MARKETBEAT DALLAS/FORT WORTH

M A R K E T B E AT

Industrial Q2 2021DALLAS/FORT WORTH

ECONOMYThe economy began to see a return to pre-pandemic activity in Q2 2021. As government restrictions have lifted, the Dallas-Fort Worth (DFW) economy continued its recovery. While the unemployment rate remains above pre-pandemic lows, the market’s economy continues to improve with 42,941 jobs added quarter-over-quarter. The increase in jobs is now 80,971 jobs shy of returning to its pre-pandemic high. The region’s population increased by 91,331 people year-over-year (YOY), and by 27,863 in Q2alone. As of Q2 2021, the population remains at a new high of over 7.8 million residents.

According to Moody’s Analytics, the industrial sector grew by 11,267 jobs (1.0%) from the previous quarter. Industrial roles aredescribed as positions that fall within manufacturing and trade, transportation, and utilities. The leading indicator of industrial demand is driven by trade, transportation, and utilities sector jobs, which accounted for a majority of industrial roles at 75% (826,624 jobs). The region’s industrial employment totaled 1.1 million jobs as of quarter end.

SUPPLYThe DFW industrial market remained fiery through second quarter. The quarter closed with a 70-basis point (bps) decrease in vacancy to 6.9% compared to the prior quarter. The decrease in vacancy in the quarter resulted from net absorption outpacing completions by 5.1 million square feet (msf). Developers added 2.7 msf of new product to the market. North Fort Worth and Allen/McKinney submarkets recorded the highest number of completions, with 794,364 sf and 400,400 sf completed. Build-to-suit projects accounted for 34% of new project completions. Construction activity has remained strong due to the increase in demand, with 28.7 msf under construction. Dallas-Fort Worth remains well above the national average with an additional 52.4 msf of proposed space over the next three years . Speculative sites accounted for the majority of product under construction at 25.5 msf(89.0%) with 32.0% of all under construction projects currently pre-leased.

6.9%Vacancy Rate

7.8MNet Absorption, SF

$5.61Asking Rent, PSF

Overall, Net Asking Rent

6.0%Dallas-Ft WorthUnemployment Rate

3.7MDallas-Ft WorthEmployment

5.9%U.S.Unemployment Rate

Source: BLS

ECONOMIC INDICATORS Q2 2021

12-Mo.Forecast

12-Mo.Forecast

YoY Chg

YoY Chg

SPACE DEMANDS / DELIVERIES OVERALL VACANCY & ASKING RENT

2%

4%

6%

8%

$2

$4

$6

2017 2018 2019 2020 2021

Asking Rent, $ PSF Vacancy Rate

-505

101520253035

2017 2018 2019 2020 YTD 2021

Milli

ons

Net Absorption, SF Construction Completions, SF

M A R K E T B E AT

Industrial Q2 2021DALLAS/FORT WORTH

DEMANDStrong demand for product in the DFW market will continue to keep vacancy rates relatively stable. The market’scentral location and extensive transportation and distribution network has continued to make it a vital logistics hub. Overall new leasing activity (excluding renewals) totaled 18.9 msf with the highest activity in Great Southwest at 3.0 msf, followed by DFW Airport and South Fort Worth at 2.9 msf and 2.8 msf, respectively.

The DFW industrial market recorded its highest occupancy growth since the start of the pandemic and absorbed 7.8 msf in second quarter 2021. The highest cumulative increase in occupancy was in the Great Southwest submarket at 1.9 msf followed by Mesquite and Allen/McKinney at 1.4 msf and 1.1 msf, respectively. Top new leases signed this quarter were TJ Maxx/HomeGoods (1.0 msf), Henry Schein, Inc (810,908 sf) and Comptree(576,123 sf). The largest move-ins this quarter were Amazon (1.0 msf), Encore Wire (724,380 sf) and Lowes Home Improvement (648,726 sf). All large move-ins and top new leases signed were in warehouse/distribution assets. Renewals decreased 27.3% YOY and accounted for 13.2% of combined renewal and leasing activity. The decrease in renewals correlates with greater economic clarity for tenants' post pandemic.

PRICINGAsking rental rates have steadily increased in the DFW industrial market. The quarter concluded with an overall average asking rate of $5.61 per square foot (psf) in Q2, marking a 8.1% increase from year-end 2020 ($5.19 psf). The Richardson/Plano submarket led with the highest overall average asking rate in DFW with rents at $11.10 psf. North Dallas/Metropolitan and East Dallas submarkets followed closely at $8.15 psf and $7.79 psf, respectively. Warehouse/Distribution properties rental rates increased by 4.0% from the previous quarter. Warehouse/Distribution assets reported average rental rate of $4.95 psf with the Richardson/Plano submarket with the highest asking rental rate at $8.78 psf.

NEW SUPPLY (msf)

OVERALL NET ABSORPTION/OVERALL ASKING RENT

OVERALL VACANCY

Outlook

• Dallas-Fort Worth’s central location and extensive transportation and distribution network will continue to make it a vital logistics hub.

• The construction pipeline will remain robust and continue to deliver new Class A product throughout the entire market.

• Leasing activity will continue to outpace new supply, keeping vacancy below historical levels.

• Rental rates will see a slight uptick across Dallas-Fort Worth due to demand and arrival of new Class A product.

0

5

10

15

20

25

30

35

2017 2018 2019 2020 2021 2022 2023

MSF

10-Year Historic Average = 20.6 MSF

$3.50$4.00$4.50$5.00$5.50$6.00

0

5

10

15

2017 2018 2019 2020 2021

Net Absorption, MSF Asking Rent, $ PSF

2%

4%

6%

8%

10%

2017 2018 2019 2020 2021

15-Year Historical Average = 8.2%

M A R K E T B E AT

Industrial Q2 2021DALLAS/FORT WORTH

KEY LEASE TRANSACTIONS Q2 2021

*Renewals not included in leasing statistics

MARKET STATISTICS

KEY SALES TRANSACTIONS Q2 2021

PROPERTY SUBMARKET SELLER / BUYER SF

1851 NE Loop 820 North Fort Worth Hunt Southwest / Realty Income Corp 1,023,488

2130 French Settlement Pinnacle/Turnpike Billingsley / Holt Lunsford Commercial 623,968*

2625 E Belt Line Rd Valwood/N Stemmons Grupo Haddad US / Reynolds Group Holdings 410,000

PROPERTY SUBMARKET TENANT RSF TYPE

7500 Oak Grove Rd South Fort Worth TJ Maxx/HomeGoods 1,009,033 New Lease

3701 Litsey Rd Alliance Henry Schein Inc 810,908 New Lease

7343 Grady Niblo Rd Great Southwest Niagara Bottling 630,000 Renewal

*Rental rates reflect weighted net asking $psf/year

*Includes two buildings

SUBMARKET TOTAL BLDGS INVENTORY DIRECT VACANT

OVERALL VACANT

DIRECT VACANCY

RATE

OVERALL VACANCY

RATE

Q2 NET ABSORPTION

2021 NET ABSORPTION

UNDER CONSTRUCTION

2021 COMPLETIONS

OVERALL AVG. ASKING

RENT*

DIRECT AVG. ASKING RENT*

Allen/McKinney 127 12,803,828 1,181,538 1,206,774 9.2% 9.4% 1,147,476 1,235,039 584,392 1,584,420 $7.61 $7.48

Brookhollow/Trinity 882 48,690,028 2,554,141 2,808,329 5.2% 5.8% -238,043 -348,032 329,358 109,200 $6.83 $6.87

Central Dallas 212 14,211,228 172,288 172,288 1.2% 1.2% -10,500 -10,500 0 0 N/A N/A

DFW Airport 603 94,990,641 7,868,264 8,546,361 8.3% 9.0% 95,279 3,215,582 1,655,238 1,252,956 $6.62 $6.57

Far North/I-35 245 23,440,261 1,304,491 1,361,059 5.6% 5.8% 573,892 534,274 1,005,411 0 $6.50 $6.50

Garland 539 45,344,379 2,242,750 2,928,864 4.9% 6.5% 593,228 640,904 0 0 $4.43 $4.43

Great Southwest 1039 117,780,988 4,916,139 5,100,454 4.2% 4.3% 1,867,082 1,021,215 1,637,353 0 $5.75 $5.83

Mesquite 196 22,492,161 2,313,381 2,342,173 10.3% 10.4% 1,406,368 1,358,530 1,605,098 145,303 $4.84 $4.84

North Dallas/Metropolitan 330 19,038,516 624,912 689,309 3.3% 3.6% 64,949 195,692 167,305 0 $8.15 $7.91

Pinnacle/Turnpike 213 30,392,396 1,202,583 1,202,583 4.0% 4.0% 524,534 995,460 0 0 $3.53 $3.53

Redbird 208 23,252,929 921,561 921,561 4.0% 4.0% 166,712 117,684 354,246 0 $5.24 $5.24

Richardson/Plano 493 36,854,618 1,957,307 2,288,017 5.3% 6.2% -9,181 155,010 87,360 0 $11.10 $11.12

East Dallas 103 12,221,064 120,392 120,392 1.0% 1.0% 13,556 12,646 2,705,329 0 $7.79 $7.79

South Dallas 247 59,256,905 4,074,275 4,613,216 6.9% 7.8% 642,010 1,935,775 6,201,469 0 $4.27 $4.00

Valwood/N. Stemmons 555 51,728,488 1,987,350 2,521,382 3.8% 4.9% 421,721 13,912 178,500 0 $7.60 $7.45

Walnut Hill/Stemmons 482 22,574,381 829,533 914,965 3.7% 4.1% -59,483 349,098 220,412 0 $6.20 $6.20

DALLAS TOTAL 6,474 635,072,811 34,270,905 37,737,727 5.4% 5.9% 7,199,600 11,422,289 16,731,471 3,091,879 $6.05 $5.99 Alliance 176 57,422,384 8,560,048 9,230,130 14.9% 16.1% 236,901 770,356 4,024,354 1,346,989 $4.58 $5.13

Central Fort Worth 293 15,836,116 603,717 643,767 3.8% 4.1% -102,013 -35,208 0 0 $3.42 $3.24

East Fort Worth 429 23,656,654 780,320 821,936 3.3% 3.5% 45,558 -208,529 491,218 0 $5.42 $5.44

North Fort Worth 361 48,050,222 2,635,882 2,635,882 5.5% 5.5% 945,127 950,048 1,342,928 829,364 $4.81 $4.81

South Fort Worth 298 30,987,121 4,719,832 4,759,832 15.2% 15.4% -532,868 465,733 6,087,824 945,743 $4.69 $4.69

West Fort Worth 77 4,551,740 545,907 545,907 12.0% 12.0% 1,950 -295 0 380,020 $7.02 $7.02

FORT WORTH TOTAL 1,634 180,504,237 17,845,706 18,637,454 9.9% 10.3% 594,655 1,942,105 11,946,324 3,502,116 $4.74 $4.98

DFW TOTAL 8,108 815,577,048 52,116,611 56,375,181 6.4% 6.9% 7,794,255 13,364,394 28,677,795 6,593,995 $5.61 $5.67

M A R K E T B E AT

Industrial Q2 2021DALLAS/FORT WORTH

INDUSTRIALSUBMARKETS

A CUSHMAN &WAKEFIELD RESEARCH PUBLICATIONCushman & Wakefield (NYSE: CWK) is a leading globalreal estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 50,000 employees in 400 offices and 60 countries. In 2020, the firm had revenue of $7.8 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.

©2021 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources believed to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.

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Christopher GrubbsResearch AnalystTel: +1 972 663 [email protected]

Ching-Ting WangDirector of ResearchTel: +1 972 663 [email protected]