Since the economy bounced back from the Great Recession, some 50 developers built industrial product across North Texas. Almost two dozen of those groups were new to the market. That’s a signal of something pretty special, says Majestic Realty Co VP Al Sorrels. He’s not the only one to think industrial made a love connection with investors.
Al (right, with C-III Capital Partners’ Joe Akers) says DFW’s industrial appeal has a variety of factors from population accumulation to good weather and distribution arteries. Additionally, incentives from cities and the state are better than anywhere else. Dallas and Texas will continue to be a huge hotbed for years. Life companies are long-term holders like Majestic, Al says, and their outlook has been, and will remain, very bullish on industrial. As e-commerce continues to grow—from 9% of all sales now and projected to grow to 15% by 2018—the demand is strong for new product. However, Al says the future is unclear on how e-commerce will evolve from huge distribution centers into smaller ones for same-day delivery or into something else.
DFW’s industrial market has matured into a top four choice nationally, says Holt Lunsford Commercial principal John Gorman (right, with FCL Builders director Cory Singer, panel moderator). DFW makes sense because of its location and it’s a safe investment because it’s a place tenants want to be, he says. Foreign investors consider it especially safe when looking at the global economy, he says. His concern is the control of new supply coming out at the same time. For now, John says, he’s enjoying this unique time with rent growth and stable vacancy levels.
E-commerce is a buzz word, but it’s a misnomer, says Dalfen America Corp president & CIO Sean Dalfen (right, with Bank of America Merrill Lynch’s Jeff Hendricks). The phrase should simply be commerce, because it’s just a new way of doing business today, he says. It’s driving business because companies need to locate where people are, and DFW has 7 million people and growing. Add in low taxes, great climate and low cost of living, and DFW is a natural location, he says. He says most foreign capital is underinvested in industrial because it’s not a sexy segment and it’s hard to put $100M into one transaction (something more easily done with an office building). But, he agrees industrial is seen as a safer asset class with lower turnover, lower levered and lower costs.
DCT Industrial moved into ground-up development in the past few years because the ever-increasing competition for industrial acquisitions gave most of the value to the sellers, says DCT SVP Art Barkley. Development provides the best opportunities to grow and create the best value for shareholders, Art says. Relationships with brokers have made a big difference in finding the sites most in demand by users. DFW industrial metrics remain positive with historically low vacancy rates amid record construction starts. DFW is also in its fifth consecutive year of above-average absorption and rental rates continue to rise. The table is set for a great run for the next 20 years here as employers and employees alike want to come to Texas, he says. Pictured: JLL’s Terry Darrow, Art, JLL’s Craig Jones, Cory, Hillwood’s Toby Rogers and East Group Properties’ David Hicks.