DFW In Top Three for Industrial Development, Investments

DALLAS—The US industrial real estate market had a solid year in 2018 and has continued to strengthen through the first quarter of 2019. Industrial rents are on an upward path, while the construction pipeline is healthy and development is spurred on by the e-commerce sector, according to COMMERCIALCafe’s recent pipeline report.

In terms of development, 2019 is poised to bring continuity and stability, as the total square footage scheduled for delivery by year-end is set to match the total pipeline volume of 2018. Last year, developers brought 270 projects totaling 105.7 million square feet of new industrial space to the US market, while in 2019, 304 projects and 104.6 million square feet are expected to be delivered.

“Chicago, the Inland Empire and Dallas-Fort Worth are still the top three destinations for industrial construction, just as in 2018,” COMMERCIALCafe’s Ioana Neamt tells GlobeSt.com. “Investors are betting big on multi-building industrial campuses, as the 10 largest projects scheduled for 2019 delivery all feature more than one building. December is likely to be the busiest month of the year, with the three largest projects scheduled for completion during the final month of 2019.”

Dallas-Fort Worth holds up as the third most attractive market for industrial development going forward this year, with 57 projects totaling roughly 18 million square feet expected to become available, according to the report. In fact, Yardi Matrix tells GlobeSt.com that the most active owners of industrial property by square footage this year will be Crow Holdings at 2.24 million square feet (five projects), Hillwood at 2.16 million square feet (four projects) and Trammell Crow at 2.01 million square feet (three projects).

Buildings 1-4 of Passport Park in Irving make up the second largest US industrial project of the year. Owned by Trammell Crow, the development is scheduled for December and amounts to 2 million square feet. Two other projects part of the DFW market made the top 10, a list which only includes developments that feature more than one building.

Another survey of commercial real estate investors ranked Dallas-Fort Worth as one of the top investment targets among Americas metros. Investors listed DFW the second most desirable investment market for the third year in a row, behind only Los Angeles, according to CBRE’s 2019 Americas Investor Intentions Survey.

“We are seeing unprecedented investor interest for industrial and logistics properties in Dallas-Fort Worth coming not only from US investors, but also global capital from Asia, primarily Singapore, Europe and the Middle East,” said Randy Baird, CBRE executive vice president, industrial and logistics. “DFW is capturing the interest of all forms of capital because we are at a central point in the US supply chain, we have a pro-business environment with a low cost of doing business and we have nation-leading population growth. Investors are attracted not only by the current market fundamentals, which are stronger than ever, but by the long-term view that DFW and Texas as a whole will continue to outpace the country in population and job growth, translating to long-term asset appreciation.”

The survey, which covers all asset types, found in 2019, more investors are prioritizing secondary markets that can offer greater potential for both equity and income growth. Investor interest in secondary assets increased for the fifth consecutive year (33%) to gain significant ground on value-add (37%) as the most preferred strategy.

The survey also examined how investors view each of the different asset types: Industrial and logistics is still the preferred property type, cited by 39% of investors as the most attractive for investment in 2019. Multifamily closely followed in second place, with 37% of investors naming it as the next most attractive property type—up from 20% in 2018. Office was cited by 10% of investors as the most attractive for purchase in 2019. Retail’s share of investors (9%) has held essentially steady during the past three years, despite competition from e-commerce.

“In terms of multifamily investment, DFW has been attractive to capital due to the staggering economic growth we have seen through this cycle, resulting in strong absorption and rent growth in the multifamily space,” said Jeremy Faltys, CBRE senior vice president, multifamily. “This economic growth paired with multifamily being viewed as the most recession-proof asset class has led to unprecedented flows of capital into the multifamily space.”

Overall, the survey shows that investors will remain active in commercial real estate markets this year, with 98% of respondents intending to make acquisitions. There has been a pronounced shift toward greater caution, with the share of investors planning to either maintain or increase spending in 2019 falling to 75% (from 88% in 2018).

“Continued strong real estate fundamentals, combined with historically deep debt and equity capital markets, provide good momentum for 2019. Investors are reducing risk and protecting income streams through diversification. Pricing is at or near the previous peak for most asset types in prime locations, so investors are seeking yield in secondary markets and alternative asset types,” said Chris Ludeman, global president, capital markets, CBRE.

GlobeSt. (2019, Aprl 24). DFW In Top Three for Industrial Development, Investments [Blog post]. Retrieved from https://www.globest.com/2019/04/24/dfw-in-top-three-for-industrial-development-investments/?slreturn=20190402121635

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