There has been a sentiment expressed among some in the industrial real estate sector that, with all the big deals in the market, if they all get done, we’ll be running out of large spaces. You can understand how this might not sound crazy, when you consider that in the last two quarters, the Dallas-Fort Worth market has absorbed about 4.5 million square feet of industrial space. Compare that to the end of the third quarter of 2010, when year-to-date absorption was about … zero. So activity has picked up pretty dramatically within the last six months.
Size is relative. So let’s say we’re talking about warehouses that are 400,000 square feet and larger. What big boxes are out there, and how many deals are in the market?
Right now I count about 20 buildings, ranging from 400,000 square feet up to Majestic Realty’s 1 million-square-foot facility. Second in size to that is CB Richard Ellis’ 887,800-square-foot property on Beckleymeade Avenue in South Dallas. The good news is that Majestic has a short-term tenant in its building for the rest of 2011, and CBRE has a couple of viable prospects for its entire facility. So, in fact, when you consider that particular size option, a couple of deals could get signed, and we’d be out of the biggest bombers to lease.
Not yet showing up on absorption statistics are a couple of large transactions: KidKraft is taking 500,000 square feet in a building at D/FW International Airport; and Navistar is taking Hillwood’s Garland building. That’s two new deals of more than 400,000 square feet each that have just been signed.
Another deal is expected to land soon that would take half of a 527,000-square-foot building in Coppell. And although it may not be new absorption, it’s now possible Amazon may stay in its huge Irving facility stay for a while. So, when you consider the space in and around North DFW Airport, the squeeze is definitely tightening on very large spaces.
Of course, submarkets matter. When you look at the available buildings south of Dallas and south of Fort Worth, those tend to take a while to get leased. No secret there. But when the third-party logistics companies are looking for cost-effective large spaces, those buildings will certainly be considered.
Alliance in North Fort Worth has a few facilities available, as does IDI with its building near the Texas Motor Speedway. History has shown that this area can lease very quickly, given the tenant mix currently in that area.
South of D/FW Airport, tenants will find 728,000 square feet of available space, and scattered around North Texas are a several 500,000-square-foot-plus buildings that are designed for a single tenant, making them more challenging to lease. I’m told there are a few big deals out there looking at all of these options. But we’ve seen it before; some will make and some will simply renew where they are or fade away.
Here’s the bottom line: If a company doesn’t have to be in the North D/FW Airport area, and it’s not looking for 800,000 square feet, it should have several great options for the next year or so. But, just in case leasing continues at the current pace, there are a couple of developers getting their sites “pad-ready,” eager to pull the trigger on that next big box.
Allen Gump is executive vice president of the industrial division at Colliers International. Contact him at firstname.lastname@example.org.