Where’s the Industrial Space Going?
Industrial vacancies across Dallas are still at historically low levels (around 6.6%), but the tight space should be alleviated later this year when about 12M SF of spec development is set to be delivered, according to Avison Young research released earlier this week. Avison Young SVP Matt Middendorf tells us significant tenant demand, coupled with conservative development in 2013, has caused market fundamentals to tighten significantly during the past year.
At the end of the Q1, 24% of the space under construction was pre-leased, Matt says. Many large build-to-suits, such as Quaker’s and BMW’s distribution buildings, made headlines in the beginning of 2013, but development has largely shifted toward spec construction. Matt tells us in the past year or so, the landlords with 350k SF and up were patiently waiting for tenants, because that’s what the market was showing them. The tenants wanting less than that were left wondering when the 100k SF to 150k SF space would become available; now we’re starting to see the mid-size distribution space buildings under construction, Matt tells us.
There’s other distribution centers and inventory existing in that size range, but not the modern facilities that the tenants desire. Raymond Construction’s Charles Raymond is building one facility about this size and he’s in talks to build another, Matt says. Matt thinks space will continue to fill as out-of-state companies look to North Texas to set up shop (and to avoid state income tax taking chunks of their personal incomes). A prime example is a recent deal he worked: the sale of a 261k SF former semiconductor plant at 105 W. Bethany Dr in Allen to California-based MonkeySports for the firm’s distribution center, corporate HQ, and showroom. Matt repped the buyer with Venture’s Theo Thompson’s referral. JLL’s Nathan Durbin, Terry Darrow, and Melissa Holland repped the seller. Away from the industrial parks, he’s chasing around 10-year-old Grace and almost 8-year-old John with his wife, Stephanie.
