Ample Land, Last-Mile Opportunities: Dallas-Fort Worth Industrial Is Slated For Hefty Expansion

In the industrial space, few markets can compete with Dallas-Fort Worth. Over the past year alone, the Dallas industrial sector has added more than 33,000 jobs. And with 54M SF of industrial space under construction, DFW is the top market for industrial expansion in the nation.

But like every CRE sector, a market slowdown has become unavoidable. Of the industrial space in the pipeline, about 50M SF is being built speculatively, with only about 20% of the space pre-leased as of Q3. This is roughly a 30% decrease in pre-leasing activity from the previous quarter, according to a report from Cushman & Wakefield. 

While many industry professionals remain confident that DFW industrial will continue to perform well, others are sitting on the sidelines, waiting for market conditions to settle.

“Players in this market are talking about the ‘survive until 2025’ mantra,” said Rick Rodman, Catamount Constructors vice president of business development/national industrial. “They're looking for the activity to slow so the pace of demand can catch up. It’s such a strong market that it's going to continue to flow, just not as much as previous years. That said, it’s still above what it was pre-pandemic.” 

Catamount Constructors is a 100% employee-owned general contracting and construction management company with offices in Texas, Florida, Colorado and Georgia. The firm has delivered more than 500 industrial projects, including distribution centers, maintenance facilities and research and development facilities.

To learn more about the DFW industrial market, Bisnow spoke with Rodman and fellow Vice President of National Industrial Roy Allen about growth trends and where they see the sector heading. 

Rodman will speak on the Developing and Designing for Efficiency: Optimal Layouts and Features in Industrial Commercial Real Estate panel at Bisnow’s Dallas Industrial Conference on Nov. 7, alongside other local real estate leaders and industry professionals. Register here.

Bisnow: How has the economy impacted DFW market growth this year?

Allen: Dallas-Fort Worth is one of the strongest markets in the nation. But it slowed in 2023, mainly due to elevated construction costs, interest rates and labor rates. Overall, there are 12 large-scale projects going on in the market right now, so that’s slowed things down a bit.

Vacancy rates are still low, and DFW has the largest construction pipeline in the nation, with 58.4M SF on the horizon. Within the last couple of months, we’ve seen several large tenants signing contracts on previously vacant large-scale speculative warehouse buildings. 

Rodman: The market is going strong compared to the rest of the country. But interest rates have risen and equity is still sitting on the sidelines a bit, which is undoubtedly impacting the growth of the market. A lot of the deals we’re seeing right now are B2B and design-build deals because they've got their own money and are able to make decisions on new construction based on their own business plans, not on interest rates. Long lead items like transformers, switchgear and other essentials are also pushing projects out.

Due to the slowdown in the market, smaller industrial warehouses are more in demand with more potential tenants versus the 1M-plus SF warehouse spaces. Finding tenants for those is proving to be a bit more difficult. 

Bisnow: What is driving the demand for industrial properties in the area? 

Allen: More people are continuing to move into the DFW area as a whole, which drives demand for more companies to move headquarters into the area, and then manufacturing is soon to follow. 

There is also still a lot of land in Dallas to be developed, and it’s also a strong market for last-mile opportunities. With trends around reshoring with manufacturing companies coming back to the U.S., more manufacturing warehouse space is needed. 

Bisnow: How does Catamount help its clients in the DFW industrial space? 

Allen: We work all over the U.S., so we're able to look at pricing from both a national and local standpoint, which helps us be more competitive. The same goes for purchasing power. We often pre-purchase essential construction components like steel, roofing materials and even electrical switchgear to stay ahead of the curve and support our clients in any way possible.

Rodman: Our purchasing power is a key aspect of how we’re able to help our clients, and in addition to what Roy mentioned, we've got a lot of projects with local subcontractors that support us. This lets us bring a unique perspective to every market we’re in. Several of our developer partners are based in Dallas, so establishing these relationships has allowed us to gain their confidence in other markets in addition to Dallas.

Another key differentiator that Catamount brings to the table is our pre-construction efforts. There are so many deals that can't pencil, and we get brought in on these projects all the time. We're running pre-construction budgets weekly. We can always get our clients within 5% of a building budget, but we excel in evaluating all of the things about the site that you can't understand until you’ve really gone deeper into a set of civil drawings. We will capture drone footage of a potential site, dig into [ground-fault circuit interrupters] with contours and do all the things to help us understand the site better so our clients can get a shovel in the ground. 

Bisnow: What are some notable Catamount projects in Texas?

Allen: We’ve recently started working on a large 1.2M SF project in Forney called East Gate. We have another four-building spec warehouse property in Fort Worth totaling 657K SF. We are also working on a project in Dallas with Amazon, who we’ve completed more than 130 projects for nationwide. We have additional industrial projects in the surrounding areas, including Austin, Pflugerville and Nacogdoches. 

Rodman: In the Dallas area, we've got about three projects in the pre-construction stage. This is not unusual for us. We consistently have three to four projects in pre-construction that we work on to help our clients get over the finish line and get a jump-start. Before a job starts, clients come to us looking for information on cost. That’s where our unique pre-con approach comes into play.

Bisnow: Where do you see the DFW industrial market heading?

Rodman: When economic conditions become favorable again, developers and owners are going to want to be the first to market. There are those on both sides of the coin right now. Some are optimistic and want to be ready for what’s next, and there are those who are more shy and are standing back on the sidelines. Hopefully, those that are shy get on board sooner rather than later, but overall, the market is moving forward with force.

Allen: The Dallas industrial market is going to continue to build because it has ample land availability. Design-build customers are going to continue to build because of the retailers that are funding their own projects. It's just a matter of trying to get through the slow time to where the equity groups feel comfortable enough to jump back into the market.

Dallas continues to stay in the top five markets nationally. It’s a primary industrial hub within the U.S., and you have major interstates and headquarters coming in as Dallas keeps growing. It’s going to keep bringing in work.

This article was produced in collaboration between Catamount Constructors and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to [email protected].