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Dallas-Fort Worth Second Quarter 2020 / Industrial Research Report 14643 Dallas Parkway, Suite 950, LB#58 | Dallas, TX 75254 214.294.4400 MARKETInsights DALLAS-FORT WORTH Population Like most of the country, the Dallas–Fort Worth economy saw a drastic spike in unemployment (from 3.1% at the end of 2019 to 12.3% as of May 2020) and job losses (226,800 year over year) as COVID-19 wreaked havoc on the economy. Since May, initial payroll numbers have rebounded some, but overall employment has stayed significantly below levels seen in February, before COVID-19 measures took effect. POPULATION GROWTH Longer term, strong population growth is expected to continue to drive demand for industrial space Dallas/Fort Worth Population Growth in DFW. As U.S. consumption and production expands, third-party logistics providers, national retail- 10,000,000 Dallas-Fort Worth-Arlington ers, and consumer products companies continue to look to DFW as a critical hub for their distribution 9,000,000 networks. 8,000,000 7,000,000 DFW is projected to experience the most robust population growth in the U.S. over the next few 6,000,000 years in both nominal and percentage-based terms driven by high levels of in-migration. DFW has 5,000,000 several structural advantages over other distribution markets including four intermodal terminals, a 4,000,000 dedicated cargo airport (Alliance) and the massive DFW International Airport, along with several 3,000,000 other regional airports (Love Field, Addison, McKinney, etc.) 2,000,000 1,000,000 According to the U.S. Census Bureau, the Metroplex is the fourth largest Metropolitan Statistical Area 0 1970 1980 1990 2000 2010 2018 2020 2030 (“MSA”) in the United States, with an estimated population of 7.4 million. Since the last census in 2010, the Census Bureau estimates the population of the Dallas-Fort Worth MSA grew by 900,000 or an Source: North Texas Council of Governments; US Census average of 130,000 people per year. That’s a gain of 356 per day. The Dallas-Fort Worth-Arlington metropolitan area’s 130,000-resident increase over the past year was the most of any metro area in the United States. Employment EMPLOYMENT BY INDUSTRY SECTOR NET JOB GROWTH VS. After several years of very strong job UNEMPLOYMENT RATE growth, the Dallas-Fort Worth-Ar- EmploymentMAY by Industry2020 (May 2020) 150,000 14.0% Financial Information Professional and lington metropolitan area saw an Activities 2% Business Services 100,000 9% 12.0% unprecedented decline in jobs in the Other Services 17% 3% 50,000 second quarter of 2020 (due to the 10.0% Manufacturing 0 COVID-19 pandemic and subsequent 8% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD -50,000 8.0% shutdown). Employment losses were -100,000 widespread across industries, with Trade, 6.0% Transportation, Government -150,000 only financial services seeing a slight 13% and Utilities 22% 4.0% -200,000 year-over-year increase. All other -250,000 2.0% industries had a combined loss of Education and Health Services Leisure and Net Job Growth Unemployment Rate 12% Mining, Logging and Construction Hospitality JOBS 226,800 jobs over the past year. 6% 8% EMPLOYMENT youngerpartners.com 1 MARKETInsights Second Quarter 2020 / Industrial Research Report DALLAS-FORT WORTH Employment (continued) According to the Bureau of Labor Statistics, Dallas-Fort Worth was the fourth largest employment market in the nation with total non-farm employment of IND & FLEX TOTAL more than 3.5 million as of May 2020. Of this total, 1.3 million jobs fall into the NET ABSORPTION typical industrial property sectors of Manufacturing, Trade/Transportation and Ind and Flex Total Net Absorption Utilities, and Mining/Logging/Construction. 10,000,000 Demand 8,000,000 While retail and office properties showed considerable negative demand for 6,000,000 space in the second quarter, the industrial market showed general signs of resil- ience with strong positive net absorption in the industrial sector and only mod- 4,000,000 erate negative absorption for the flex sector. 2,000,000 For the second quarter, the industrial market recorded 3.5 million square feet of positive net absorption, bringing the year-to-date total to a healthy 12.7 million square feet (this is roughly in-line with the net absorption seen in the first half 0 of 2019). What weakness there was in the market was largely concentrated in the flex sector which recorded a negative 320K SF for the second quarter and a (2,000,000) 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 negative 540K SF for the year-to-date. Ind Total Net Absorption Flex Total Net Absorption IND & FLEX TOTAL VACANCY & NET ABSORPTION Ind and Flex Total Vacancy and Net Absorption 28,000,000 14.0% SUBMARKET 23,000,000 12.0% UNDER CONSTRUCTION 18,000,000 10.0% Under Construction 13,000,000 South Stemmons, 8.0% 973,442, 3% 8,000,000 DFW Airport, South Ft Worth, 3,000,000 6.0% 5,220,680, 18% 3,279,221, 11% (2,000,000) 4.0% 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 YTD South Dallas, 2,201,240, 8% Ind Total Net Absorption East Dallas, NW Dallas 2,144,106, 8% Outlying, 86,000, New Supply (Construction) Great 0% Southwest/Arling Northwest Dallas, As of of June 2020, there was a total of 29 million rentable square feet of indus- ton, 576,123, 2% 2,699,668, 9% trial space under construction in Dallas-Fort Worth with an additional 370K of flex space. Of the 29 million square feet of construction currently underway, 31% has been accounted between a combination of build-to-suits and pre-leasing. Northeast Dallas, 2,943,499, 10% Of the 29 million square feet of space currently under construction, 24.3 million North Fort (84% is scheduled for delivery by the end of 2020). The North Fort Worth and Worth, 8,844,855, 31% DFW Airport submarkets account for the highest concentration of projects un- derway at 8.8 million and 5.2 million square feet, respectively. youngerpartners.com 2 MARKETInsightsSecond Quarter 2020 / Industrial Research Report DALLAS-FORT WORTH Vacancy Trends While demand for space has remained high for most submarkets through the first half of 2020, new construction has outpaced demand, resulting more new supply than absorption over the past two quarters, but the gap was not large enough to change the overall industrial vacancy rate, which currently stands at 6.7%. Online and logistic companies have seen an uptick in demand, while manufacturing and flex properties have shown some signs of lesser demand through the first half of 2020. Overall, most indicators point to a slowing, but overall healthy industrial market over the next few quarters. Historically, the industrial market averages a total vacancy rate of just under 8% (and 10% for flex properties). Among the submarkets, North Fort Worth stands out with a mucher higher total vacancy rate and the largest construction pipeline. Still, most submarkets remain at below their historic norms. IND & FLEX TOTAL VACANCYInd and Flex Total Vacancy RATES Rates 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% YTD 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Ind Total Vacancy Rate Flex Total Vacancy Rate TOTAL VACANCY RATE Total Vacancy Rate DFW Airport East Dallas Great Southwest/Arlington North Fort Worth Northeast Dallas Northwest Dallas NW Dallas Outlying South Dallas South Ft Worth South Stemmons 0% 2% 4% 6% 8% 10% 12% youngerpartners.com 3 MARKETInsightsSecond Quarter 2020 / Industrial Research Report DALLAS-FORT WORTH Rental Rates Asking rates have not shown any signs of softening to date with both industrial and flex rates reaching all-time high in the second quarter of 2020 ($5.45 and $10.23 NNN, respectively). All submarkets currently remain above the $4.00 (NNN) threshold. With the exception of South Dallas, most submarkets with the higher concentrations of newer construction are closer to above or near $5.00 per SF (NNN). IND & FLEX ASKINGInd and FlexRATES Asking Rates (NNN) (NNN) $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 YTD 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Ind Asking Rate Flex Asking Rate AVERAGE ASKING RATEAverage Asking (NNN) Rate (NNN) DFW Airport East Dallas Great Southwest/Arlington North Fort Worth Northeast Dallas Northwest Dallas NW Dallas Outlying South Dallas South Ft Worth South Stemmons $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 youngerpartners.com 4 Second Quarter 2020 / Industrial Research Report 14643 Dallas Parkway, Suite 950, LB#58 | Dallas, TX 75254 214.294.4400 MARKETInsights DALLAS-FORT WORTH SUBMARKETS ASKING INVENTORY VACANCY NET ABSORPTION COMPLETIONS UC RENT At End of Wtd. # of Current Current Current Avg. SUBMARKETS Bldgs. Total SF Total SF Rate Quarter YTD Quarter YTD Quarter (NNN) DFW Airport 459 74,901,154 6,184,263 8.3% 19,996 201,569 1,881,434 2,121,895 5,220,680 $5.88 East Dallas 410 41,813,305 3,097,297 7.4% 58,350 398,686 0 0 2,144,106 $4.05 Great SW/Arlington 840 107,410,832 6,551,754 6.1% -32,878 1,978,073 401,557 2,469,782 576,123 $4.74 North Fort Worth 548 99,296,802 11,522,142 11.6% 1,631,729 3,555,677 3,224,819 5,859,266 8,844,855 $5.29 Northeast Dallas 807 84,623,321 5,353,431 6.3% 370,718 816,446 486,860 723,860 2,943,499 $5.72 Northwest Dallas 882 91,713,829 4,551,015 5.0% -196,186 -21,369 23,800 428,248 2,699,668 $5.69 NW Dallas Outlying 21 2,268,022 67,403 3.0% 37,925 50,425 0 0 86,000 $7.63 South Dallas 548 100,486,359
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