DFW’s industrial market – still working to reach balance
DFW remains a preferred logistics hub due to its central US location, strong multimodal access options, and affordability. At the most basic level, DFW’s industrial vacancy looks to have been spiking, up from a consistent 6% to 7% over the last decade to 11% in 2024. This is well above the overall market’s 8.4% long-term average vacancy.
While some sources push the “out of balance” story, market fundamentals are more nuanced when examined closely. As we highlighted in our quarterly report, this vacancy increase is largely due to new deliveries that were developed as spec product and are still in initial lease-up.
As we examined construction trends, DFW’s evolution into a logistics hub became clear. Over the long-term past, typically 10–12 msf of industrial product came online annually. While development was ramping up over those years, even the 2000 to 2017 period saw only 13–14 msf developed annually. From 2016 to 2018, DFW’s construction rose rapidly as 24–25 msf hit the market each year.
Since then, activity has moved higher, with 2019 to 2022 annual development hitting almost 32 msf—close to 2½ times 2000–2017’s average annual deliveries. This also does not reflect the 67 msf spike in 2023. With that much space hitting the market, a leasing overhang began to occur. As of Q4 2024, 2022 deliveries (which should be fully leased) are still 14.9% vacant and 2023 assets sit at almost 40%.
After this delivery rush, DFW’s pipeline slowed—the market adding only 39 msf in 2024. While still elevated, this development scale is not unfounded. Rather, it will take more time to absorb all this new product as DFW continues to evolve into a more dominant logistics hub. We believe balance will return and vacancy will improve as these new properties stabilize.
This is because demand remains high as evidenced by better than average vacancy in DFW’s stabilized properties across all age tiers. In fact, even though vacancy did tick up slightly between Q4 2023 and 2024, all vintages are well below the DFW’s current 11.0% rate—and even below the market’s long-term 8.4% average.
Higher development and land costs, as well as elevated interest rates, are slowing development across the US. This pause should allow DFW’s newest assets to lease up and bring vacancy down closer to its long-term average over the next several quarters.