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2020 North America Industrial Big Box Review & Outlook

Dallas/Ft. Worth
March 22, 2021

“The Dallas/Ft. Worth industrial market continues to have one of the highest levels of activity, demand and absorption in the country. Its central location, business friendly state government, relatively low cost of living and first-class international airport have established DFW has a destination for brand-name users. However, its biggest demand driver is continued population growth, most recently from several large corporate relocations with distribution hub components from California.”
Steve Trese – Senior Vice President

Demographics

Nearly 7.7 million people live within the Dallas/Ft. Worth (DFW) urban core, with 9.6% expected growth over the next five years – second only to Houston (9.7%) in North America. Nearly 28 million people live within 250 miles of the urban core, with 7.7% expected growth over the next five years. Nearly a quarter of the total population within 50 miles of DFW is in the 18-to-34 age bracket.

Figure 1: Dallas/Ft. Worth Population Analysis

Source: CBRE Location Intelligence.

According to CBRE Labor Analytics, the region’s warehouse labor force of 150,029 is expected to grow by 17.3% by 2030. The average salary of a non-supervisory employee is $13.60 per hour, 3.4% lower than the U.S. average.

Figure 2: Dallas/Ft. Worth Warehouse & Storage Labor Fundamentals

Source: CBRE Labor Analytics.
*Median Wage (1 year experience); Non-Supervisory Warehouse Workers (forklift, warehouse workers).

Location Incentives

Over the past five years, there have been 73 economic incentives deals totaling more than $606 million at an average of $11,541 per new job in the DFW metropolitan area, according to Wavteq.

According to CBRE’s Location Incentives Group, among the top incentive programs offered in DFW is the Texas Enterprise Fund (TEF), commonly referred to as a “deal-closing” grant. TEF awards discretionary cash grants to companies considering a new project for which a Texas site is competing against other viable out-of-state options. Award amounts are determined based on an analytical model that factors in the average wage of new employees, the hiring timeline and a company’s total capital investment.

Another incentive program is the Skills Development Fund, which provides job training grants to community and technical colleges for customized training programs that support Texas businesses. This job training program is designed to upgrade the skill levels of new or existing employees, as well as increase wages of the Texas workforce.

Figure 3: Dallas/Ft. Worth Top Incentive Programs

Source: CBRE Location Incentives Group.
Note: The extent, if any, of state and local offerings depends on location and scope of the operation.

Logistics Driver

DFW’s central location gives it a significant advantage in reaching a large consumer base. The region is home to two major inland ports: Alliance Global Logistics Hub and the International Inland Port of Dallas.

The confluence of three major railroad networks (Union Pacific, Burlington Northern-Santa Fe and Kansas City Southern) puts 98% of the U.S. market within 48 hours by train. DFW International is the nation's ninth largest cargo airport and the only one with the capacity to double operations in its existing footprint. All major U.S. markets can be reached by air in less than four hours.

Capital Markets


"DFW continues to outperform expectations and possesses some of the healthiest industrial market fundamentals and sales activity in the U.S. Q1 2020 sales volume totaled $1.1 billion, up by more than 500% from Q1 2019 volume. However, the COVID pandemic brought sales activity to a virtual halt in Q2, with only $91 million worth of properties trading hands. Sales activity picked up in the second half of the year, with $658 million of sales volume in Q3 and $1.2 billion in Q4. Along with the increased activity in the second half of the year, DFW cap rates compressed by 25 to 50 bps. The capital market activity was driven both by established domestic institutional capital and by new foreign investors, as well as capital originally targeted for other property types."
Randy Baird – Vice Chairman

Figure 4: Cap Rate Comparison

Source: CBRE Research.

Supply & Demand

With 387 million sq. ft. of total inventory, DFW is the fourth largest big-box market in North America. Occupiers continue to move into and expand within the market, as transactions increased by 30.2% year-over-year in 2020 to 35 million sq. ft. DFW’s direct vacancy rate dropped to 6.7% after 21.2 million sq. ft. of net absorption last year. 3PLs, retailers and wholesalers were the most active tenants in the market last year. Food & beverage occupiers accounted for nearly 13% of total transactions.

Despite robust demand, dropped to 19.2 million sq. ft., slightly slower than 2019. The availability rate is expected to decline in 2021, with only 11.3 million sq. ft. currently under construction. Taking rents increased to a record $4.07 per sq. ft. for big-box product. The lower amount of development, coupled with strong demand, will further reduce the availability rate and increase taking rents in 2021.

Figure 5: 2020 Occupier Transaction Market Share

Source: CBRE Research.

Figure 6: Transaction Volume

Note: Includes new leases, renewals, and user sales transactions 200,000 sq. ft. and above.
Source: CBRE Research.

Figure 7: Big Box Year-Over-Year Comparison

Source: CBRE Research.

Figure 8: Under Construction & Percentage Preleased

Source: CBRE Research.

Figure 9: First Year Taking Rents (psf/yr)

Note: Includes first year taking rents for leases 200,000 sq. ft. and above.
Source: CBRE Research.

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2020 North America Industrial Big Box Report & Outlook

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Contacts

James Breeze
Senior Director, Global Head of Industrial & Logistics Research
Research
+1 602 735 1939
Matt Walaszek
Director of Research
Research
+1 312 297 7686
John Morris
Executive Managing Director, Americas Industrial & Logistics Leader
+1 630 573 7020
Richard Barkham, Ph.D.
Global Chief Economist, Head of Global Research & Head of Americas Research
+1 617 912 5215
Spencer Levy
Global Chief Client Officer and Senior Economic Advisor
+1 617 912 5236