2024 Dallas-Fort Worth Industrial Market Report
Highlights
- The Dallas-Fort Worth market is cooling, due to decreased net absorption and the end of the current development cycle.
- Small bay units developed in the 1980s or earlier account for more than 70% of properties in this sector.
- Annual rent growth stands at 3.9%. This is lower than the peak of 10.7% reached at the end of 2022, but it remains strong in comparison to other top-tier industrial markets/
- Sales volume in the area decreased below pre-pandemic levels, with only $1.2 billion reported in the last year.
Market Overview
Elevated move-outs and significant supply-side pressures will cause vacancies to peak toward the end of the year before gradually declining. Dallas-Fort Worth’s industrial vacancy rate, currently standing at 9.4%, is among the highest of the 20 largest U.S. markets, owing mostly to supply-side constraints. Since the beginning of last year, approximately 110 million square feet of new space has been brought online, equivalent to Buffalo, New York’s total industrial inventory. A slowdown in deliveries and the anticipated revival of tenant demand are expected to balance high vacancies by 2025 and beyond.
Rents | Vacancy | Construction
Over six quarters, this market saw rates nearly double from the previous low of 5.2% at the end of 2022. However, a reprieve from these escalations does not guarantee a quick recovery, as vacancy rates are likely to remain comfortably over 9% for the rest of 2025. Net absorption fell further in the second half of 2024, and this trend is expected to continue into the new year. Strong demographic expansion, as well as Dallas-Fort Worth’s position as a superregional distribution hub, will help to meet long-term space demand. Between mid-2022 and mid-2023, the metro gained over 152,000 new residents. Based on a ten-year average occupied square footage per capita of around 95 square feet per inhabitant, this recent expansion necessitates an additional 14.4 million square feet of industrial occupancy every year to serve these new North Texans.
Construction activity has slowed as a result of high construction costs and rising vacancies, although many top developers predict this will reverse in the coming quarters.
Sales
Inventory turnover, a useful indicator of market activity in non-disclosure jurisdictions such as Texas, has nearly halved in the last two years. As of year end 2024, the trailing 12-month average for this indicator has dropped to 1.2%, a low figure even by historical norms for this market, which generally averages around 2%. Sales activity has slowed for a variety of factors other than the current macroeconomic issues. The most notable of them is an excess of new, investment-grade stocks.
By the Numbers
- Vacancy Change (YOY): 0.6%
- Net Absorption SF: 22.4M
- Deliveries SF: 41.5M
- Rent Growth: 5.2%
- Sales Volume: $1.3B | 12-Months | Source: CoStar Group
