Dallas+Fort Worth Industrial Market Maintains MomentumLeasing And Absorption Resume After Pausing In March/April

E X ECU TI V E SU M M A RY

Major Market Highlights: � Absorption remained positive this quarter while large users—

especially those in e-commerce and related sectors—continued leasing and absorbing space

� Vacancy inched up to 7.1% with new deliveries but remains about 150 bps below the long-term average

� The construction pipeline is tapering from its historic highs as speculative construction adjusts timing to match current market conditions

� As expected, investment sales showed a sharp decline in transaction volume of 85%. Pricing and cap rates were elevated as Flex carried a large share of transactions

LE A SING , DE M A N D, A N D VAC A NC Y

Leasing Activity Rebounds, Absorption SolidAfter slowing drastically in March and April, leasing activity rebounded in May and June to finish the quarter at 12.5 MSF, in line with average levels of the past few years. The majority of new leases were signed by large users while mid-size and small users were more likely to sign renewals or short-term extensions.

Net absorption finished the quarter at 5.1 MSF to reach 25.1 MSF on a T-12 basis. Market-level vacancy inched up 31 bps to 7.1% with Warehouse/Distribution vacancy increasing by only 19 bps to 7.4%. Absorption dynamics showed normal levels of gross absorption (i.e. move-ins to vacant space) and no significant rise in negative absorption from move-outs.

Stable move-out levels suggest that small business programs such as PPP loans are succeeding in preventing business failures

INDUSTRIAL MARKETQ 2 2 0 2 0 | D A L L A S + F O R T W O R T H

TRENDLINES

5-YEAR TREND CURRENT QUARTER

N E T A BSO R P T I O NN E T A BSO R P T I O NOverall Vacancy

X

5.1 msfYTD absorption is positive 13.8 MSF, up from last year

VAC A N C YVAC A N C YOverall Vacancy

7.1%56.8 MSF currently vacant, up 50 bps from last year

I N D US T R I A L R E N TA L R AT E (N N N)I N D US T R I A L R E N TA L R AT E (N N N)

$4.80 psfUp $0.11 PSF or 2.3% from last year

F L E X R E N TA L R AT E (N N N)F L E X R E N TA L R AT E (N N N)Flex Rental Rates

X$9.67 psfDown 2.4% from last year overall, varies by submarket

CO N S T RU C T I O NCO N S T RU C T I O N

23.8 msf Down 7.5 MSF from last quarter

Q 2 2 0 2 0 | D A L L A S + F O R T W O R T H | I N D U S T R I A L M A R K E T

Q2 2020 | DALLAS+FORT WORTH | INDUSTRIAL MARKET | 2

SU PPLY A N D DE V E LOPM E NT

Construction Pipeline Begins Tapering Deliveries this quarter totaled 9.8 MSF, bringing total deliveries over the last 12 months to 29.6 MSF or 3.8% of inventory. Large deliveries include Amazon’s distribution center in South Stemmons (2.3 MSF), 2 MSF of speculative space at Alliance Westport 11, and Goodyear’s 1.2 MSF facility in Forney.

Dallas+Fort Worth still leads the nation in new construction even as the pipeline ramps down to 2018 levels of 23.8 MSFWe expect further tapering in submarkets such as Alliance and DFW Airport as the market absorbs new construction and diminishes submarket vacancy. On the other hand, submarkets with high occupancy and relatively little ongoing construction—particularly the Great Southwest, South Stemmons, and Northwest Dallas—will remain ripe for new development as the number of available sites continues to decline.

IN V E S TM E NT SA LE S

Industrial Trades Decline In Q2Investment sales volume totaled $225M in the quarter, declining from approximately $1.4B in Q1. Nearly half of transactions were in Flex properties, causing average price to rise to $88 PSF and cap rates to rise to 6.3%.

Short-term capital market disruption will manifest in lower transaction volumes due to decreased visibility for forward acquisitions and longer lease-up periods. Nevertheless, we expect industrial to remain one of the best performing asset classes, leading to stable prices and cap rates once transactions resume.

Areas Ranked By Construction

SUBMARKET CLUSTER SF UNDER CONSTRUCTION

% OF INVENTORY

North Fort Worth 7,264,616 7.1%

DFW Airport 4,182,395 5.5%

Northeast Dallas 3,256,290 3.3%

South Fort Worth 3,202,171 5.8%

Northwest Dallas 2,460,151 2.3%

South Dallas 1,374,237 1.5%

East Dallas 944,106 2.1%

South Stemmons 581,222 0.5%

Great Southwest 576,123 0.5%

DELIVERIES, VACANCY, AND ABSORPTION Yearly and Year-To-Date Totals

SOURCE: Transwestern, CoStar

3%

4%

5%

6%

7%

8%

9%

0M

5M

10M

15M

20M

25M

30M

10 11 12 13 14 15 16 17 18 19 20 YTD

Deliveries Net Absorption Vacancy

Notable Lease Transactions

TENANT LANDLORD SF DEAL TYPE BUILDING SUBMARKET

General Mills JP Morgan 856,278 Renewal Alliance Gateway 51 North Fort Worth

FedEx Trammell Crow Company 776,630 New Cedardale 1 South Dallas

Geodis Cohen Asset Management 616,875 Renewal Pinnacle Park 1 South Stemmons

Mars Petcare Crow Holdings 610,806 New I-35 Logistics Crossing A South Dallas

AmeriPac Prologis 401,280 New Mustang Park 1 DFW Airport

SOURCE: Transwestern, CoStar=Landlord and/or tenant represented by Transwestern

Q 2 2 0 2 0 | D A L L A S + F O R T W O R T H | I N D U S T R I A L M A R K E T

Q2 2020 | DALLAS+FORT WORTH | INDUSTRIAL MARKET | 3

Key Market Indicators

Inventory SF Occupied

OverallVacancy %

Direct Vacancy %

Under Construction

Q2 Leasing Activity

Q2 Net Absorption

12 Mo Net Absorption

NNN Rents

D+FW Market Total 798,235,105 741,456,634 56,778,471 7.1% 53,914,955 6.8% 23,841,311 12,451,501 5,086,710 25,115,471 $5.25

Flex/High-Tech 97,607,712 91,072,337 6,535,375 6.7% 6,272,897 6.4% 288,084 758,068 33,355 520,345 $9.67

Manufacturing 82,063,980 79,817,409 2,246,571 2.7% 1,858,931 2.3% 1,064,450 503,389 211,840 174,582 $4.80

Warehouse/Distribution 618,563,413 570,566,888 47,996,525 7.8% 45,783,127 7.4% 22,488,777 11,190,044 4,841,515 24,420,544 $4.79

Submarkets

DFW Airport 76,333,090 69,440,849 6,892,241 9.0% 6,602,378 8.6% 4,182,395 1,709,763 (36,713) 1,006,020 $6.19

Flex/High-Tech 6,507,919 5,732,532 775,387 11.9% 743,327 11.4% 163,028 95,394 (51,455) 85,130 $10.72

Manufacturing 2,497,978 2,480,284 17,694 0.7% 17,694 0.7% 319,450 0 0 30,000 $5.05

Warehouse/Distribution 67,327,193 61,228,033 6,099,160 9.1% 5,841,357 8.7% 3,699,917 1,614,369 14,742 890,890 $5.93

South Stemmons 107,886,842 102,432,637 5,454,205 5.1% 5,259,680 4.9% 581,222 1,628,031 2,818,780 4,773,810 $7.31

Flex/High-Tech 19,081,086 18,390,367 690,719 3.6% 663,273 3.5% 0 95,559 185,680 515,624 $12.27

Manufacturing 8,553,732 7,985,211 568,521 6.6% 568,521 6.6% 0 - 94,100 (70,764) -

Warehouse/Distribution 80,252,024 76,057,059 4,194,965 5.2% 4,027,886 5.0% 581,222 1,532,472 2,539,000 4,328,950 $6.13

Northwest Dallas 109,336,420 103,473,722 5,862,698 5.4% 5,452,193 5.0% 2,460,151 1,392,457 (7,984) 1,213,637 $6.30

Flex/High-Tech 18,258,757 16,832,094 1,426,663 7.8% 1,385,223 7.6% 24,000 153,882 26,453 (107,742) $9.97

Manufacturing 7,332,016 7,007,026 324,990 4.4% 291,490 4.0% 0 29,082 (210,266) (174,450) $4.98

Warehouse/Distribution 83,745,647 79,634,602 4,111,045 4.9% 3,775,480 4.5% 2,436,151 1,209,493 175,829 1,495,829 $5.69

Northeast Dallas 99,987,824 92,938,271 7,049,553 7.1% 6,099,701 6.1% 3,256,290 890,265 1,016,266 593,883 $7.25

Flex/High-Tech 25,719,123 23,400,852 2,318,271 9.0% 2,196,256 8.5% 64,431 280,157 (75,978) (422,039) $9.67

Manufacturing 16,609,619 15,988,593 621,026 3.7% 279,186 1.7% 320,000 13,307 314,395 177,294 $6.10

Warehouse/Distribution 57,659,082 53,548,826 4,110,256 7.1% 3,624,259 6.3% 2,871,859 596,801 777,849 838,628 $6.47

East Dallas 44,485,462 41,336,938 3,148,524 7.1% 3,075,930 6.9% 944,106 202,661 1,258,212 1,472,762 $4.59

Flex/High-Tech 3,557,793 3,462,772 95,021 2.7% 95,021 2.7% 0 - (19,304) (7,765) $7.84

Manufacturing 6,199,879 6,115,383 84,496 1.4% 84,496 1.4% 0 - (47,820) (84,496) $5.00

Warehouse/Distribution 34,727,790 31,758,783 2,969,007 8.5% 2,896,413 8.3% 944,106 202,661 1,325,336 1,565,023 $4.47

South Dallas 89,255,648 81,729,233 7,526,415 8.4% 7,522,200 8.4% 1,374,237 2,475,951 103,138 8,006,539 $4.05

Flex/High-Tech 2,237,025 2,172,259 64,766 2.9% 60,551 2.7% 0 8,579 (7,738) (11,328) $8.50

Manufacturing 12,259,387 12,259,387 0 0.0% 0 - 0 305,000 66,011 344,933 -

Warehouse/Distribution 74,759,236 67,297,587 7,461,649 10.0% 7,461,649 10.0% 1,374,237 2,162,372 44,865 7,672,934 $4.00

Great Southwest 113,693,026 106,562,948 7,130,078 6.3% 6,836,766 6.0% 576,123 1,430,021 (677,673) 2,011,456 $5.04

Flex/High-Tech 7,453,916 6,896,563 557,353 7.5% 524,351 7.0% 0 44,202 (47,236) (196,038) $10.41

Manufacturing 11,588,759 11,434,221 154,538 1.3% 154,538 1.3% 0 0 (36,380) 24,270 $4.09

Warehouse/Distribution 94,650,351 88,232,164 6,418,187 6.8% 6,157,877 6.5% 576,123 1,385,819 (594,057) 2,183,224 $4.62

South Fort Worth 55,537,888 53,409,090 2,128,798 3.8% 2,076,448 3.7% 3,202,171 1,250,495 215,970 185,748 $4.92

Flex/High-Tech 7,910,744 7,460,262 450,482 5.7% 450,482 5.7% 0 26,562 (18,881) (65,568) $7.58

Manufacturing 9,649,880 9,498,141 151,739 1.6% 139,439 1.4% 0 0 19,200 (37,746) $4.25

Warehouse/Distribution 37,977,264 36,450,687 1,526,577 4.0% 1,486,527 3.9% 3,202,171 1,223,933 215,651 289,062 $4.68

North Fort Worth 101,718,905 90,132,946 11,585,959 11.4% 10,989,659 10.8% 7,264,616 1,471,857 396,714 5,851,616 $4.94

Flex/High-Tech 6,881,349 6,724,636 156,713 2.3% 154,413 2.2% 36,625 53,733 41,814 730,071 $12.83

Manufacturing 7,372,730 7,049,163 323,567 4.4% 323,567 4.4% 425,000 156,000 12,600 (34,459) $4.99

Warehouse/Distribution 87,464,826 76,359,147 11,105,679 12.7% 10,511,679 12.0% 6,802,991 1,262,124 342,300 5,156,004 $4.82

SOURCE: Transwestern, CoStar

Q 2 2 0 2 0 | D A L L A S + F O R T W O R T H | I N D U S T R I A L M A R K E T

WHY OUR METHODOLOGY IS THE BEST INDICATOR OF CURRENT MARKET CONDITIONS

We include multi-tenant, single-tenant, and owner-occupied buildings greater than 15,000 SF to capture more market activity.

By including single-tenant and owner-occupied space, we allow owners and investors to consider potentially competing

space in the future and empower industrial tenants to anticipate changes in the critical area of labor availability.

CONTACT

Andrew MathenyResearch Manager

972.774.2529

andrew.matheny@transwestern.com

777 Main Street, Suite 1500Fort Worth, TX 76102

2300 N Field Street, Suite 2000Dallas, TX 75201

Copyright © 2020 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from various primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.

380 75

2020

20

20

635

635

635

35E

35E

35E

35E

35W

35W

35W

820820

820

820 183

360

183

161

360

35

380

380

121

DNT

121

DNT

30

3030

30

20

287

287

287

175

175

8030

PGBT

PGBT

PGBT

PGBT121

121

45

45

75

20

114

114

67

377

CTP

CTP

F4 Northeast Dallas

F5 East Dallas

F6 South Dallas

F7 Great Southwest

F8 South Fort Worth

F9 North Fort Worth

F1 DFW Airport

F2 South Stemmons

F3 Northwest Dallas

SU B M A RK E T S

1

2

34

5

6

78

9 DFW Int’l

Alliance

McKinney

Denton

Meacham

Lancaster