsford.com 817.710.1111

Market Associate tgrafton@holtlunsford.com 817.632.6152

Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

221,874

656,168

110,250

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

4.0%

4.2%

2.9%

Leasing Act.

vs. Prev. Qtr

vs. 12 Mths Ago

1,281,496

1,253,356

488,610

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

South Freeway with Koldaire Supply.

• Triton Environmental, LLC has signed a 15K SF lease

3,224,971

783,192

Delivered SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

TOP LEASE TRANSACTIONS • Printed Threads has signed a 20,840 SF lease in 210 HLC Deal

3,202,171 22,800

In terms of 2021 speculative development in south Fort Worth, the pipeline is extremely robust. Two projects have recently broken ground and are in the process of installing utilities. These projects include Jackson Shaw’s three (3) building 562,670 SF spec development, 46 Ranch Logistics Park, and Industrial Realty Group’s 212,175 SF front loader. There are also two additional proposed developments that will likely be put into production later on in 2020. These projects include Ascendant Commercial’s 858,420 SF crossdock and VanTrust’s 670,914 SF crossdock. Both developments will not begin dirt work till later in 2020. While there is still upwards of 4.7M SF of proposed development in the pipeline, we do not expect all sites to be put into production in the next year with the exception of Crow Holdings Capital/Clarion/Rob Riner Co., TCRG and Bandera (should close late 3Q).

Additional major land holdings are controlled by Majestic, Mereken Land, Hillwood, Agellen and TCRG who are pursing build-to-suits.

in 1317 Eden Drive with WC Jennings.

• Novartis has signed a 13,294 SF lease in Everman

346,066

HLC Deal

Trade Center, Building D with TA Realty.

VITAL STATS

12.0%

4,350,000 3,850,000

10.0% 3,350,000 8.0%

2,850,000 2,350,000

6.0% 1,850,000 4.0%

1,350,000

DEALS IN THE MARKET • 2200 Heritage Parkway – a 459,868 SF building • 3131 W Bolt Street – a 136,570 SF building • 412 W Bolt Street – a 114,190 SF building • 600 S 2nd Street – a 81,154 SF building • 1300-1350 E Berry – a 74,366 SF building

850,000 2.0% 350,000 0.0%

(150,000) 2Q 17

3Q 17

4Q 17

1Q 18

Absorption

2Q 18

3Q 18

4Q 18

1Q 19

Deliveries

2Q 19

3Q 19

4Q 19

1Q 20

2Q 20

Vacancy

Source: CoStar 2Q 2020 Industrial Report

18

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 569K SF three (3) building project with Black Creek Group

• 46 Ranch Logistics Park – a 562,669 SF three (3) building project with Jackson Shaw

• Fort Worth South Business Park | Buildings 2 and 3 – a 489,150 SF two (2) building project with Majestic Realty • 5054 South Freeway – a 212,175 SF development with Rob Riner Companies and Industrial Realty Group • 501 Easy Drive – a 173,603 SF building expansion with Klein Tools

LARGE EXISTING VACANCIES • 7550 Oak Grove Road – 498,475 SF • 6601 Oak Grove Road – 264,125 SF • 6633 Oak Grove Road – 135,141 SF (Sublease) • 6445 Will Rogers Boulevard – 122,500 SF (Sublease) • 412 W Bolt Street – 114,190 SF • 8300 South Freeway – 106,308 SF

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