With 2013 well underway, we’re certainly seeing an upswing in industrial activity at AllianceTexas, highlighted by the recent Amazon announcement and our record year of leasing activity. As market occupancy continues to rise, I and others agree that it will support the development of spec industrial projects.
Each year around this time, members of the Hillwood team are invited to provide insight on the current state of the commercial real estate market here in North Texas, as well as how we stack up to the rest of the nation. In late January, Hillwood Senior Vice President Bill Burton presented an industrial market overview during the Tarrant County Commercial Real Estate Forecast, and there are some really great numbers from his presentation I’d like to share.
Once again, at the end of 2012, Dallas-Fort Worth represented the fifth-largest industrial market in the nation. And, of the top five, it had the second-lowest vacancy rate at 8.9 percent—nearly a full percentage point lower than the previous year. This one-year difference is good news, but a look back at the past five years shows how this recovery has come to fruition.
At the end of 2007, just before the financial crisis began, DFW had net absorption of 18.7 million square feet, with a vacancy rate sitting at 8.1 percent. Just two years later, during the darkest days of the recession, net absorption was nearly 9 million square feet underwater (a two-year drop of more than 23.6 million square feet), with the vacancy rate hitting 11.3 percent.
Just two years ago, net absorption was still 1.2 million square feet in the red, and our vacancy rate hit a peak of 11.3 percent. Things were looking pretty bleak; I recall a Mar. 18, 2011 headline in The Dallas Morning News proclaiming “An Industrial Drought.” At the time, and even though our retail and office activity was performing well, AllianceTexas had a little over 3 million square feet of industrial to fill.
What a difference two years can make. For those of us that have been in this business (or any business, for that matter) for an extended period, we’ve seen this cycle happen before. And, sometimes the highs can be incredibly high—and the lows even lower! But, it’s part of how our market works, and it’s always the lows that make us a little wiser.
With the election behind us and the market stabilizing, much of the uncertainty of the past few years is, hopefully, distancing. Hillwood continues to take a long-term approach, investing for the next decade. We’re going to be focused on emerging market trends, like e-commerce fulfillment, which will open up new industrial opportunities in the years to come.