February 7, 2020
Dallas/Ft. Worth is North America’s top market for both industrial demand and new supply, says Cushman & Wakefield. North Texas industrial is projected to see net absorption of 45.1 million square feet over the next two years, and deliveries totaling 46.3 million square feet.
If those numbers suggest that DFW may soon experience supply getting ahead of demand, then that’s in keeping with the broader trend seen by Cushman & Wakefield in its “2020 North American Industrial Outlook” report. Across North America, the report says, “New supply—which finally surpassed demand in 2019—will continue to do so over the next two years.”
Across North America, deliveries are projected to reach 573.4 million square feet over the next two years.
“Nonetheless, vacancy will remain anchored around the 5% mark, ending 2021 at 5.2%—an uptick of 60 basis points from year-end 2019,” according to the report.
Moreover, among the top five markets for both projected demand and projected deliveries, DFW is in better shape than the rest. Southern California’s Inland Empire will see deliveries outpace demand by 3.5 million square feet in 2020 and 2021, compared to 1.2 million square feet for North Texas. In Atlanta, the gap is expected to widen by 4.8 million square feet; while in both Chicago and Pennsylvania’s I-81/I-78 corridor, projected deliveries will outpace demand by 5.2 million square feet.
“Because 2018 was a record year for industrial absorption, absorption numbers for 2019 appeared low compared to the past few years,” Cushman & Wakefield says. “Other market fundamentals— such as construction deliveries and rents— reflected continued growth.
This means that much-needed industrial supply finally caught up to tenant demand and began to alleviate some of the pressure on vacancy rates.”
Despite 336.3 million square feet of industrial deliveries by year-end 2019, North American vacancy is expected to register 4.6% for last year. The region’s lowest vacancy rates are in Canada (2.8%), with Mexico markets following (2.9%).
Meanwhile, net rents continued to climb in 2019, albeit at a slower pace than in recent years, and are expected to finish the year at US $6.51 per square foot, 2.8% above their 2018 levels and another record rental rate for industrial space. Cushman & Wakefield is projecting a further 6.8% increase in net rents over the next two years.
Pictured: Goodyear’s 1.2-million-square-foot distribution facility in Forney, TX.
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