America's Property Tax Advisor

DFW Warehouse Market on Track for Another Record Year


North Texas is one of the nation's hottest warehouse markets. Leasing activity from e-commerce and consumer products firms have caused a building boom during the last five years that shows no signs of slowing down. The total current warehouse development pipeline in the Dallas/Fort Worth Metroplex is bigger than the rest of the area's commercial construction combined.


"Although 2016 and 2017 were record years for absorption, we are on track to again exceed over 20 million square feet in net occupancy gains for the fourth year in a row - a new record," Cushman & Wakefield executive managing director Kurt Griffin said.


Prices and Rents Increase


New deals for warehouse storage and distribution facilities indicate a continued increase in purchase prices. Market rents continue to climb with continued low vacancies. While market values and assessed values continue to increase, many assessment increases can be kept in check with equal and uniform appeals. Also, with assessed values rising across all property types, the tax rates have flattened out or declined in the past few years.


Most of the ongoing warehouse construction is in projects located near DFW Airport, north Fort Worth, and in Mesquite. Currently, just under 7 percent of DFW's warehouse space is empty, up slightly from a year ago.


The largest leases in the third quarter were for vehicle accessory firm Leer and uniform company Cintas in the Great Southwest Industrial District in the Mid Cities. Last quarter, nearly two-thirds of the warehouse absorption was attributed to Tellworks occupying their speculative space; General Motors occupying two buildings; along with GE Appliance and FedEx occupying newly constructed build-to-suit facilities.


Valuation Model Changes


During the building phase, warehouse properties are assessed based on construction costs as of January 1. It is crucial to audit construction documents in order to determine if there are items that can be omitted from the valuation.


Once stabilized occupancy is achieved, appraisal districts begin valuing based on the income approach to value. At this time it is necessary to determine that the proper market rents, vacancies, expenses and cap rates are used in the valuation. It is also important to ensure that the property is not over assessed in comparison with similar properties, and appeal if necessary.


DFW Warehouse Space Under Construction Totals 19 Million SF

1. DFW Airport

6 million sf

2. North Fort Worth

2.8 million sf

3. Mesquite

2.3 million sf

4. Great Southwest

2.1 million sf

5. West Dallas

1.3 million sf

6. Southern Dallas

939,000 sf

Source: Cushman & Wakefield