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Record D-FW industrial building is tops in the U.S.

Warehouse building in North Texas has more than doubled in the last few years.

North Texas industrial building has ramped up to a record level.

At the end of the third quarter, more than 76 million square feet of warehouse and distribution space is being built in the Dallas-Fort Worth area, according to a report from commercial property firm Cushman & Wakefield.

Industrial development in the area has more than doubled in the last few years.

But market analysts expect the frantic building pace to slow in the months ahead.

“While the current development pipeline remains elevated, we expect new construction will start to temper over the next couple of quarters until the market figures out when the Federal Reserve is done raising rates,” said Nathan Orbin, executive managing director of Cushman & Wakefield’s Dallas office. “With the strong demand from users and slowing of supply, rent rates will continue to rise into next year.”

Most of the industrial building is in southern Dallas County (21.8 million square feet) and the AllianceTexas area of North Fort Worth (15.8 million square feet).

Dallas-Fort Worth leads the country in both industrial building construction and sales.

While much of the construction is speculative, there are signs that builders are taking a step back from projects with no leasing.

“Coupled with the fact that construction costs remain high and interest rates continue to climb, many developers have dropped land sites around the market,” said David Eseke, Cushman & Wakefield executive director.

Through the first nine months of 2022, developers have completed about 26 million square feet of D-FW industrial buildings. That’s just less than the 26.7 million square feet of net leasing through the third quarter, Cushman & Wakefield reports.

In the third quarter alone, D-FW warehouse leasing was 13.9 million square feet.

Some of the largest third-quarter warehouse leases were to Pegasus Logistics, which took 754,473 square feet of space in North Fort Worth, and retailer Crate & Barrel, which leased almost 700,000 square feet in southern Dallas County. Samsung leased 670,914 square feet of space in South Fort Worth.

Less than 5% of North Texas warehouse space was vacant at the end of September.

Leasing of distribution space in the region has soared as e-commerce has grown and the population in the D-FW area has increased at the greatest rate in the country.

“This demand continues to drive the market and has kept us in equilibrium from a fundamentals perspective as vacancy remains below 5% overall,” said Kurt Griffin, Cushman & Wakefield executive managing director. “Rental rates continue to escalate as they mirror the current inflationary environment, and we expect rents to continue to increase over the next few months.”

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