The market is quickly tightening for smaller-footprint industrial developments, while larger properties continue to struggle finding occupants.<\/p>\n
In the current Dallas-Fort Worth industrial market<\/a>, there\u2019s almost a direct correlation between vacancy rates decreasing and developments shrinking in size. <\/p>\n For projects 50,000 square feet in size and under, commercial real estate firm CoStar shows a 6.5% vacancy rate \u2014 the tightest in the metro \u2014 despite nearly two million square feet of space vacated over the last year within that category. <\/p>\n Related:Dallas developer plots 180-acre industrial park near airport<\/a><\/p>\n D-FW Real Estate News<\/p>\n \u201cThese small bay buildings of 50,000 square feet or less have a large percentage of older stock, some of which becomes obsolete over time,\u201d said Cody Gibbs, director of market analytics with CoStar. <\/p>\n He explained that if the market is split into properties built before and after 2000, net absorption for newer properties clocks in at a positive 1.1 million square feet over the last year. While that still leaves around 900,000 square feet in the red for that segment in total, it represents strong demand for smaller-footprint properties built to more modern standards, such as higher clear heights. <\/p>\n To put that into context, Gibbs said there is around 1.8 million square feet of new construction for this segment currently underway.<\/p>\n A competitive edge<\/p>\n Citadel Properties recently sold three buildings in this size category at Allen Exchange, a 72,000-square-foot flex industrial development by McKinney-based Gillett Commercial, and built by Raymond Construction, headquartered in Richardson.<\/p>\n \u201cWhen you look at an industrial building in this tight submarket, if you\u2019re a landlord you have a ton of leverage so rates have been climbing like crazy,\u201d said Citadel senior adviser Katherine Pool, who facilitated the deal alongside company partner Mac Morse. <\/p>\n She explained that it is crucial for brokers to learn about potential deals as early as possible, and manage clients\u2019 expectations about pricing and competitiveness. <\/p>\n \u201cThe velocity and volume of deals for this product type post-COVID-19 has been second to none,\u201d Morse said. \u201cThe pricing is very competitive but it highly depends on the type of product, the type of user that it fits, and the micro-market it\u2019s in.\u201d<\/p>\n