Dallas Fort-Worth industrial market report
Q1 2024
DFW’s economy is experiencing continued growth. Even after the Bureau of Labor Statistics’ recent revisions, the area’s total job base has risen by 9% since the end of 2019 and continues to hit new job peaks. Industrial jobs rose by 10.4%, or 77,000 new jobs in warehousing, wholesale trade, and manufacturing since year-end 2019. DFW’s industrial sector now totals more than 814,000 jobs.
Even with this strong economy, DFW’s industrial vacancy has continued to rise. As of Q1 2024 it was recorded at 11.1%, up from 9.9% at year-end 2023, and higher than the region’s long-term average of 8.4%. This is mostly due to a lag in lease-up of its significant development pipeline.
For assets delivered in 2020 and 2021, demand has been solid. Vacancy in those properties is well below the regional average. In comparison, buildings delivered in 2022 are roughly 18% vacant and 2023 deliveries are at 55% vacancy, both an improvement of roughly 2-percentage points since the end of 2023. These assets, as well as Q1 2024 deliveries are still in the initial lease-up.
Even with this strong economy, DFW’s industrial vacancy has continued to rise. As of Q1 2024 it was recorded at 11.1%, up from 9.9% at year-end 2023, and higher than the region’s long-term average of 8.4%. This is mostly due to a lag in lease-up of its significant development pipeline.
For assets delivered in 2020 and 2021, demand has been solid. Vacancy in those properties is well below the regional average. In comparison, buildings delivered in 2022 are roughly 18% vacant and 2023 deliveries are at 55% vacancy, both an improvement of roughly 2-percentage points since the end of 2023. These assets, as well as Q1 2024 deliveries are still in the initial lease-up.
2.2 | 11.1 msf
Absorption and leasing activity drop to more historic levels
At 2.2 msf for the quarter, absorption was a small share of the annual 30-40+ msf it hit the last few years. Likewise, leasing activity pulled back to 11.6 msf in Q1. While a notable deceleration from what had become “normal” in DFW the last several years, it is actually 27% ahead of its longer-term quarterly average of 9.1 msf.
11.1%
Vacancy rises to near historic high, but it’s different this time
Q1 vacancy rose to 11.1%, up from 9.7% at year-end. It last hit this level in the early 2000s after the tech bust and again in 2009–2010 during the recovery from the Great Recession. Rather than the deep demand decline that drove the past increases, this time the increase is almost entirely due to the lag in lease-up of DFW’s extraordinarily high development pipeline.
8.23
Rents continue to increase dramatically
Industrial rents hit $8.23 psf in Q1, reflecting a 27% increase in the last year. Despite this, DFW remains an affordable logistics hub compared to most, but the dramatic shift is creating sticker shock among space users, developers, and investors.
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