It’s not just people that are migrating to Texas. Companies are too, with many of them filling the industrial spaces in Fort Worth.
Reshoring, the growth of the electric vehicle supply chain and new, more automated distribution centers are fueling the growth, according to local real estate leaders.
“I’m busier than I’ve ever been,” said Bob Scully of real estate firm CBRE, who has over 40 years in the business.
Scully and others in the industry believe 2023 may end up being a record for leases in the industrial space.
“Some of it may be pent-up demand from the pandemic and the fact that most of our supply-chain issues have abated, but our population growth is pushing a lot of this,” said Scully.
Third-party logistics companies, food and beverage and retail drove demand in the second quarter of 2023, taking up 4.1 million square feet or nearly 71 percent of the market of lease transactions over 100,000 square feet, Scully said.
“And that’s pretty much been true for the past year,” he said. “Companies want to be here, along the I-35 corridor.”
The demand for industrial space is being felt in the increase in rents in the industrial market. Rent prices have grown 13% in Fort Worth in the second quarter year-over-year, according to a report from Transwestern.
The recent announcement that Junchuang North America Inc., a China-based provider of advanced products for the electric vehicle market, is leasing a 55,000-square-foot manufacturing/industrial facility at 46 Ranch Logistics Park in south Fort Worth, is an example of how the area is attracting companies that supply the electric vehicle market.
“The North Texas region is becoming an important hub for new forms of sustainable energy, and that includes electric vehicles and the technology that powers them,” said Robert Sturns, the city of Fort Worth’s economic development director.
CBRE’s Scully said he is seeing that trend as well.
“That industry needs suppliers and this area has the logistics in place to be attractive to them,” he said.
Among the areas in demand is the vast Alliance corridor in north Fort Worth.
That is where Southwire, one of North America’s largest wire and cable producers, leased over 1 million square feet of space in mid-summer.
“Southwire wanted what a lot of our companies want,” said Reid Goetz, senior vice president of Hillwood. “This location at AllianceTexas will provide a distribution platform that will ensure the efficient and speedy delivery of electric components essential to their business operations.”
Goetz noted the access to the BNSF Intermodal terminal, Interstate 35 and Alliance Airport as key reasons for Southwire locating here.
Companies are getting more out of the modern industrial warehouse than they were in the past, Goetz said.
“There’s more utilization of the cube, more volume that is going through the facility, more throughput now,” he said.
Much of that is due to technology, such as automated conveyor systems.
“All of that, in the end, means companies are investing money, tens of millions in some cases, upfront to get what may be a 50-fold increase in efficiency and throughput,” he said.
Companies are also increasing the length of their lease for these sites.
“Used to be, five to seven years was the top,” said CBRE’s Scully. “Now, 10 years is not unusual.”
Companies want to avoid the gradual rent increase of the past, he said. “They want to know what their costs are going to be, and the longer lease is a way to control that,” he said.
While the Alliance area remains the top area in Fort Worth for industrial warehouse space, other areas are seeing interest, said Scully.
“South Fort Worth used to be a secret,” he said. “It’s not any more. We see a lot of interest there.”
That’s where German industrial giant Siemens may build an advanced manufacturing plant at 7200 Harris Legacy Drive at Carter Park East. The plant would produce low-voltage switchgear and switchboards and employ over 700.
The one area which could cause a slowdown in the industrial market is new construction.
“The capital markets are still sorting out the interest rate increases, so there may be some slowdown on new product hitting the market,” said Scully.
At the moment though, new warehouse construction is continuing.
In early September, TCRG Properties filed plans for a more than 1 million-square-foot warehouse with speculative office space at Everman Parkway and Interstate 35 in south Fort Worth.
In August, Hillwood announced the launch of two new speculative industrial buildings, Alliance Center East 2 and Alliance Center East 3. Each are 224,616 square feet, bringing nearly half a million square feet to the AllianceTexas industrial market. Speculative industrial buildings are constructed without a lease.
Hillwood’s AllianceTexas strategy is to continually have available, ready-to-occupy Class A speculative industrial options of all sizes for new and existing customers, said Goetz.
“There is continued market demand for spaces up to 225,000 square feet, particularly for manufacturers, 3PL’s, and ecommerce companies,” said Goetz. “With the recent completion of more than $1 billion in expansion improvements to Interstate 35W, and located within the heart of AllianceTexas’ world-class logistics amenities, these buildings will give our customers access to one of the most critical freight corridors in the country.”
Scully said that despite the issues in the capital markets, he expects to see more announcements of new construction in Dallas-Fort Worth.
“The demand is there,” he said.
Bob Francis is business editor for the Fort Worth Report. Contact him at bob.francis@fortworthreport.org.
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