Demand tops 20 million sq. ft. for third consecutive year. · MARKETVIEW Demand tops 20 million sq. ft. for third consecutive year. Dallas/Fort Worth Industrial, Q4 2018 PRODUCT PIPELINE

MARKETVIEW

Demand tops 20 million sq. ft.

for third consecutive year.

Dallas/Fort Worth Industrial, Q4 2018

PRODUCT PIPELINE CONTRACTS SUBSTANTIALLY

Q4 2018 CBRE Research © 2019 CBRE, Inc. | 1

Figure 1: DFW Industrial Market

Source: CBRE Research, Q4 2018.

SUPPLY AND DEMAND REMAIN BALANCED

MARKET-WIDE VACANCY RATE REMAINS SNUG

*Arrows indicate trend from previous quarter.

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30

2013 2014 2015 2016 2017 2018

Total Net Absorption Delivered Construction Construction Starts Total Vacancy

Vacancy Rate (%)MSF

8,273,325 SF 7,108,176 SF6.0% 14,513,927 SF

MARKETVIEW

Q4 2018 CBRE Research 2

DALLAS/FORT WORTH INDUSTRIAL

© 2019 CBRE, Inc. |

Source: Real Capital Analytics, Q4 2018.

Figure 2: DFW Industrial Market Snapshot


Figure 3: Select Lease Transactions

Market

Net Rentable

Area(SF)

Available(SF)

Avail.Rate(%)

Direct Vacancy

(SF)

Direct Vacancy

Rate(%)

Total Vacancy

(SF)

Total Vacancy

Rate(%)

Q4 2018Direct Net

Absorption(SF)

Q4 2018Total Net

Absorption(SF)

2018Total

Absorption (SF)

DFW Airport 76,537,446 7,143,995 9.3 4,981,889 6.5 5,496,992 7.2 1,021,613 1,093,964 2,816,521

East Dallas 36,711,061 3,247,617 8.8 1,640,650 4.5 1,674,582 4.6 455,405 421,473 323,735

Northeast Dallas 98,857,581 7,721,313 7.8 4,920,189 5.0 5,634,661 5.7 749,356 666,538 1,314,114

Northwest Dallas 110,278,941 6,873,465 6.2 4,158,527 3.8 4,433,034 4.0 360,646 333,645 1,007,725

South Dallas 77,278,616 13,465,000 17.4 12,086,981 15.6 12,226,952 15.8 1,206,291 1,254,279 5,847,155

South Stemmons 116,757,096 7,800,940 6.7 4,460,334 3.8 4,759,216 4.1 (375,470) (376,688) (1,290,388)

Great SW/Arlington 111,266,798 8,018,274 7.2 5,043,620 4.5 5,140,768 4.6 2,566,998 2,601,478 7,293,671

North Ft. Worth 86,756,177 6,851,203 7.9 4,999,167 5.8 5,057,167 5.8 347,594 327,594 2,382,231

South Ft. Worth 70,871,099 4,297,564 6.1 2,541,191 3.6 2,654,191 3.7 800,196 785,893 1,523,597

DALLAS TOTALS 516,420,741 46,252,330 9.0 32,248,570 6.2 34,225,437 6.6 3,417,841 3,393,211 10,018,862

FT.WORTH TOTALS 268,894,074 19,167,041 7.1 12,583,978 4.7 12,852,126 4.8 3,714,788 3,714,965 11,199,499

MARKET TOTALS 785,314,815 65,419,371 8.3 44,832,548 5.7 47,077,563 6.0 7,132,629 7,108,176 21,218,361

Tenant Building(s) City Submarket SF

1 Dematic Synergy Crossing Fort Worth North Fort Worth 707,000

2 Nobel Cotton 1011 Isuzu Pkwy Grand Prairie Great Southwest/Arlington 470,000

3 Smart Warehousing Alliance Center North 15 Fort Worth North Fort Worth 269,500

4 KGP Logistics 801 Industrial Blvd Grapevine DFW Airport 204,600

5 Chase Industries Liberty Park GSW North Building 1 Irving Great Southwest/Arlington 172,000

Buyer Building(s) City Submarket SF

1 LBA Realty Portfolio Sale Coppell DFW Airport 557,000

2 Brookfield Asset Management Portfolio Sale Multiple Multiple 369,000

3 Owner/User 3100 Eagle Pkwy Fort Worth North Fort Worth 151,000

4 Alpine Century Center LLC 2211 Century Center Blvd Irving Great Southwest/Arlington 121,000

5 Finial Group Westmoreland Business Center Dallas South Dallas 85,500

Figure 4: Select Sale Transactions


MARKETVIEW




Figure 5: Industrial/Flex Total Quarterly Market Summary

Inventory Vacancy Net Absorption (SF) Construction (SF)

AreaBldg.Count

Total(SF)

% ofMarket

Direct (SF)

Direct (%)

Total(%)

Qtr.Direct

Qtr.Total

2018Total

UnderConst.

Qtr.Deliveries

2018 Deliveries

DFW Airport

E DFW/Las Colinas 382 57,836,035 7.4 4,139,420 7.2 7.9 1,155,458 1,116,906 2,440,848 2,016,000 2,726,177 4,100,907

W DFW/Grapevine 310 18,701,411 2.4 842,469 4.5 4.8 (133,845) (22,942) 375,673 43,000 - 646,796

DFW Airport Total 692 76,537,446 9.7 4,981,889 6.5 7.2 1,021,613 1,093,964 2,816,521 2,059,000 2,726,177 4,747,703

East Dallas

Central E Dallas 408 16,907,109 2.2 361,505 2.1 2.2 (29,132) (43,982) 29,677 - - -

East Dallas/Mesquite 284 19,803,952 2.5 1,279,145 6.5 6.6 484,537 465,455 294,058 1,623,230 487,200 587,226

East Dallas Total 692 36,711,061 4.7 1,640,650 4.5 4.6 455,405 421,473 323,735 1,623,230 487,200 587,226

Northeast Dallas

Allen/McKinney 189 11,576,864 1.5 522,123 4.5 4.6 (62,878) (62,878) 24,456 190,176 202,270 366,857

NE Dallas/Garland 847 48,345,635 6.2 2,467,014 5.1 6.3 689,933 674,533 900,951 248,825 764,400 764,400

Plano 346 19,123,072 2.4 891,391 4.7 5.1 129,803 65,504 348,754 242,701 234,908 234,908

Richardson 300 16,813,826 2.1 1,010,981 6.0 6.2 18,378 15,259 45,873 434,640 - -

Rockwall 54 2,998,184 0.4 28,680 1.0 1.0 (25,880) (25,880) (5,920) 700,000 - -

Northeast Dallas Total 1,736 98,857,581 12.6 4,920,189 5.0 5.7 749,356 666,538 1,314,114 1,816,342 1,201,578 1,366,165

Northwest Dallas

Denton 175 10,705,234 1.4 291,779 2.7 3.0 10,288 10,288 65,179 - 169,469 169,469

Lewisville 231 26,638,926 3.4 613,692 2.3 2.3 536,470 536,470 1,002,139 1,041,280 470,000 763,682

Metropolitan/Addison 439 20,453,181 2.6 1,432,674 7.0 7.3 3,388 (12,756) (469,619) - - -

N Stemmons/Valwood 657 49,636,115 6.3 1,789,382 3.6 3.9 (194,325) (205,182) 431,026 768,996 - 235,900

NW Dallas Outlying 24 2,845,485 0.4 31,000 1.1 1.1 4,825 4,825 (21,000) - - -

Northwest Dallas Total 1,526 110,278,941 14.0 4,158,527 3.8 4.0 360,646 333,645 1,007,725 1,810,276 639,469 1,169,051

South Dallas

Red Bird/Airport 190 19,677,387 2.5 536,127 2.7 2.7 225,980 225,980 (3,379) - 100,360 154,960

SE Dallas/I-45 254 39,805,722 5.1 8,447,953 21.2 21.2 1,404,387 1,452,375 4,559,874 - 1,200,356 6,583,690

SW Dallas/US 67 153 17,795,507 2.3 3,102,901 17.4 18.2 (424,076) (424,076) 1,290,660 - - 1,300,000

South Dallas Total 597 77,278,616 9.8 12,086,981 15.6 15.8 1,206,291 1,254,279 5,847,155 - 1,300,716 8,038,650

South Stemmons

East Brookhollow 188 8,510,381 1.1 158,482 1.9 1.9 (39,114) (39,114) (27,551) - - -

E Hines North 624 20,173,510 2.6 458,198 2.3 2.7 (24,994) (16,514) (139,282) - - -

Eastern Lonestar/Tpke 288 24,974,013 3.2 1,327,178 5.3 6.0 254,853 268,053 (521,468) 855,000 - -

North Trinity 392 10,417,683 1.3 629,830 6.0 6.1 (47,410) (49,710) (187,323) - - -

West Brookhollow 977 39,163,344 5.0 766,857 2.0 2.0 64,079 45,431 (91,734) - - -

W Hines North 191 6,642,481 0.8 154,039 2.3 2.3 53,381 51,431 (102,795) - - -

Western Lonestar/Tpke 96 6,875,684 0.9 965,750 14.0 14.0 (636,265) (636,265) (220,235) - - 189,200

South Stemmons Total 2,756 116,757,096 14.9 4,460,334 3.8 4.1 (375,470) (376,688) (1,290,388) 855,000 - 189,200

Great SW/Arlington

Arlington 401 22,258,928 2.8 1,332,061 6.0 6.0 372,028 372,028 1,699,488 - 110,468 110,468

Lower Great Southwest 422 36,985,923 4.7 836,171 2.3 2.3 80,618 80,618 1,521,176 - 271,794 1,984,926

Upper Great Southwest 503 52,021,947 6.6 2,875,388 5.5 5.7 2,114,352 2,148,832 4,073,007 1,992,849 494,518 1,196,518

Great SW/Arlington Total 1,326 111,266,798 14.2 5,043,620 4.5 4.6 2,566,998 2,601,478 7,293,671 1,992,849 876,780 3,291,912

North Fort Worth

Meacham Fld/Fossil Creek 399 41,587,770 5.3 1,957,717 4.7 4.8 232,556 232,556 323,802 500,029 491,000 1,267,205

NE Tarrant Alliance 209 40,972,296 5.2 2,976,450 7.3 7.3 140,038 120,038 1,881,629 3,099,456 550,405 2,449,562

West Tarrant 61 4,196,111 0.5 65,000 1.5 1.5 (25,000) (25,000) 176,800 - - 90,000

North Fort Worth Total 669 86,756,177 11.0 4,999,167 5.8 5.8 347,594 327,594 2,382,231 3,599,485 1,041,405 3,806,767

South Fort Worth

East Fort Worth 611 23,033,874 2.9 922,651 4.0 4.3 (15,179) (40,179) 302,253 - - -

Mansfield 80 4,014,312 0.5 3,760 0.1 0.1 - - 143,116 - - -

N Central Fort Worth 291 10,032,750 1.3 234,790 2.3 2.3 (8,784) (8,784) (84,810) - - -

S Central Tarrant County 261 22,635,186 2.9 1,002,345 4.4 4.4 826,309 837,006 1,322,423 757,745 - 287,261

S Central Fort Worth 250 9,284,204 1.2 143,524 1.5 1.5 8,150 8,150 (66,397) - - -

SW Tarrant 75 1,870,773 0.2 234,121 12.5 15.0 (10,300) (10,300) (92,988) - - -

South Fort Worth Total 1,568 70,871,099 9.0 2,541,191 3.6 3.7 800,196 785,893 1,523,597 757,745 - 287,261

Dallas Total 7,999 516,420,741 65.8 32,248,570 6.2 6.6 3,417,841 3,393,211 10,018,862 8,163,848 6,355,140 16,097,995

Fort Worth Total 3,563 268,894,074 34.2 12,583,978 4.7 4.8 3,714,788 3,714,965 11,199,499 6,350,079 1,918,185 7,385,940

Dallas/Fort Worth Total 11,562 785,314,815 100.0 44,832,548 5.7 6.0 7,132,629 7,108,176 21,218,361 14,513,927 8,273,325 23,483,935

MARKETVIEW

Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.


CONTACTS CBRE OFFICES

MARKETVIEW

Equilibrium defines the state

of the DFW industrial market.


LABOR IS A CRITICAL DECISION FOR OCCUPIERS




SUPPLY AND DEMAND REMAIN BALANCED


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2013 2014 2015 2016 2017 YTD 2018


Vacancy Rate (%)MSF

6,457,289 SF 4,190,845 SF6.0% 20,681,490 SF

MARKETVIEW



© 2018 CBRE, Inc. |





Market

Net Rentable

Area(SF)

Available(SF)

Avail.Rate(%)

Direct Vacancy

(SF)

Direct Vacancy

Rate(%)

Total Vacancy

(SF)

Total Vacancy

Rate(%)

Q3 2018Direct Net

Absorption(SF)

Q3 2018Total Net

Absorption(SF)

2018 YTDTotal

Absorption (SF)

DFW Airport 73,502,027 6,239,805 8.5 3,277,325 4.5 3,864,779 5.3 454,196 301,497 1,722,557

East Dallas 36,129,023 3,276,827 9.1 2,028,481 5.6 2,028,481 5.6 223,237 243,987 (97,738)

Northeast Dallas 97,533,719 7,392,181 7.6 4,515,703 4.6 5,147,357 5.3 39,733 153,240 647,576

Northwest Dallas 109,796,363 6,647,039 6.1 3,958,385 3.6 4,205,891 3.8 335,667 316,146 674,080

South Dallas 75,960,690 13,598,900 17.9 10,960,699 14.4 12,193,305 16.1 1,254,124 1,114,153 4,592,876

South Stemmons 116,756,129 8,515,542 7.3 4,207,292 3.6 4,504,956 3.9 (356,255) (480,817) (913,700)

Great SW/Arlington 110,390,484 8,081,601 7.3 6,555,888 5.9 6,687,516 6.1 816,636 1,705,022 4,692,193

North Ft. Worth 85,622,575 6,081,862 7.1 4,383,628 5.1 4,421,628 5.2 537,382 510,382 2,054,637

South Ft. Worth 71,132,416 4,327,766 6.1 3,527,977 5.0 3,626,674 5.1 343,535 327,235 737,704

DALLAS TOTALS 509,677,951 45,670,294 9.0 28,947,885 5.7 31,944,769 6.3 1,950,702 1,648,206 6,625,651

FT.WORTH TOTALS 267,145,475 18,491,229 6.9 14,467,493 5.4 14,735,818 5.5 1,697,553 2,542,639 7,484,534

MARKET TOTALS 776,823,426 64,161,523 8.3 43,415,378 5.6 46,680,587 6.0 3,648,255 4,190,845 14,110,185


1 Mars Candy Build-to-Suit in Passport Business Park DFW Airport DFW Airport 1,500,000

2 Quest Window Systems 1720 S Jupiter Rd Garland Northeast Dallas 327,600

3 Vistaprint 9900 Bonnie View Rd Dallas South Dallas 322,000

4 American Hotel Register 3801 S 20th Ave Euless DFW Airport 227,924

5 Better Home Products 600 109th St Arlington Great Southwest/Arlington 179,875


1 Cohen Asset Management 3801 Pinnacle Point Dr Dallas South Stemmons 1,350,000

2 MPI Group LLC 3800 Railport Pkwy Midlothian South Dallas 826,000

3 Blackstone Mercantile Center 35/820 Fort Worth North Fort Worth 657,043

4 Stonelake Capital Partners 1850 Westpark Dr Grand Prairie Great Southwest/Arlington 425,870

5 Morgan Stanley Ridge Railhead Industrial Park Building 2 Fort Worth North Fort Worth 343,720



MARKETVIEW






AreaBldg.Count

Total(SF)

% ofMarket

Direct (SF)

Direct (%)

Total(%)

Qtr.Direct

Qtr.Total

2018 YTDTotal

UnderConst.

Qtr.Deliveries

2018 YTD Deliveries

DFW Airport

E DFW/Las Colinas 375 54,804,190 7.1 2,568,701 4.7 5.4 167,102 173,473 1,323,942 3,239,435 193,935 1,374,730

W DFW/Grapevine 310 18,697,837 2.4 708,624 3.8 4.7 287,094 128,024 398,615 - 646,796 646,796

DFW Airport Total 685 73,502,027 9.5 3,277,325 4.5 5.3 454,196 301,497 1,722,557 3,239,435 840,731 2,021,526

East Dallas

Central E Dallas 409 16,804,681 2.2 332,373 2.0 2.0 32,530 45,780 73,659 - - -

East Dallas/Mesquite 285 19,324,342 2.5 1,696,108 8.8 8.8 190,707 198,207 (171,397) 2,591,950 100,026 100,026

East Dallas Total 694 36,129,023 4.7 2,028,481 5.6 5.6 223,237 243,987 (97,738) 2,591,950 100,026 100,026

Northeast Dallas

Allen/McKinney 188 11,332,608 1.5 256,975 2.3 2.3 39,346 39,346 87,334 317,446 - 164,587

NE Dallas/Garland 844 47,530,236 6.1 2,392,547 5.0 6.3 1,801 66,151 226,418 1,013,225 - -

Plano 345 18,870,045 2.4 786,286 4.2 4.3 (10,761) 46,283 283,250 234,948 - -

Richardson 300 16,813,826 2.2 1,077,095 6.4 6.6 (8,753) (16,640) 30,614 - - -

Rockwall 54 2,987,004 0.4 2,800 0.1 0.1 18,100 18,100 19,960 700,000 - -

Northeast Dallas Total 1,731 97,533,719 12.6 4,515,703 4.6 5.3 39,733 153,240 647,576 2,265,619 - 164,587

Northwest Dallas

Denton 175 10,584,216 1.4 132,598 1.3 1.6 73,989 73,989 54,891 169,469 - -

Lewisville 230 26,179,402 3.4 758,843 2.9 2.9 153,963 159,505 465,669 1,411,280 14,994 293,682

Metropolitan/Addison 441 20,509,525 2.6 1,436,062 7.0 7.3 (253,811) (271,415) (456,863) - - -

N Stemmons/Valwood 657 49,677,735 6.4 1,595,057 3.2 3.5 375,551 368,092 636,208 825,096 235,900 235,900

NW Dallas Outlying 24 2,845,485 0.4 35,825 1.3 1.3 (14,025) (14,025) (25,825) - - -

Northwest Dallas Total 1,527 109,796,363 14.1 3,958,385 3.6 3.8 335,667 316,146 674,080 2,405,845 250,894 529,582

South Dallas

Red Bird/Airport 189 19,547,027 2.5 661,747 3.4 3.4 (140,328) (140,328) (229,359) 100,360 54,600 54,600

SE Dallas/I-45 251 38,605,366 5.0 7,607,337 19.7 22.5 1,251,446 1,251,446 3,107,499 1,438,800 2,176,178 5,383,334

SW Dallas/US 67 153 17,808,297 2.3 2,691,615 15.1 15.9 143,006 3,035 1,714,736 - - 1,300,000

South Dallas Total 593 75,960,690 9.8 10,960,699 14.4 16.1 1,254,124 1,114,153 4,592,876 1,539,160 2,230,778 6,737,934

South Stemmons

East Brookhollow 189 8,559,693 1.1 119,368 1.4 1.4 6,560 6,560 11,563 - - -

E Hines North 624 20,185,783 2.6 433,204 2.1 2.6 (15,927) (15,927) (122,768) - - -

Eastern Lonestar/Tpke 288 24,974,628 3.2 1,582,031 6.3 7.1 (233,112) (424,168) (789,521) 1,281,714 - -

North Trinity 392 10,417,433 1.3 582,420 5.6 5.6 21,738 23,263 (137,613) - - -

West Brookhollow 978 39,092,927 5.0 830,936 2.1 2.1 (76,128) (21,271) (137,165) - - -

W Hines North 192 6,649,981 0.9 329,848 5.0 5.0 (153,201) (143,089) (154,226) - - -

Western Lonestar/Tpke 96 6,875,684 0.9 329,485 4.8 4.8 93,815 93,815 416,030 - - 189,200

South Stemmons Total 2,759 116,756,129 15.0 4,207,292 3.6 3.9 (356,255) (480,817) (913,700) 1,281,714 - 189,200

Great SW/Arlington

Arlington 399 21,876,666 2.8 1,321,827 6.0 6.1 (9,286) 21,100 1,327,460 - - -

Lower Great Southwest 422 36,983,771 4.8 916,789 2.5 2.5 1,108,123 1,966,123 1,440,558 271,794 1,200,000 1,713,132

Upper Great Southwest 502 51,530,047 6.6 4,317,272 8.4 8.6 (282,201) (282,201) 1,924,175 2,487,367 - 702,000

Great SW/Arlington Total 1,323 110,390,484 14.2 6,555,888 5.9 6.1 816,636 1,705,022 4,692,193 2,759,161 1,200,000 2,415,132

North Fort Worth

Meacham Fld/Fossil Creek 397 41,097,019 5.3 1,699,273 4.1 4.2 59,611 32,611 91,246 891,000 432,485 776,205

NE Tarrant Alliance 207 40,329,445 5.2 2,644,355 6.6 6.6 417,771 417,771 1,761,591 2,949,861 1,402,375 1,899,157

West Tarrant 61 4,196,111 0.5 40,000 1.0 1.0 60,000 60,000 201,800 - - 90,000

North Fort Worth Total 665 85,622,575 11.0 4,383,628 5.1 5.2 537,382 510,382 2,054,637 3,840,861 1,834,860 2,765,362

South Fort Worth

East Fort Worth 613 23,068,219 3.0 907,472 3.9 4.1 502,031 471,731 342,432 - - -

Mansfield 80 4,014,312 0.5 3,760 0.1 0.1 4,176 4,176 143,116 - - -

N Central Fort Worth 292 10,225,139 1.3 402,906 3.9 3.9 (29,637) (29,637) (76,026) - - -

S Central Tarrant County 262 22,647,186 2.9 1,828,654 8.1 8.1 (145,978) (131,978) 485,417 757,745 - 287,261

S Central Fort Worth 251 9,305,379 1.2 161,364 1.7 1.7 (1,244) (1,244) (74,547) - - -

SW Tarrant 75 1,872,181 0.2 223,821 12.0 14.4 14,187 14,187 (82,688) - - -

South Fort Worth Total 1,573 71,132,416 9.2 3,527,977 5.0 5.1 343,535 327,235 737,704 757,745 - 287,261

Dallas Total 7,989 509,677,951 65.6 28,947,885 5.7 6.3 1,950,702 1,648,206 6,625,651 13,323,723 3,422,429 9,742,855

Fort Worth Total 3,561 267,145,475 34.4 14,467,493 5.4 5.5 1,697,553 2,542,639 7,484,534 7,357,767 3,034,860 5,467,755


MARKETVIEW



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MARKETVIEW

Construction hits highwater mark as vacancy stays snug.


NORTH TEXAS IS A TOP FIVE U.S. LOGISTICS MARKET

The Metroplex remains a premier destination for industrial occupiers and investors. For occupiers, the market offers a favorable business and taxation environment, and for investors the region has exceptional fundamentals, making it the second most desirable market for investment in the Western Hemisphere, according to the Americas Investor Intentions Survey 2018, produced by CBRE Research. Industrial remained the preferred asset type in 2018, with 50% of respondents calling it the most attractive sector to target for investment purchase in 2018. The local economy remains strong, adding 55,500 jobs in the first five months of 2018, an annualized rate of 3.7%, according to the Federal Reserve Bank of Dallas. DFW’s widely recognized job and residential growth is powering investor interest in addition to vibrant economic fundamentals in the near and long-term outlook.




CONSTRUCTION REACHES NEW HIGH

This past 90 days marks more than two and a half years of consecutive quarterly positive net absorption for the Dallas/Fort Worth industrial market. The construction pipeline has grown to nearly 22.3 million sq. ft. with 7.9 million sq. ft. in new starts tracked in Q2 2018 alone, with more than two-thirds of starts this quarter in either the DFW Airport or North Fort Worth submarkets. Deliveries totaled 6.4 million sq. ft. and were 54.8% pre-committed. Over 100 million sq. ft. in space has been added to DFW industrial since 2013, yet vacancy still rests at a tight 5.8%. Rock bottom vacancy along with a high level of completions suggest exceedingly robust occupier demand. Year-to-date absorption was just under 10 million sq. ft., inline with mid-year absorption levels seen over the past three years.


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2013 2014 2015 2016 2017 YTD 2018


Vacancy Rate (%)MSF

Completions6,432,612 SF

Net Absorption5,980,988 SF

Vacancy5.8%

Under Construction22,282,426 SF

MARKETVIEW



© 2018 CBRE, Inc. |





Market

Net Rentable

Area(SF)

Available(SF)

Avail.Rate(%)

Direct Vacancy

(SF)

Direct Vacancy

Rate(%)

Total Vacancy

(SF)

Total Vacancy

Rate(%)

Q2 2018Direct Net

Absorption(SF)

Q2 2018Total Net

Absorption(SF)

2018 YTDTotal

Absorption (SF)

DFW Airport 72,473,651 6,530,476 9.0 2,987,552 4.1 3,422,307 4.7 776,990 632,184 1,421,060

East Dallas 36,035,488 3,339,055 9.3 2,164,692 6.0 2,185,442 6.1 (303,481) (310,981) (341,725)

Northeast Dallas 97,488,864 7,038,790 7.2 4,579,806 4.7 5,324,967 5.5 45,142 (21,374) 494,336


South Dallas 73,806,539 13,301,312 18.0 9,984,045 13.5 11,076,680 15.0 2,975,138 2,927,150 3,478,723

South Stemmons 116,808,958 8,779,244 7.5 3,918,763 3.4 4,091,865 3.5 (116,013) (211,684) (432,883)


North Ft. Worth 83,865,296 4,666,054 5.6 3,007,878 3.6 3,018,878 3.6 602,052 591,052 1,544,255

South Ft. Worth 71,242,209 5,105,084 7.2 3,881,938 5.4 3,964,335 5.6 112,790 152,905 410,469

DALLAS TOTALS 505,968,802 46,004,119 9.1 27,694,799 5.5 30,452,957 6.0 3,848,878 3,437,883 4,977,445

FT.WORTH TOTALS 264,096,566 20,120,065 7.6 13,125,635 5.0 14,239,046 5.4 3,382,490 2,543,105 4,941,895

MARKET TOTALS 770,065,368 66,124,184 8.6 40,820,434 5.3 44,692,003 5.8 7,231,368 5,980,988 9,919,340


1 Elements International Group 2250 Skyline Rd Mesquite East Dallas 487,200

2 PPG 1001 Lakeside Pkwy Lewisville Northwest Dallas 450,000

3 VMInnovations 1200 W Wintergreen Rd Hutchins South Dallas 416,891

4 Rent the Runway 1111 Bardin Road Arlington Great Southwest/Arlington 319,200

5 Toyota Motor Sales Inc 1825 Midway Rd Lewisville Northwest Dallas 121,188


1 John Hancock 300 Gateway Parkway Roanoke North Fort Worth 602,000

2 Hard Six Holdings 1501 Kings Rd Garland Northeast Dallas 265,885

3 Hines DFW East Logistics Center Irving DFW Airport 259,555

4 Owner Occupier 1820 North Josey Lane Carrollton Northwest Dallas 197,748

5 Agellan Capital Partners 10425 Plano Road Dallas Northeast Dallas 155,324



MARKETVIEW






AreaBldg.Count

Total(SF)

% ofMarket

Direct (SF)

Direct (%)

Total(%)

Qtr.Direct

Qtr.Total

2018 YTDTotal

UnderConst.

Qtr.Deliveries

2018 YTD Deliveries

DFW AirportE DFW/Las Colinas 373 54,418,232 7.1 2,541,868 4.7 5.4 603,998 459,192 1,150,469 3,433,370 - 1,180,795 W DFW/Grapevine 307 18,055,419 2.3 445,684 2.5 2.5 172,992 172,992 270,591 646,796 - -DFW Airport Total 680 72,473,651 9.4 2,987,552 4.1 4.7 776,990 632,184 1,421,060 4,080,166 - 1,180,795

East DallasCentral E Dallas 411 16,811,172 2.2 377,903 2.2 2.3 (11,207) (11,207) 27,879 - - -East Dallas/Mesquite 283 19,224,316 2.5 1,786,789 9.3 9.3 (292,274) (299,774) (369,604) 2,530,216 - -East Dallas Total 694 36,035,488 4.7 2,164,692 6.0 6.1 (303,481) (310,981) (341,725) 2,530,216 - -

Northeast DallasAllen/McKinney 192 11,383,887 1.5 303,094 2.7 2.7 130,513 121,958 47,988 317,446 164,587 164,587 NE Dallas/Garland 846 47,577,441 6.2 2,411,945 5.1 6.4 (160,162) (196,918) 160,267 764,400 - -Plano 345 18,785,671 2.4 775,525 4.1 4.5 117,651 98,851 236,967 284,948 - -Richardson 300 16,754,861 2.2 1,068,342 6.4 6.5 (40,060) (42,465) 47,254 - - -Rockwall 54 2,987,004 0.4 20,900 0.7 0.7 (2,800) (2,800) 1,860 700,000 - -Northeast Dallas Total 1,737 97,488,864 12.7 4,579,806 4.7 5.5 45,142 (21,374) 494,336 2,066,794 164,587 164,587

Northwest DallasDenton 175 10,584,216 1.4 206,587 2.0 2.3 (11,398) (11,398) (19,098) 169,469 - -Lewisville 229 26,164,102 3.4 914,595 3.5 3.5 298,751 298,751 306,164 484,994 278,688 278,688 Metropolitan/Addison 441 20,381,393 2.6 1,182,251 5.8 6.0 (134,154) (111,226) (185,448) - - -N Stemmons/Valwood 655 49,380,106 6.4 1,734,708 3.5 4.0 317,903 246,461 268,116 909,820 - -NW Dallas Outlying 24 2,845,485 0.4 21,800 0.8 0.8 - - (11,800) - - -Northwest Dallas Total 1,524 109,355,302 14.2 4,059,941 3.7 4.0 471,102 422,588 357,934 1,564,283 278,688 278,688

South DallasRed Bird/Airport 188 19,492,427 2.5 466,819 2.4 2.4 4,555 4,555 (89,031) 154,960 - -SE Dallas/I-45 248 36,403,315 4.7 6,682,605 18.4 21.4 1,374,638 1,326,650 1,856,053 3,377,300 3,077,156 3,207,156 SW Dallas/US 67 153 17,910,797 2.3 2,834,621 15.8 15.8 1,595,945 1,595,945 1,711,701 - 1,300,000 1,300,000 South Dallas Total 589 73,806,539 9.6 9,984,045 13.5 15.0 2,975,138 2,927,150 3,478,723 3,532,260 4,377,156 4,507,156

South StemmonsEast Brookhollow 189 8,559,693 1.1 125,928 1.5 1.5 9,436 9,436 5,003 - - -E Hines North 625 20,185,655 2.6 485,003 2.4 2.9 (42,366) (140,883) (106,841) - - -Eastern Lonestar/Tpke 288 24,975,991 3.2 1,348,919 5.4 5.4 (295,722) (295,722) (365,353) - - -North Trinity 393 10,427,933 1.4 604,158 5.8 5.8 (79,631) (78,331) (160,876) - - -West Brookhollow 979 39,099,622 5.1 754,808 1.9 2.1 (34,488) (22,830) (115,894) - - -W Hines North 192 6,684,380 0.9 176,647 2.6 2.8 4,543 (5,569) (11,137) - - -Western Lonestar/Tpke 96 6,875,684 0.9 423,300 6.2 6.2 322,215 322,215 322,215 - 189,200 189,200

South Stemmons Total 2,762 116,808,958 15.2 3,918,763 3.4 3.5 (116,013) (211,684) (432,883) - 189,200 189,200 Great SW/Arlington

Arlington 399 21,887,666 2.8 1,312,541 6.0 6.2 1,344,302 1,344,302 1,306,360 - - -Lower Great Southwest 421 35,752,623 4.6 824,912 2.3 4.7 (2,804) (860,804) (525,565) 1,471,794 - 513,132 Upper Great Southwest 502 51,348,772 6.7 4,098,366 8.0 8.2 1,326,150 1,315,650 2,206,376 1,361,192 702,000 702,000 Great SW/Arlington Total 1,322 108,989,061 14.2 6,235,819 5.7 6.7 2,667,648 1,799,148 2,987,171 2,832,986 702,000 1,215,132

North Fort WorthMeacham Fld/Fossil Creek 396 40,639,753 5.3 1,326,399 3.3 3.3 (107,037) (118,037) 58,635 1,323,485 343,720 343,720 NE Tarrant Alliance 205 39,017,432 5.1 1,581,479 4.1 4.1 619,089 619,089 1,343,820 4,352,236 - 496,782 West Tarrant 62 4,208,111 0.5 100,000 2.4 2.4 90,000 90,000 141,800 - 90,000 90,000 North Fort Worth Total 663 83,865,296 10.9 3,007,878 3.6 3.6 602,052 591,052 1,544,255 5,675,721 433,720 930,502

South Fort WorthEast Fort Worth 614 23,150,597 3.0 1,409,503 6.1 6.1 (35,890) 12,225 (129,299) - - -Mansfield 80 4,014,312 0.5 7,936 0.2 0.2 10,000 10,000 138,940 - - -N Central Fort Worth 293 10,231,226 1.3 383,695 3.8 3.8 (28,494) (28,494) (46,389) - - -S Central Tarrant County 263 22,642,114 2.9 1,682,676 7.4 7.5 254,079 246,079 617,395 - 287,261 - 287,261 S Central Fort Worth 252 9,329,279 1.2 160,120 1.7 1.7 16,163 16,163 (73,303) - - -SW Tarrant 75 1,874,681 0.2 238,008 12.7 15.2 (103,068) (103,068) (96,875) - - -South Fort Worth Total 1,577 71,242,209 9.3 3,881,938 5.4 5.6 112,790 152,905 410,469 - 287,261 - 287,261

Dallas Total 7,986 505,968,802 65.7 27,694,799 5.5 6.0 3,848,878 3,437,883 4,977,445 13,773,719 5,009,631 6,320,426Fort Worth Total 3,562 264,096,566 34.3 13,125,635 5.0 5.4 3,382,490 2,543,105 4,941,895 8,508,707 1,422,981 2,432,895Dallas/Fort Worth Total 11,548 770,065,368 100.0 40,820,434 5.3 5.8 7,231,368 5,980,988 9,919,340 22,282,426 6,432,612 8,753,321

MARKETVIEW



CONTACTS

Robert C. KrampDirector, Research & [email protected]

E. Michelle MillerResearch Operations [email protected]

Lauren ParisTeam Lead+1 214 [email protected]

Miller Hamrick Research Analyst+1 214 [email protected]

CBRE OFFICES

CBRE Dallas2100 McKinney Ave., Suite 700Dallas, TX 75201

To learn more about CBRE Research,or to access additional research reports,please visit the Global Research Gateway at www.cbre.com/research-and-reports.

MARKETVIEW

Vacancy dropped to 5.8% following record deliveries


CONSUMER GOODS AND LOGISTICS DRIVE DEMAND

Unsurprisingly, third party logistics companies (3PLs), consumer goods suppliers, and e-commerce outfits led demand during Q1 2018. These three key industries, driven by the Metroplex’s booming population, have been absolute juggernauts this cycle in terms of driving demand for industrial space. Population growth drives demand for warehouse space, and Dallas/Fort Worth is predicted to have an average annual residential growth rate of 1.9% over the next five years, or 391 new people per day. Additionally, increased adoption of automation and increased sophistication of industrial product has led to larger super-regional distribution centers. The geographic location of Dallas/Fort Worth, which is at the center of the Sun Belt and is The South’s largest urban agglomeration, is a prime location for this type of development.




SUPPLY AND DEMAND REMAIN IN EQUILIBRIUM

Q1 2018 marks the 30th consecutive quarter of positive net absorption for the Dallas/Fort Worth industrial market. Following a year of record deliveries, just 2.3 million sq. ft. was added to the market during Q1 2018, with over 50% of this space pre-committed. With 3.9 million sq. ft. taken by occupiers during Q1 2018, along with the removal of the Vought Airplane Factory, which accounted for over 3 million sq. ft. of functionally obsolete space, the vacancy rate dropped 64 basis points (bps) over the quarter to sit at 5.8% by the end of March. The supply pipeline remained flat, with 19.3 million sq. ft. of active projects observed at the end of Q1 2018. The pre-committed rate of 45% for under construction product remained well above historic levels, which have averaged around 30% throughout this cycle.


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Total Net Absorption Under Construction Delivered Construction Total Vacancy

Vacancy Rate (%)MSF



Vacancy5.8%


MARKETVIEW



© 2018 CBRE, Inc. |





Market

Net Rentable

Area(SF)

Available(SF)

Avail.Rate(%)

Direct Vacancy

(SF)

Direct Vacancy

Rate(%)

Total Vacancy

(SF)

Total Vacancy

Rate(%)

Q1 2018Direct Net

Absorption(SF)

Q1 2018Total Net

Absorption(SF)

2018 YTDTotal

Absorption (SF)

DFW Airport 72,472,058 6,100,555 8.4 3,767,595 5.2 4,057,544 5.6 882,690 788,876 788,876

East Dallas 36,575,988 3,616,066 9.9 1,861,211 5.1 1,874,461 5.1 (27,494) (30,744) (30,744)


Northwest Dallas 109,303,033 6,794,546 6.2 4,194,809 3.8 4,457,239 4.1 63,540 (64,654) (64,654)

South Dallas 69,007,059 10,021,814 14.5 9,613,884 13.9 9,613,884 13.9 551,573 551,573 551,573

South Stemmons 116,931,024 7,717,644 6.6 3,731,557 3.2 3,808,988 3.3 (226,015) (221,199) (221,199)


North Ft. Worth 83,504,482 5,238,301 6.3 3,433,324 4.1 3,433,324 4.1 942,203 953,203 953,203

South Ft. Worth 71,130,376 5,046,706 7.1 3,745,666 5.3 3,868,178 5.4 262,579 257,564 257,564

DALLAS TOTALS 501,638,866 41,801,261 8.3 27,579,916 5.5 28,901,621 5.8 1,773,989 1,539,562 1,539,562

FT.WORTH TOTALS 263,303,348 21,012,361 8.0 15,360,634 5.8 15,595,908 5.9 2,347,764 2,398,790 2,398,790

MARKET TOTALS 764,942,214 62,813,622 8.2 42,940,550 5.6 44,497,529 5.8 4,121,753 3,938,352 3,938,352


1 Tellworks Communications Park 20/360 Building 1 Arlington Great Southwest/Arlington 722,733

2 Exel Logistics 13601 Independence Pkwy Fort Worth North Fort Worth 409,914

3 ProPac 1400 N Hwy 360 Grand Prairie Great Southwest/Arlington 349,421

4 Dart Warehouse Wildlife Commerce Park Building 5 Grand Prairie Great Southwest/Arlington 342,526

5 Vira Insight Majestic Airport Center Building 6 Lewisville Northwest Dallas 329,060


1 2020 Singleton Blvd LLC 2020 Singleton Blvd Dallas South Stemmons 472,284

2 LBA Realty 500 Airline Dr Coppell DFW Airport 467,766

3 Family Trust 4949 Joseph Hardin Dr Dallas South Dallas 276,000

4 Entrada Partners 7301 Ambassador Row Dallas South Stemmons 242,310

5 Vahid Properties LLC 2603 Technology Dr Plano Northeast Dallas 189,955



MARKETVIEW






AreaBldg.Count

Total(SF)

% ofMarket

Direct (SF)

Direct (%)

Total(%)

Qtr.Direct

Qtr.Total

2018 YTDTotal

UnderConst.

Qtr.Deliveries

2018 YTD Deliveries

DFW AirportE DFW/Las Colinas 373 54,407,659 7.1 3,145,866 5.8 6.3 779,477 691,277 691,277 461,330 1,180,795 1,180,795 W DFW/Grapevine 308 18,064,399 2.4 621,729 3.4 3.5 103,213 97,599 97,599 646,796 - -DFW Airport Total 681 72,472,058 9.5 3,767,595 5.2 5.6 882,690 788,876 788,876 1,108,126 1,180,795 1,180,795

East DallasCentral E Dallas 414 17,311,853 2.3 366,696 2.1 2.2 42,336 39,086 39,086 - - -East Dallas/Mesquite 284 19,264,135 2.5 1,494,515 7.8 7.8 (69,830) (69,830) (69,830) 1,464,456 - -East Dallas Total 698 36,575,988 4.8 1,861,211 5.1 5.1 (27,494) (30,744) (30,744) 1,464,456 - -

Northeast DallasAllen/McKinney 191 11,191,386 1.5 269,020 2.4 2.4 (73,970) (73,970) (73,970) 342,270 - -NE Dallas/Garland 846 47,592,734 6.2 2,192,857 4.6 5.9 371,718 357,185 357,185 764,400 - -Plano 347 18,825,435 2.5 899,176 4.8 5.1 123,054 138,116 138,116 284,948 - -Richardson 302 16,772,620 2.2 1,031,707 6.2 6.2 104,233 89,719 89,719 - - -Rockwall 54 2,967,529 0.4 18,100 0.6 0.6 4,660 4,660 4,660 - - -Northeast Dallas Total 1,740 97,349,704 12.7 4,410,860 4.5 5.2 529,695 515,710 515,710 1,391,618 - -

Northwest DallasDenton 176 10,576,693 1.4 195,189 1.8 2.2 (7,700) (7,700) (7,700) - - -Lewisville 225 25,374,854 3.3 605,598 2.4 2.4 7,413 7,413 7,413 763,682 - -Metropolitan/Addison 442 20,485,910 2.7 990,551 4.8 5.2 1,644 (74,222) (74,222) - - -N Stemmons/Valwood 658 50,009,291 6.5 2,381,671 4.8 5.1 73,983 21,655 21,655 235,900 - -NW Dallas Outlying 25 2,856,285 0.4 21,800 0.8 0.8 (11,800) (11,800) (11,800) - - -Northwest Dallas Total 1,526 109,303,033 14.3 4,194,809 3.8 4.1 63,540 (64,654) (64,654) 999,582 - -

South DallasRed Bird/Airport 188 19,492,373 2.5 471,374 2.4 2.4 (93,586) (93,586) (93,586) 154,960 - -SE Dallas/I-45 245 33,334,971 4.4 6,024,734 18.1 18.1 529,403 529,403 529,403 6,451,176 130,000 130,000 SW Dallas/US 67 151 16,179,715 2.1 3,117,776 19.3 19.3 115,756 115,756 115,756 1,300,000 - -South Dallas Total 584 69,007,059 9.0 9,613,884 13.9 13.9 551,573 551,573 551,573 7,906,136 130,000 130,000

South StemmonsEast Brookhollow 190 8,571,111 1.1 135,364 1.6 1.6 (4,433) (4,433) (4,433) - - -E Hines North 625 20,097,381 2.6 442,637 2.2 2.2 26,542 34,042 34,042 - - -Eastern Lonestar/Tpke 291 25,022,164 3.3 1,053,197 4.2 4.2 (86,660) (69,631) (69,631) - - -North Trinity 393 10,413,842 1.4 524,527 5.0 5.1 (94,552) (82,545) (82,545) - - -West Brookhollow 981 39,138,172 5.1 720,320 1.8 2.0 (56,689) (93,064) (93,064) - - -W Hines North 192 6,684,380 0.9 181,190 2.7 2.7 (10,223) (5,568) (5,568) - - -Western Lonestar/Tpke 96 7,003,974 0.9 674,322 9.6 9.6 - - - - - -

South Stemmons Total 2,768 116,931,024 15.3 3,731,557 3.2 3.3 (226,015) (221,199) (221,199) - - -Great SW/Arlington

Arlington 394 20,346,598 2.7 1,556,528 7.7 7.8 (41,079) (37,942) (37,942) - - -Lower Great Southwest 427 37,707,176 4.9 1,897,887 5.0 5.0 270,174 335,239 335,239 1,200,000 513,132 513,132 Upper Great Southwest 504 50,614,716 6.6 4,727,229 9.3 9.6 913,887 890,726 890,726 1,598,075 - -Great SW/Arlington Total 1,325 108,668,490 14.2 8,181,644 7.5 7.7 1,142,982 1,188,023 1,188,023 2,798,075 513,132 513,132

North Fort WorthMeacham Fld/Fossil Creek 394 39,583,191 5.2 1,139,474 2.9 2.9 165,672 176,672 176,672 1,667,205 - -NE Tarrant Alliance 208 39,803,180 5.2 2,193,850 5.5 5.5 724,731 724,731 724,731 1,636,652 496,782 496,782 West Tarrant 61 4,118,111 0.5 100,000 2.4 2.4 51,800 51,800 51,800 90,000 - -North Fort Worth Total 663 83,504,482 10.9 3,433,324 4.1 4.1 942,203 953,203 953,203 3,393,857 496,782 496,782

South Fort WorthEast Fort Worth 615 23,135,852 3.0 1,373,613 5.9 6.2 (134,009) (141,524) (141,524) - - -Mansfield 81 4,026,356 0.5 18,818 0.5 0.5 128,940 128,940 128,940 - - -N Central Fort Worth 293 10,264,373 1.3 355,201 3.5 3.5 (17,895) (17,895) (17,895) - - -S Central Tarrant County 261 22,420,366 2.9 1,648,612 7.4 7.4 371,316 371,316 371,316 287,261 - -S Central Fort Worth 256 9,408,748 1.2 214,482 2.3 2.3 (89,466) (89,466) (89,466) - - -SW Tarrant 75 1,874,681 0.2 134,940 7.2 9.7 3,693 6,193 6,193 - - -South Fort Worth Total 1,581 71,130,376 9.3 3,745,666 5.3 5.4 262,579 257,564 257,564 287,261 - -


MARKETVIEW



CONTACTS



Lauren ParisTeam Lead+1 214 [email protected]

Miller Hamrick Research Analyst+1 214 [email protected]

CBRE OFFICES



MARKETVIEW

Market record: 26.8 million sq. ft. delivered in 2017


BUILD-TO-SUIT CONSTRUCTION PICKS UP

Deliveries in 2017 totaled 26.8 million sq. ft., breaking the record set last year for annual construction completions. Since 2010, 96.6 million sq. ft. has been delivered to the market, slightly more than the entire Austin and San Antonio industrial markets combined. The industrial product pipeline widened to 19.2 million sq. ft. during Q4 2017. The majority of the starts in Q4 2017 were attributable to build-to-suits (BTS), with 4.6 million sq. ft. of newly started BTS activity in South Dallas alone. Market-wide, BTS projects account for 50% of all active industrial development, the highest ratio of BTS to speculative construction seen this cycle. The increase in BTS activity is not unexpected as distribution centers have become more sophisticated to meet specific occupier needs.




YEAR ENDED WITH A SURGE IN LEASING ACTIVITY

Q4 2017 marks the 29th consecutive 90-day period of positive net absorption. The annual industrial absorption in Dallas/Fort Worth surged to over 20.6 million sq. ft. Despite the relatively fainter absorption in the first two quarters, yearly demand was the second-highest of the current cycle and fourth-highest of all annual absorption tracked by CBRE Research with data from the early 1990s. Third party logistics groups (3PLs) and consumer goods companies led tenant demand this quarter, accounting for over half of the top 25 move-ins of Q4 2017. Market experts say DFW will see more distribution center consolidation into larger regional and super-regional hubs. Being located adjacent to or near third party logistics groups such as FedEx, UPS and additional fulfillment service providers is now a major factor in real estate decision making for industrial tenants.


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Vacancy Rate (%)MSF



Vacancy6.4%


MARKETVIEW



© 2018 CBRE, Inc. |





Market

Net Rentable

Area(SF)

Available(SF)

Avail.Rate(%)

Direct Vacancy

(SF)

Direct Vacancy

Rate(%)

Total Vacancy

(SF)

Total Vacancy

Rate(%)

Q4 2017Direct Net

Absorption(SF)

Q4 2017Total Net

Absorption(SF)

2017Total

Absorption (SF)

DFW Airport 71,370,995 5,695,188 8.0 3,469,490 4.9 3,732,244 5.2 101,224 126,276 2,051,707

East Dallas 36,271,745 2,761,444 7.6 1,833,717 5.1 1,843,717 5.1 117,261 227,561 708,463

Northeast Dallas 97,527,670 7,806,758 8.0 5,054,134 5.2 5,718,794 5.9 1,078,688 1,033,997 1,046,946


South Dallas 68,819,169 10,651,361 15.5 10,035,457 14.6 10,035,457 14.6 389,883 406,520 3,609,125

South Stemmons 120,799,622 10,704,915 8.9 6,435,865 5.3 6,558,893 5.4 338,131 287,419 1,221,125


North Ft. Worth 83,043,489 4,989,643 6.0 3,798,745 4.6 3,860,145 4.6 1,296,254 1,302,254 6,033,150

South Ft. Worth 71,227,828 5,345,533 7.5 4,054,868 5.7 4,172,365 5.9 (784,335) (827,832) (1,095,582)

DALLAS TOTALS 503,479,182 44,407,787 8.8 31,234,156 6.2 32,428,834 6.4 2,526,657 2,649,362 11,633,046

FT.WORTH TOTALS 262,972,058 22,382,750 8.5 16,575,609 6.3 16,951,061 6.4 1,940,906 1,898,143 9,029,417

MARKET TOTALS 766,451,240 66,790,537 8.7 47,809,765 6.2 49,379,895 6.4 4,467,563 4,547,505 20,662,463


1 3M 300 Gateway Pkwy Roanoke North Fort Worth 603,050

2 Stonecrop Technologies 3737 Miller Rd Garland Northeast Dallas 472,200

3 Electrolux 2935 Danieldale Rd Lancaster South Dallas 343,421

4 Woods Distribution Solutions 2900 Meacham Blvd Fort Worth North Fort Worth 250,000

5 Ecolab 2101 Reeves Pl Fort Worth South Fort Worth 192,000


1 Confidential Eagle Park 20/35 DeSoto South Dallas 454,408

2 New Mountain Capital ESAB Denton Denton Northwest Dallas 422,819

3 International Airport Centers Cardinal Health Distribution Center Grand Prairie Great Southwest/Arlington 361,690

4 Confidential Railhead Industrial Park Building 1 Fort Worth North Fort Worth 299,000

5 High Street Realty Las Colinas Distribution Center Irving DFW Airport 260,040



MARKETVIEW






AreaBldg.Count

Total(SF)

% ofMarket

Direct (SF)

Direct (%)

Total(%)

Qtr.Direct

Qtr.Total

2017 YTDTotal

UnderConst.

Qtr.Deliveries

2017 YTD Deliveries

DFW AirportE DFW/Las Colinas 371 53,243,696 6.9 2,744,548 5.2 5.6 41,278 64,980 1,560,751 1,374,730 - 1,605,738

W DFW/Grapevine 310 18,127,299 2.4 724,942 4.0 4.0 59,946 61,296 490,956 646,796 347,042 347,042

DFW Airport Total 681 71,370,995 9.3 3,469,490 4.9 5.2 101,224 126,276 2,051,707 2,021,526 347,042 1,952,780

East Dallas -

Central E Dallas 417 17,338,896 2.3 409,032 2.4 2.4 (3,174) 2,326 240,150 - - 344,400

East Dallas/Mesquite 284 18,932,849 2.5 1,424,685 7.5 7.5 120,435 225,235 468,313 877,230 - -

East Dallas Total 701 36,271,745 4.7 1,833,717 5.1 5.1 117,261 227,561 708,463 877,230 - 344,400

Northeast DallasAllen/McKinney 192 11,262,406 1.5 195,050 1.7 1.7 102,692 102,692 165,030 342,270 68,000 113,120

NE Dallas/Garland 846 47,679,019 6.2 2,747,304 5.8 7.0 601,670 590,733 764,848 764,400 818,000 1,225,350

Plano 348 18,844,135 2.5 1,022,230 5.4 5.8 73,360 39,606 (67,902) - - 23,750

Richardson 302 16,774,581 2.2 1,066,790 6.4 6.4 (69,299) (69,299) (192,295) - - -

Rockwall 54 2,967,529 0.4 22,760 0.8 0.8 370,265 370,265 377,265 - 370,025 370,025

Northeast Dallas Total 1,742 97,527,670 12.7 5,054,134 5.2 5.9 1,078,688 1,033,997 1,046,946 1,106,670 1,256,025 1,732,245

Northwest DallasDenton 176 10,576,693 1.4 187,489 1.8 2.1 39,998 39,998 969,745 - - 1,017,400

Lewisville 225 25,372,709 3.3 734,769 2.9 2.9 374,577 388,016 1,151,021 748,994 322,981 806,331

Metropolitan/Addison 445 20,587,442 2.7 1,017,581 4.9 5.0 (38,831) (38,691) (61,147) - - -

N Stemmons/Valwood 659 49,293,032 6.4 2,455,654 5.0 5.2 125,726 178,266 902,861 234,904 285,788 976,888

NW Dallas Outlying 25 2,860,105 0.4 10,000 0.3 0.3 - - 33,200 - - -

Northwest Dallas Total 1,530 108,689,981 14.2 4,405,493 4.1 4.2 501,470 567,589 2,995,680 983,898 608,769 2,800,619

South DallasRed Bird/Airport 188 19,440,636 2.5 377,788 1.9 1.9 (11,604) 5,033 640,334 - - 663,000

SE Dallas/I-45 244 33,204,971 4.3 6,424,137 19.3 19.3 103,750 103,750 2,426,592 6,545,176 1,654,940 4,493,762

SW Dallas/US 67 151 16,173,562 2.1 3,233,532 20.0 20.0 297,737 297,737 542,199 1,300,000 948,392 1,098,392

South Dallas Total 583 68,819,169 9.0 10,035,457 14.6 14.6 389,883 406,520 3,609,125 7,845,176 2,603,332 6,255,154

South StemmonsEast Brookhollow 190 8,572,011 1.1 130,931 1.5 1.5 (15,231) (15,231) 3,028 - - -

E Hines North 627 20,137,493 2.6 469,179 2.3 2.4 13,229 53,729 103,589 - - -

Eastern Lonestar/Tpke 292 25,038,164 3.3 812,459 3.2 3.5 39,439 (13,771) 476,629 - - 518,241

North Trinity 394 10,435,832 1.4 429,975 4.1 4.3 (17,631) (29,638) 8,384 - - -

West Brookhollow 984 39,855,227 5.2 663,631 1.7 1.8 69,283 47,943 44,482 - - -

W Hines North 192 6,684,380 0.9 170,967 2.6 2.6 84,542 79,887 130,613 - - -

Western Lonestar/Tpke 97 10,076,515 1.3 3,758,723 37.3 37.3 164,500 164,500 454,400 - 792,240 1,042,240

South Stemmons Total 2,776 120,799,622 15.8 6,435,865 5.3 5.4 338,131 287,419 1,221,125 - 792,240 1,560,481

Great SW/ArlingtonArlington 394 20,320,089 2.7 1,476,697 7.3 7.5 754,258 751,121 2,125,599 - 301,000 2,368,766

Lower Great Southwest 425 37,279,604 4.9 1,654,929 4.4 4.6 56,027 66,027 356,625 1,713,132 743,840 743,840

Upper Great Southwest 506 51,101,048 6.7 5,590,370 10.9 11.1 618,702 606,573 1,609,625 702,000 83,125 4,006,654

Great SW/Arlington Total 1,325 108,700,741 14.2 8,721,996 8.0 8.2 1,428,987 1,423,721 4,091,849 2,415,132 1,127,965 7,119,260

North Fort WorthMeacham Fld/Fossil Creek 395 39,618,980 5.2 1,225,146 3.1 3.2 708,511 714,511 1,778,009 1,397,205 600,000 1,257,043

NE Tarrant Alliance 207 39,306,398 5.1 2,421,799 6.2 6.2 587,743 587,743 4,293,065 2,133,434 - 3,061,275

West Tarrant 61 4,118,111 0.5 151,800 3.7 3.7 - - (37,924) 90,000 - 100,000

North Fort Worth Total 663 83,043,489 10.8 3,798,745 4.6 4.6 1,296,254 1,302,254 6,033,150 3,620,639 600,000 4,418,318

South Fort WorthEast Fort Worth 616 23,152,631 3.0 1,279,604 5.5 5.7 39,494 (1,306) 87,332 - 100,000 100,000

Mansfield 81 4,026,356 0.5 147,758 3.7 3.7 (7,516) (7,516) 31,882 - - -

N Central Fort Worth 294 10,278,114 1.3 337,306 3.3 3.3 (22,823) (22,823) 97,327 - - -

S Central Tarrant County 262 22,426,366 2.9 2,022,428 9.0 9.1 (788,152) (790,849) (1,319,334) 287,261 488,564 488,564

S Central Fort Worth 258 9,469,305 1.2 129,139 1.4 1.4 4,049 4,049 175,605 - - -

SW Tarrant 75 1,875,056 0.2 138,633 7.4 10.0 (9,387) (9,387) (168,394) - - -

South Fort Worth Total 1,586 71,227,828 9.3 4,054,868 5.7 5.9 (784,335) (827,832) (1,095,582) 287,261 588,564 588,564

Dallas Total 8,013 503,479,182 65.7 31,234,156 6.2 6.4 2,526,657 2,649,362 11,633,046 12,834,500 5,607,408 14,645,679

Fort Worth Total 3,574 262,972,058 34.3 16,575,609 6.3 6.4 1,940,906 1,898,143 9,029,417 6,323,032 2,316,529 12,126,142


MARKETVIEW



CONTACTS



Lauren ParisSenior Research Analyst+1 214 [email protected]

Miller Hamrick Research Coordinator +1 214 [email protected]

CBRE OFFICES



MARKETVIEW

Market in top gear – Q3 2017 demand nears 8.2M sq. ft.


STRONGER PRELEASED RATES FOR NEW BUILDINGS

Buildings delivered in Q3 2017 were 60.3% preleased and accounted for over one third of the quarterly absorption; an indication of healthy demand in the market and an improvement over Q4 2016 and Q1 2017 when market deliveries were preleased at only 22.2% and 36.5%, respectively. The overall amount of industrial space under construction in DFW continued to decline and is now observed to be around 16.4 million sq. ft. This was still firmly in the top markets for building activity, but could be a sign that developers are holding back a bit to let the existing vacant space occupy. Notably, only 6.3% of these active construction projects are attributable to REITs, as many have tabled planned projects in Dallas/Fort Worth, particularly in South Dallas and Great Southwest/Arlington where a combined 27.6 million sq. ft. has been delivered since 2015.




E-COMMERCE RE-ENERGIZED LEASING

Q3 2017 marks the 28th consecutive period of positive net absorption. While the absorption of the first two quarters was fainter than the blockbuster quarters of the past two years, industrial demand roared back this past quarter to nearly 8.2 million sq. ft., which is the second-highest absorption observed this cycle after Q3 2016 when 8.9 million sq. ft. was taken down by tenants in Dallas/Fort Worth. The majority of absorption can be attributed to consumer goods, e-commerce and logistics companies this quarter. Q3 2017 was marked by large move-ins, with 43.5% of absorption due to the largest five tenant move-ins, which were all from the aforementioned categories. Consequently, vacancy fell 56 basis points to 6.2% as tenants are taking down empty newer spaces that had caused recent rises in the rate.


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Vacancy Rate (%)MSF



Vacancy6.2%


MARKETVIEW



© 2017 CBRE, Inc. |





Market

Net Rentable

Area(SF)

Available(SF)

Avail.Rate(%)

Direct Vacancy

(SF)

Direct Vacancy

Rate(%)

Total Vacancy

(SF)

Total Vacancy

Rate(%)

Q3 2017Direct Net

Absorption(SF)

Q3 2017Total Net

Absorption(SF)

2017 YTDTotal

Absorption (SF)

DFW Airport 71,260,677 5,368,608 7.5 3,231,391 4.5 3,519,197 4.9 1,662,673 1,474,571 1,925,431

East Dallas 36,385,828 2,594,747 7.2 1,954,244 5.4 2,074,544 5.7 306,306 196,006 480,902



South Dallas 66,214,521 9,022,379 13.3 7,822,008 11.8 7,838,645 11.8 1,157,225 1,157,225 3,202,605

South Stemmons 119,986,140 9,710,872 8.2 6,085,291 5.1 6,132,223 5.1 (15,435) (65,606) 933,706

Great SW / Arlington 107,574,697 11,513,059 10.7 9,289,445 8.6 9,447,354 8.8 1,662,001 1,684,530 2,668,128

North Ft. Worth 82,527,740 5,868,096 9.8 4,588,763 5.6 4,656,163 5.6 2,970,843 2,970,843 4,730,896

South Ft. Worth 70,921,113 4,978,888 5.7 2,732,183 3.9 2,806,183 4.0 (317,218) (312,818) (267,750)

DALLAS TOTALS 498,844,291 42,084,678 8.4 28,573,421 5.7 29,865,420 6.0 4,091,342 3,851,265 8,983,684

FT.WORTH TOTALS 261,023,550 22,360,043 9.6 16,610,391 6.4 16,909,700 6.5 4,315,626 4,342,555 7,131,274

MARKET TOTALS 759,867,841 64,444,721 9.0 45,183,812 5.9 46,775,120 6.2 8,406,968 8,193,820 16,114,958


1 Wayfair.com BTS NEC N I35 E & Wintergreen Rd Lancaster South Dallas 874,000

2 Haier Wildlife Commerce Park Building 6 Grand Prairie Great Southwest/Arlington 703,000

3 S&S Active Wear 4800 N Sylvania Rd Fort Worth North Fort Worth 493,000

4 Allen Distribution 4250 Dale Earnhardt Way Fort Worth North Fort Worth 349,000

5 XPO Logistics 400 Dividend Dr Coppell DFW Airport 263,000


1 Stockbridge 751 Port America PL Grapevine DFW Airport 717,000

2 Flex-N-Gate 2250 W Bardin Rd Grand Prairie Great Southwest/Arlington 430,000

3 Lexington Realty 4005 I-30 Grand Prairie South Stemmons 215,000

4 Stonelake Capital Partners 3401 Garden Brook Dr Dallas Northwest Dallas 134,000

5 Cohen Asset Management 701 S International Rd Garland Northeast Dallas 124,000



MARKETVIEW






AreaBldg.Count

Total(SF)

% ofMarket

Direct (SF)

Direct (%)

Total(%)

Qtr.Direct

Qtr.Total

2017 YTDTotal

UnderConst.

Qtr.Deliveries

2017 YTD Deliveries

DFW AirportE DFW/Las Colinas 374 53,502,235 7.0 2,793,545 5.2 5.7 1,541,134 1,353,032 1,495,771 1,180,795 256,748 1,605,738 W DFW/Grapevine 308 17,758,442 2.3 437,846 2.5 2.5 121,539 121,539 429,660 347,042 - -DFW Airport Total 682 71,260,677 9.4 3,231,391 4.5 4.9 1,662,673 1,474,571 1,925,431 1,527,837 256,748 1,605,738

East DallasCentral E Dallas 422 17,446,979 2.3 409,124 2.3 2.4 272,887 267,387 237,824 - 344,400 344,400 East Dallas/Mesquite 284 18,938,849 2.5 1,545,120 8.2 8.7 33,419 (71,381) 243,078 - - -East Dallas Total 706 36,385,828 4.8 1,954,244 5.4 5.7 306,306 196,006 480,902 - 344,400 344,400

Northeast DallasAllen/McKinney 192 11,541,739 1.5 229,742 2.0 2.0 (21,098) (21,098) 62,338 208,000 - 45,120 NE Dallas/Garland 844 46,896,386 6.2 2,643,680 5.6 6.9 217,016 311,089 174,115 818,000 - 407,350 Plano 348 18,844,135 2.5 1,095,590 5.8 6.0 72,506 62,555 (107,508) - - 23,750 Richardson 302 16,761,353 2.2 997,491 6.0 6.0 (11,760) (11,760) (122,996) - - -Rockwall 53 2,597,748 0.3 23,000 0.9 0.9 4,850 4,850 7,000 370,025 - -Northeast Dallas Total 1,739 96,641,361 12.7 4,989,503 5.2 5.8 261,514 345,636 12,949 1,396,025 - 476,220

Northwest DallasDenton 176 10,576,693 1.4 227,487 2.2 2.5 (14,350) (47,850) 929,747 - - 1,017,400 Lewisville 222 25,050,475 3.3 786,365 3.1 3.2 193,677 193,677 763,005 792,981 - 483,350 Metropolitan/Addison 447 20,723,324 2.7 1,171,540 5.7 5.7 (112,975) (67,269) (22,456) - - -N Stemmons/Valwood 658 48,981,177 6.4 2,295,592 4.7 5.0 652,707 664,875 724,595 285,788 330,100 691,100 NW Dallas Outlying 27 3,024,095 0.4 10,000 0.3 0.3 - - 33,200 - - -Northwest Dallas Total 1,530 108,355,764 14.3 4,490,984 4.1 4.3 719,059 743,433 2,428,091 1,078,769 330,100 2,191,850

South DallasRed Bird/Airport 188 19,440,636 2.6 366,184 1.9 2.0 2,660 2,660 635,301 - - 663,000 SE Dallas/I-45 242 31,548,715 4.2 4,872,947 15.4 15.4 996,295 996,295 2,322,842 3,596,216 1,367,089 2,838,822 SW Dallas/US 67 150 15,225,170 2.0 2,582,877 17.0 17.0 158,270 158,270 244,462 948,392 150,000 150,000 South Dallas Total 580 66,214,521 8.7 7,822,008 11.8 11.8 1,157,225 1,157,225 3,202,605 4,544,608 1,517,089 3,651,822

South StemmonsEast Brookhollow 192 8,650,162 1.1 193,851 2.2 2.2 8,125 8,125 18,259 - - -E Hines North 626 20,068,215 2.6 482,408 2.4 2.6 12,199 (35,801) 49,860 - - -Eastern Lonestar/Tpke 294 25,104,324 3.3 877,282 3.5 3.4 (9,326) (13,926) 490,400 - - 518,241 North Trinity 395 10,451,467 1.4 412,344 3.9 4.0 24,388 26,817 38,022 - - -West Brookhollow 988 39,995,942 5.3 732,914 1.8 1.9 (61,106) (61,106) (3,461) - - -W Hines North 193 6,714,262 0.9 255,509 3.8 3.8 10,285 10,285 50,726 - - -Western Lonestar/Tpke 94 9,001,768 1.2 3,130,983 34.8 34.8 - - 289,900 792,240 - 250,000

South Stemmons Total 2,782 119,986,140 15.8 6,085,291 5.1 5.1 (15,435) (65,606) 933,706 792,240 - 768,241 Great SW/Arlington

Arlington 393 20,019,089 2.6 2,026,013 10.1 10.3 1,046,635 1,076,635 1,374,478 301,000 1,044,000 2,067,766 Lower Great Southwest 423 36,535,841 4.8 1,009,466 2.8 3.0 515,456 526,456 290,598 2,456,972 - -Upper Great Southwest 505 51,019,767 6.7 6,253,966 12.3 12.4 99,910 81,439 1,003,052 785,125 102,375 3,923,529 Great SW/Arlington Total 1,321 107,574,697 14.2 9,289,445 8.6 8.8 1,662,001 1,684,530 2,668,128 3,543,097 1,146,375 5,991,295

North Fort WorthMeacham Fld/Fossil Creek 395 39,047,744 5.1 1,333,657 3.4 3.6 1,126,824 1,126,824 1,063,498 821,000 657,043 657,043 NE Tarrant Alliance 208 39,366,552 5.2 3,103,306 7.9 7.9 1,895,819 1,895,819 3,705,322 2,133,434 712,500 3,061,275 West Tarrant 61 4,113,444 0.5 151,800 3.7 3.7 (51,800) (51,800) (37,924) - - 100,000 North Fort Worth Total 664 82,527,740 10.9 4,588,763 5.6 5.6 2,970,843 2,970,843 4,730,896 2,954,434 1,369,543 3,818,318

South Fort WorthEast Fort Worth 616 23,113,483 3.0 1,219,098 5.3 5.3 63,265 67,665 88,638 100,000 - -Mansfield 81 4,026,356 0.5 140,242 3.5 3.5 (664) (664) 39,398 - - -N Central Fort Worth 298 10,361,515 1.4 322,322 3.1 3.1 (17,479) (17,479) 120,150 - - -S Central Tarrant County 261 21,972,317 2.9 788,087 3.6 3.7 (276,890) (276,890) (528,485) 488,564 - -S Central Fort Worth 259 9,536,873 1.3 133,188 1.4 1.4 (250) (250) 171,556 - - -SW Tarrant 76 1,910,569 0.3 129,246 6.8 9.3 (85,200) (85,200) (159,007) - - -South Fort Worth Total 1,591 70,921,113 9.3 2,732,183 3.9 4.0 (317,218) (312,818) (267,750) 588,564 - -


MARKETVIEW



CONTACTS





CBRE OFFICES



MARKETVIEW

Back to basics — Metroplex fundamentals remain strong


AVAILABILITY IS DOWN, AND PRE-LEASING IS UP

Following a record year for product delivery, when 22.7 million sq. ft. was delivered in the DFW industrial market, a quarterly record 9.8 million sq. ft. was delivered in Q1 2017. Pre-leasing for construction deliveries was only 22.2% for Q4 2016 and 36.5% for Q1 2017. The pre-lease rate for Q2 2017 was 49.5% - more in line with long term trends seen in the market. Also, while vacancy rose another 24 basis points (BPS) from Q1 2017 to 6.7%, space availability decreased 13 BPS over the quarter to 9.0%, despite having an additional four million sq. ft. delivered during Q2 2017. Pre-leased rates at or above 50%, as has largely been the case in Dallas/Fort Worth this cycle, suggest a sustainable resiliency in the market beyond headline grabbing deals, and a product type that continues to attract investors seeking consistent and stable returns.




WHEN DJIA TOPPED 11,000 IN Q3 2010 . . . OR THE

LAST TIME DFW HAD NEGATIVE GROWTH

Q2 2017 marks the 27th consecutive period of positive net absorption. While the recent absorption is fainter than the blockbuster quarters of the past two years (and naysayers are quick to point to signs of softening), a more clear picture can be found by careful deciphering of the data.

Industrial absorption has remained strong throughout this prolonged economic recovery that was more of a slow burn than a fire flash. Basics for the Dallas/Fort Worth industrial market remain solid and North Texas continues to attract corporate relocations and individual job seekers alike. In fact, an estimated 143,435 new residents chose the Metroplex during 2016, or about 393 new consumers per day. This expanding consumer base is boosting area industrial metrics.


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Vacancy Rate (%)MSF



Vacancy6.7%


MARKETVIEW



© 2017 CBRE, Inc. |





Market

Net Rentable

Area(SF)

Available(SF)

Avail.Rate(%)

Direct Vacancy

(SF)

Direct Vacancy

Rate(%)

Total Vacancy

(SF)

Total Vacancy

Rate(%)

Q2 2017Direct Net

Absorption(SF)

Q2 2017Total Net

Absorption(SF)

2017 YTDTotal

Absorption (SF)

DFW Airport 71,041,268 6,607,524 9.3 4,653,578 6.6 4,813,282 6.8 (773,313) (914,439) 450,860

East Dallas 36,112,918 2,592,014 7.2 1,923,017 5.3 1,933,017 5.4 105,409 105,409 284,896

Northeast Dallas 97,222,811 7,812,617 8.0 5,303,944 5.5 6,008,035 6.2 (52,297) (52,587) (332,687)


South Dallas 64,711,314 8,629,917 13.3 7,460,709 11.5 7,477,346 11.6 1,000,555 1,048,818 2,045,380

South Stemmons 120,798,636 9,960,681 8.2 6,142,722 5.1 6,164,867 5.1 554,297 558,676 999,312

Great SW / Arlington 105,308,216 12,569,274 11.9 9,771,694 9.3 10,165,509 9.7 979,432 903,367 983,598

North Ft. Worth 80,984,549 7,975,414 9.8 6,373,895 7.9 6,441,295 8.0 174,381 206,311 1,760,053

South Ft. Worth 71,030,935 4,047,174 5.7 2,518,988 3.5 2,597,388 3.7 97,215 72,415 45,068

DALLAS TOTALS 497,906,126 43,146,138 8.7 30,390,904 6.1 31,528,210 6.3 1,715,611 1,465,920 5,132,419

FT.WORTH TOTALS 257,323,700 24,591,862 9.6 18,664,577 7.3 19,204,192 7.5 1,251,028 1,182,093 2,788,719

MARKET TOTALS 755,229,826 67,738,000 9.0 49,055,481 6.5 50,732,402 6.7 2,966,639 2,648,013 7,921,138


1 UPS 2320 E Bardin Rd Arlington Great Southwest/Arlington 1,004,400

2 Lasko Products 1700 Meacham Blvd Fort Worth North Fort Worth 505,000

3 KidKraft 2525 Esters Blvd Dallas DFW Airport 401,572

4 Dematic Corporation 400 E Industrial Blvd Fort Worth North Fort Worth 299,000

5 Stonecrop Technologies 3901 West Miller Rd Garland Northeast Dallas 115,000


1 Clarion Partners DRA Longhorn Industrial Portfolio Dallas/Fort Worth Market-wide 2,501,424

2 Rialto Capital Management Greenfield Partners TX Industrial Portfolio 2017 Dallas/Fort Worth Market-wide 1,697,271

3 Pure Industrial REIT DalPort Trade Center Building 1 Wilmer South Dallas 758,922

4 Dalfen America 8901 Forney Rd Dallas East Dallas 419,626

5 LBA Realty 4895 Mountain Creek Pkwy Dallas South Dallas 192,000



MARKETVIEW






AreaBldg.Count

Total(SF)

% ofMarket

Direct (SF)

Direct (%)

Total(%)

Qtr.Direct

Qtr.Total

2017 YTDTotal

UnderConst.

Qtr.Deliveries

2017 YTD Deliveries

DFW AirportE DFW/Las Colinas 373 53,268,997 7.1 4,094,193 7.7 8.0 (804,400) (942,328) 142,739 1,142,748 423,720 1,348,990 W DFW/Grapevine 309 17,772,271 2.4 559,385 3.1 3.2 31,087 27,889 308,121 347,042 - -DFW Airport Total 682 71,041,268 9.4 4,653,578 6.6 6.8 (773,313) (914,439) 450,860 1,489,790 423,720 1,348,990

East DallasCentral E Dallas 423 17,174,069 2.3 344,478 2.0 2.1 (1,910) (1,910) (29,563) 344,400 - -East Dallas/Mesquite 284 18,938,849 2.5 1,578,539 8.3 8.3 107,319 107,319 314,459 - - -East Dallas Total 707 36,112,918 4.8 1,923,017 5.3 5.4 105,409 105,409 284,896 344,400 - -

Northeast DallasAllen/McKinney 193 11,567,553 1.5 208,644 1.8 1.8 72,791 72,791 83,436 208,000 45,120 45,120 NE Dallas/Garland 844 47,234,271 6.2 2,860,696 6.1 7.5 166,868 178,032 (136,974) 818,000 269,350 407,350 Plano 350 18,939,990 2.5 1,168,096 6.2 6.3 (170,682) (182,136) (170,063) - 23,750 23,750 Richardson 303 16,883,249 2.2 1,038,658 6.2 6.2 (105,424) (105,424) (111,236) - - -Rockwall 53 2,597,748 0.3 27,850 1.1 1.1 (15,850) (15,850) 2,150 370,025 - -Northeast Dallas Total 1,743 97,222,811 12.9 5,303,944 5.5 6.2 (52,297) (52,587) (332,687) 1,396,025 338,220 476,220

Northwest DallasDenton 176 10,559,893 1.4 213,137 2.0 2.0 135,350 135,350 977,597 - 187,400 1,017,400 Lewisville 222 25,049,912 3.3 980,042 3.9 4.0 409,167 395,728 569,328 792,981 381,000 483,350 Metropolitan/Addison 450 20,803,994 2.8 1,070,245 5.1 5.4 100,459 52,113 44,813 - - -N Stemmons/Valwood 659 48,695,975 6.4 2,633,510 5.4 5.7 235,984 136,852 59,720 615,888 361,000 361,000 NW Dallas Outlying 27 2,909,405 0.4 10,000 0.3 0.3 - - 33,200 - - -Northwest Dallas Total 1,534 108,019,179 14.2 4,906,934 4.5 4.8 880,960 720,043 1,684,658 1,408,869 929,400 1,861,750

South DallasRed Bird/Airport 188 19,440,636 2.6 368,844 1.9 2.0 3,363 51,626 632,641 - - 663,000 SE Dallas/I-45 239 30,169,429 4.0 4,500,718 14.9 14.9 980,140 980,140 1,326,547 2,802,060 - 1,471,733 SW Dallas/US 67 149 15,101,249 2.0 2,591,147 17.2 17.2 17,052 17,052 86,192 1,098,392 - -South Dallas Total 576 64,711,314 8.6 7,460,709 11.5 11.6 1,000,555 1,048,818 2,045,380 3,900,452 - 2,134,733

South StemmonsEast Brookhollow 192 8,650,162 1.2 201,976 2.3 2.3 415 415 10,134 - - -E Hines North 628 20,115,237 2.7 494,607 2.5 2.5 (26,988) (26,988) 85,661 - - -Eastern Lonestar/Tpke 293 25,189,790 3.3 929,572 3.7 3.7 465,076 465,076 504,326 - 518,241 518,241 North Trinity 399 10,496,249 1.4 447,982 4.3 4.3 (98,824) (98,824) 11,205 - - -West Brookhollow 991 40,579,546 5.4 671,808 1.7 1.7 (3,390) 989 57,645 - - -W Hines North 193 6,765,884 0.9 265,794 3.9 3.9 (42,392) (42,392) 40,441 - - -Western Lonestar/Tpke 94 9,001,768 1.2 3,130,983 34.8 34.8 260,400 260,400 289,900 792,240 250,000 250,000

South Stemmons Total 2,790 120,798,636 16.0 6,142,722 5.1 5.1 554,297 558,676 999,312 792,240 768,241 768,241 Great SW/Arlington

Arlington 392 18,998,838 2.5 2,028,648 10.7 11.0 429,628 429,628 297,843 677,000 19,366 1,023,766 Lower Great Southwest 423 35,384,246 4.7 1,524,922 4.3 5.1 109,057 32,992 (235,858) 2,436,972 - -Upper Great Southwest 503 50,925,132 6.6 6,218,121 12.2 12.3 440,747 440,747 921,613 185,500 1,384,012 3,821,154 Great SW/Arlington Total 1,318 105,308,216 13.9 9,771,691 9.3 9.7 979,432 903,367 983,598 3,299,472 1,403,378 4,844,920

North Fort WorthMeacham Fld/Fossil Creek 394 38,217,053 5.1 1,987,270 5.2 5.4 23,063 54,993 (63,326) 1,257,043 - -NE Tarrant Alliance 207 38,654,052 5.1 4,286,625 11.1 11.1 151,318 151,318 1,809,503 2,845,934 100,000 2,348,775 West Tarrant 61 4,113,444 0.5 100,000 2.4 2.4 - - 13,876 - 100,000 100,000 North Fort Worth Total 662 80,984,549 10.7 6,373,895 7.9 8.0 174,381 206,311 1,760,053 4,102,977 200,000 2,448,775

South Fort WorthEast Fort Worth 617 23,098,274 3.1 1,282,363 5.6 5.6 33,615 22,815 20,973 - - -Mansfield 81 4,052,395 0.5 139,578 3.4 3.4 3,380 3,380 40,062 - - -N Central Fort Worth 298 10,361,515 1.4 304,843 2.9 2.9 9,804 9,804 137,629 - - -S Central Tarrant County 260 22,031,008 2.9 511,197 2.3 2.4 2,143 (11,857) (251,595) 488,564 - -S Central Fort Worth 261 9,577,174 1.3 236,961 2.5 2.5 56,273 56,273 171,806 - - -SW Tarrant 76 1,910,569 0.3 44,046 2.3 4.9 (8,000) (8,000) (73,807) - - -South Fort Worth Total 1,593 71,030,935 9.5 2,518,988 3.5 3.7 97,215 72,415 45,068 488,564 - -


MARKETVIEW



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CBRE OFFICES



MARKETVIEW

Q1 2017 occupier demand on pace with 2016, a record year


The overall DFW industrial vacancy rate rose 47 basis points over the previous quarter to 6.5%, due to large speculative deliveries, primarily comprised of large distribution buildings. Industrial property vacancy rates increased 70 basis points to 6.5%, despite posting respectable absorption just above 5 million sq. ft. Flex properties, which posted a notable 225,745 sq. ft. absorption, vacancy decreased 60 basis points to a 6.4% vacancy rate.PIPELINE NARROWS, DELIVERIES SET RECORD

Following a record year for product delivery, when 22.7 million sq. ft. was delivered in the DFW industrial market, a quarterly record 9.8 million sq. ft. was delivered in Q1 2017. The under construction pipeline has fallen to 16.9 million sq. ft. of active projects. This is the lowest amount of active product under construction in the market since Q2 2015.




Industrial occupier demand in Q1 2017 kept pace with 2016, as the Dallas/Fort Worth Industrial Market absorbed 5.3 million sq. ft. E-commerce and consumer goods occupiers led absorption in Q1 2017, a reflection of population growth in the Metroplex. Dallas/Fort Worth is the largest urban agglomeration in the south with a population of 7.2 million people. DFW posted the highest population growth in the U.S., adding 143,435 new residents in 2016. Dallas/Fort Worth also showed robust employment gains with 4.0% year-over-year growth through January 2017, second only to Orlando, which grew jobs at an impressive 4.6%. DFW continues to attract corporate relocations and individual job seekers due to its south-central location, robust transportation infrastructure, low cost of doing business and pro business environment.


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Vacancy Rate (%)MSF



Vacancy6.5%


MARKETVIEW



© 2017 CBRE, Inc. |





Market

Net Rentable

Area(SF)

Available(SF)

Avail.Rate(%)

Direct Vacancy

(SF)

Direct Vacancy

Rate(%)

Total Vacancy

(SF)

Total Vacancy

Rate(%)

Q1 2017Direct Net

Absorption(SF)

Q1 2017Total Net

Absorption(SF)

2017 YTDTotal

Absorption (SF)

DFW Airport 70,623,004 6,225,371 8.8 3,484,323 4.9 3,502,901 5.0 1,364,077 1,365,299 1,365,299

East Dallas 36,179,482 2,962,806 8.2 2,028,426 5.6 2,038,426 5.6 179,487 179,487 179,487

Northeast Dallas 97,036,156 8,371,944 8.6 4,803,412 5.0 5,459,956 5.6 (278,177) (280,100) (280,100)


South Dallas 64,746,220 9,701,176 15.0 8,467,794 13.1 8,532,694 13.2 1,061,462 996,562 996,562

South Stemmons 120,185,624 9,481,877 7.9 5,917,361 4.9 5,943,885 4.9 362,843 440,636 440,636

Great SW / Arlington 104,256,533 12,255,290 11.8 9,128,916 8.8 9,266,669 8.9 68,475 80,231 80,231

North Ft. Worth 80,779,304 8,238,116 10.2 6,198,162 7.7 6,297,492 7.8 1,607,084 1,553,742 1,553,742

South Ft. Worth 71,338,924 4,006,769 5.6 2,758,881 3.9 2,812,481 3.9 20,953 (27,347) (27,347)

DALLAS TOTALS 495,917,263 43,963,163 8.9 29,493,724 5.9 30,334,082 6.1 3,687,789 3,666,499 3,666,499

FT.WORTH TOTALS 256,374,761 24,500,175 9.6 18,085,959 7.1 18,376,642 7.2 1,696,512 1,606,626 1,606,626

MARKET TOTALS 752,292,024 68,463,338 9.1 47,579,683 6.3 48,710,724 6.5 5,384,301 5,273,125 5,273,125


1 Shippers Warehouse BTS in Prime Pointe Hutchins South Dallas 556,000

2 Quaker Sales & Distribution 1350 Chalk Hill Rd Dallas South Stemmons 518,241

3 KGP Telecommunications 9400 N Royal Ln Irving DFW Airport 335,480

4 Robinson Aerospace 13901 Aviator Way Fort Worth North Fort Worth 209,081

5 BFS Services 500 Arline Dr Coppell DFW Airport 167,820


1 PNC Realty Investors Logistics Crossing I Grand Prairie Great Southwest/Arlington 667,635

2 Exeter 2900 Airport Rd Denton Northwest Dallas 392,706

3 White Wave Foods Kiest Distribution Center Dallas South Dallas 343,617

4 Private Investor 3701 Marquis Dr Garland Northeast Dallas 155,655

5 Avistone Northgate Business Park III Plano Northeast Dallas 155,494



MARKETVIEW






AreaBldg.Count

Total(SF)

% ofMarket

Direct (SF)

Direct (%)

Total(%)

Qtr.Direct

Qtr.Total

2017 YTDTotal

UnderConst.

Qtr.Deliveries

2017 YTD Deliveries

DFW AirportE DFW/Las Colinas 372 52,846,652 7.0 2,893,851 5.5 5.5 1,086,345 1,085,067 1,085,067 1,566,468 925,270 925,270W DFW/Grapevine 309 17,776,352 2.4 590,472 3.3 3.3 277,732 280,232 280,232 347,042 - -DFW Airport Total 681 70,623,004 9.4 3,484,323 4.9 5.0 1,364,077 1,365,299 1,365,299 1,913,510 925,270 925,270

East DallasCentral E Dallas 424 17,245,633 2.3 342,568 2.0 2.0 -27,653 -27,653 -27,653 344,400 - -East Dallas/Mesquite 284 18,933,849 2.5 1,685,858 8.9 8.9 207,140 207,140 207,140 - - -East Dallas Total 708 36,179,482 4.8 2,028,426 5.6 5.6 179,487 179,487 179,487 344,400 - -

Northeast DallasAllen/McKinney 192 11,517,371 1.5 236,315 2.1 2.1 10,645 10,645 10,645 185,120 - -NE Dallas/Garland 842 46,980,904 6.2 2,643,699 5.6 6.9 -310,006 -315,006 -315,006 1,033,350 138,000 138,000Plano 352 19,071,361 2.5 978,164 5.1 5.4 12,073 12,073 12,073 23,750 - -Richardson 304 16,869,422 2.2 933,234 5.5 5.5 -8,889 -5,812 -5,812 - - -Rockwall 53 2,597,098 0.3 12,000 0.5 0.5 18,000 18,000 18,000 - - -Northeast Dallas Total 1,743 97,036,156 12.9 4,803,412 5.0 5.6 -278,177 -280,100 -280,100 1,242,220 138,000 138,000

Northwest DallasDenton 175 10,327,493 1.4 161,087 1.6 1.6 839,747 842,247 842,247 187,400 830,000 830,000Lewisville 220 24,685,870 3.3 933,209 3.8 3.8 173,600 173,600 173,600 1,173,981 102,350 102,350Metropolitan/Addison 451 20,840,217 2.8 1,179,618 5.7 5.7 -7,300 -7,300 -7,300 - - -N Stemmons/Valwood 656 48,383,792 6.4 2,508,494 5.2 5.3 -41,150 -77,132 -77,132 1,154,792 - -NW Dallas Outlying 27 2,909,405 0.4 10,000 0.3 0.3 33,200 33,200 33,200 - - -Northwest Dallas Total 1,529 107,146,777 14.2 4,792,408 4.5 4.5 998,097 964,615 964,615 2,516,173 932,350 932,350

South DallasRed Bird/Airport 188 19,444,780 2.6 372,207 1.9 2.2 645,915 581,015 581,015 - 663,000 663,000SE Dallas/I-45 239 30,180,191 4.0 5,480,858 18.2 18.2 346,407 346,407 346,407 2,672,060 1,471,733 1,471,733SW Dallas/US 67 150 15,121,249 2.0 2,614,729 17.3 17.3 69,140 69,140 69,140 995,892 - -South Dallas Total 577 64,746,220 8.6 8,467,794 13.1 13.2 1,061,462 996,562 996,562 3,667,952 2,134,733 2,134,733

South StemmonsEast Brookhollow 193 8,750,294 1.2 178,623 2.0 2.0 9,719 9,719 9,719 - - -E Hines North 629 20,182,636 2.7 467,619 2.3 2.3 112,649 112,649 112,649 - - -Eastern Lonestar/Tpke 291 24,649,742 3.3 851,023 3.5 3.5 39,250 39,250 39,250 518,241 - -North Trinity 400 10,498,666 1.4 386,893 3.7 3.7 110,029 110,029 110,029 - - -West Brookhollow 991 40,586,634 5.4 668,418 1.6 1.7 54,746 56,656 56,656 - - -W Hines North 193 6,765,884 0.9 223,402 3.3 3.3 6,950 82,833 82,833 - - -Western Lonestar/Tpke 93 8,751,768 1.2 3,141,383 35.9 35.9 29,500 29,500 29,500 250,000 - -

South Stemmons Total 2,790 120,185,624 16.0 5,917,361 4.9 4.9 362,843 440,636 440,636 768,241 - -Great SW/Arlington

Arlington 393 19,022,575 2.5 2,476,710 13.0 13.4 -129,785 -131,785 -131,785 19,366 1,004,400 1,004,400Lower Great Southwest 423 35,496,864 4.7 1,562,360 4.4 4.4 -268,850 -268,850 -268,850 723,840 - -Upper Great Southwest 501 49,737,094 6.6 5,089,846 10.2 10.4 467,110 480,866 480,866 1,467,137 2,437,142 2,437,142Great SW/Arlington Total 1,317 104,256,533 13.9 9,128,916 8.8 8.9 68,475 80,231 80,231 2,210,343 3,441,542 3,441,542

North Fort WorthMeacham Fld/Fossil Creek 395 38,201,211 5.1 2,010,333 5.3 5.5 -64,977 -118,319 -118,319 1,257,043 - -NE Tarrant Alliance 207 38,564,649 5.1 4,187,829 10.9 10.9 1,658,185 1,658,185 1,658,185 2,945,934 2,248,775 2,248,775West Tarrant 60 4,013,444 0.5 - - - 13,876 13,876 13,876 - - -North Fort Worth Total 662 80,779,304 10.7 6,198,162 7.7 7.8 1,607,084 1,553,742 1,553,742 4,202,977 2,248,775 2,248,775

South Fort WorthEast Fort Worth 618 23,091,148 3.1 1,325,578 5.7 5.8 2,558 -1,842 -1,842 - - -Mansfield 81 4,052,395 0.5 142,958 3.5 3.5 36,682 36,682 36,682 - - -N Central Fort Worth 300 10,450,344 1.4 390,419 3.7 3.7 122,525 127,825 127,825 - - -S Central Tarrant County 260 22,036,095 2.9 513,340 2.3 2.3 -239,738 -239,738 -239,738 - - -S Central Fort Worth 264 9,798,373 1.3 350,540 3.6 3.6 115,533 115,533 115,533 - - -SW Tarrant 76 1,910,569 0.3 36,046 1.9 4.5 -16,607 -65,807 -65,807 - - -South Fort Worth Total 1,599 71,338,924 9.5 2,758,881 3.9 3.9 20,953 -27,347 -27,347 - - -


MARKETVIEW



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MARKETVIEW

2016 best year yet; demand and construction set new high



Vacancy Rate 6.0%

*Arrows indicate change from previous quarter.

Avg. Asking Rate $4.48

Net Absorption 3.9 MSF

Completions 6.4 MSF



POPULATION GAINS DROVE DEMAND IN 2016

Pull factors ranging from a prime U.S. central location to world-class cultural amenities have all contributed to make the DFW Metroplex a standout corporate relocation destination. The population in DFW is estimated to have grown by 9.9% since 2010 and is expected to grow to 7.7 million people, or another 9.0%, by 2021. Likewise, consumer goods and e-commerce occupiers were far and away the main drivers of industrial demand in 2016. These occupiers have taken down a variety of spaces - from big-box regional distribution centers to last-mile infill locations. Cumulatively, the DFW market absorbed 25.2 million sq. ft. in 2016, 2.6 million sq. ft. more than the second highest recorded annual absorption which was in 1999.

• Industrial occupiers in Dallas/Fort Worth took down 3.9 million sq. ft. during Q4 2016.

• This year set new records for industrial sector absorption and delivered construction.

• Annual absorption totaled 25.2 million sq. ft. • South Dallas had the highest annual absorption with

5.5 million sq. ft. absorbed in 2016, followed by North Fort Worth and DFW Airport with 5.4 million sq. ft. and 3.3 million sq. ft. annual absorption, respectively.

• Construction completions totaled 22.7 million sq. ft. for the year.

• South Dallas delivered the most new product with 8 million sq. ft. of space added to the submarket.

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Vacancy Rate (%) MSF

MARKETVIEW



Figure 3: Unemployment and Jobs

Figure 2: Nominal GDP and Vacancy Rate

Source: U.S. Bureau of Economic Analysis December 2016. CBRE Research, Q4 2016.

DFW LEADING STATE ECONOMY According to the Federal Reserve Bank of Dallas’ December DFW Economic Indicators release, Dallas/Fort Worth employment expanded at a swift annual rate of 4.0% through November 2016. Dallas led all other Texas metros with a 4.3% annualized growth rate, or 3.2% annualized growth year-to-date. Meanwhile Fort Worth had more moderated year-to-date annualized employment growth rate of 1.5%. Employment growth is still uneven in the Metroplex. Dallas continues to ride the tailwinds of the national economy, while Fort Worth remains somewhat hampered by beleaguered oil and gas prices. Nevertheless, unemployment dipped to 4.1% and 3.2% for Dallas and Fort Worth respectively, and both remain below the U.S. unemployment rate of 4.6%.

TEXAS EMPLOYMENT IS GROWING The state economy expanded in November. Employers are hiring, and unemployment continues its decline. According to the December Texas Economic Indicators release from the Dallas Federal Reserve, statewide employment grew at an annualized rate of 2.1% in November, outpacing the U.S. rate of 1.5%. Crude oil closed November at $45.71 a barrel, 7.7% above year-ago levels according to Federal Reserve economists. Natural gas prices are up 20.2% year-over-year, despite a 15.3% price drop in November. Texas exports are still being hindered by low oil prices and a strong dollar. Political observers are speculating President–elect Trump and his administration will support favorable policy toward the energy industry and would therefore benefit the Texas economy.

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U.S. GDP DFW Industrial Vacancy Rate

U.S. GDP ($, in billions) Vacancy Rate (%)

Source: Moody’s Analytics, CBRE Research, Q4 2016.

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Total DFW Jobs U.S. Texas DFW

Unemployment Rate (%) Job Count (M)

MARKETVIEW DALLAS/FORT WORTH INDUSTRIAL

Market

Net Rentable

Area (SF)

Available (SF)

Avail. Rate (%)

Direct Vacancy

(SF)

Direct Vacancy

Rate (%)

Total Vacancy

(SF)

Total Vacancy

Rate (%)

Asking Rates Q4 2016

Direct Net Absorption

(SF)

Q4 2016 Total Net Absorption

(SF)

2016 Total

Absorption (SF)

Average Annual ($/SF)

Industrial Flex

DFW Airport 69,801,925 5,809,836 8.3 3,375,306 4.8 3,465,106 5.0 4.35 8.14 440,381 455,113 3,255,739

East Dallas 36,188,665 3,563,426 9.8 2,178,826 6.0 2,188,826 6.0 4.05 9.31 226,466 236,466 248,422

Northeast Dallas 97,419,870 8,832,579 9.1 4,439,235 4.6 5,101,856 5.2 4.49 8.66 219,834 282,936 1,594,060

Northwest Dallas 106,564,249 7,379,036 6.9 4,995,847 4.7 5,075,932 4.8 4.85 8.61 413,635 351,728 2,972,807

South Dallas 62,641,331 8,743,881 14.0 7,493,894 12.0 7,493,894 12.0 3.95 8.00 327,806 327,806 5,515,930

South Stemmons 120,086,004 9,931,423 8.3 6,312,204 5.3 6,388,088 5.3 5.96 11.68 266,394 303,166 1,760,509 .

Great SW / Arlington 101,191,369 10,540,271 10.4 6,171,469 6.1 6,320,978 6.2 4.00 7.16 810,933 752,170 3,246,410

North Ft. Worth 78,726,475 7,317,367 9.3 5,799,302 7.4 5,845,290 7.4 3.91 9.00 1,024,472 1,079,589 5,377,466

South Ft. Worth 71,390,251 4,597,911 6.4 2,779,834 3.9 2,785,134 3.9 3.91 6.83 65,367 71,967 1,259,091

DALLAS TOTALS 492,702,044 44,260,181 9.0 28,795,312 5.8 29,713,702 6.0 4.78 9.45 1,894,516 1,957,215 15,347,467

FT.WORTH TOTALS 251,308,095 22,455,549 8.9 14,750,605 5.9 14,951,402 5.9 3.95 7.38 1,900,772 1,903,726 9,882,967

MARKET TOTALS 744,010,139 66,715,730 9.0 43,545,917 5.9 44,665,104 6.0 4.48 8.99 3,795,288 3,860,941 25,230,434



2016 IN REVIEW, A YEAR PAR EXCELLENCE Dallas/Fort Worth’s industrial market absorbed 25.2 million sq. ft. in 2016, the highest annual absorption ever tracked by CBRE Research. This demand figure is even more remarkable when the 22.7 million sq. ft. of construction completions are taken into account. Despite the slight 24 basis point increase in vacancy to 6.0% in Q4 2016, market-wide vacancy remains below historic averages. South Dallas had the highest annual absorption with 5.5 million sq. ft. absorbed in 2016. South Dallas is typified by large footprint and high clear buildings that are ideal for regional distribution centers. Third party logistics providers (3PLs), e-commerce, and consumer goods occupiers drove demand in the submarket in 2016. South Dallas also had the highest amount of new product added in 2016 at nearly 8 million sq. ft. Limited land availability in DFW’s infill submarkets has driven developers to South Dallas where land was once plentiful and relatively inexpensive. Despite the increase in vacancy due to large available speculative deliveries, brokers expect these spaces to be snapped up quickly as there are still limited options for tenants – specifically in the 500,000 sq. ft. and higher space segment.

SUBMARKET SPOTLIGHT: NORTH FORT WORTH North Fort Worth had the highest quarterly absorption for Q4 2016 with nearly 1.1 million sq. ft. absorption. With 78.7 million sq. ft. of flex and industrial space, North Fort Worth is the fifth largest submarket in Dallas/Fort Worth and accounts for 10.6% of the industrial space in the market. Continuing the construction trend in 2016, North Fort Worth had 2.9 million sq. ft. of projects under construction as of Q4 2016, which were 67.8% pre-committed – the highest pre-leased rate of any other submarket in DFW. In addition to projects under construction, 4.5 million sq. ft. was delivered in the submarket in 2016. North Fort Worth, anchored by the 18,000 acre master planned community AllianceTexas, benefits from a robust skilled workforce and many new residential and retail developments. The submarket is also home to Alliance Fort Worth Airport, the world’s first 100% cargo airport and which is also undergoing a major runway expansion. Fort Worth Alliance Airport posted a 16.08% increase in cargo traffic by weight from 2014 to 2015, according to the FAA. The airport also enjoys Foreign Trade Zone status with U.S. Customs and Border Protection on site, and access to the nearby BNSF Railway Alliance Intermodal Facility.


MARKETVIEW



Figure 7: Vacancy Rate


Figure 6: Construction


The final quarter of 2016 marked the 25th consecutive quarter of positive net absorption for the DFW industrial market as it scored 3.9 million sq. ft. in total absorption, contributing to the record 25.2 million sq. ft. absorbed in 2016. Warehouse and distribution space led quarterly activity with barely under 3.8 million sq. ft. of total net absorption, while flex space posted 70,619 sq. ft. of total net absorption.

Deliveries for the fourth quarter totaled 6.4 million sq. ft. Pre-leasing activity was lower with 1.4 million sq. ft., or 22%, of Q4 2016 deliveries pre-committed. In comparison, Q3 2016 deliveries were 57% pre-leased. An estimated 18.9 million sq. ft. is currently under construction in Dallas/Fort Worth, down from the peak of Q1 2016 when the pipeline swelled to 21.4 million sq. ft., which was easily the highest level of construction activity ever seen in the market. Yet market demand continues to meet supply, for now. Under construction space is currently 28% pre-leased, up from the 23% pre-committed rate seen at the end of the third quarter of 2016. South Dallas and Great Southwest/Arlington are basically tied for the most active submarkets with under construction activity, with 4.9 million sq. ft. and 4.8 million sq. ft. respectively under construction. This activity accounts for 51.6% of the total industrial development activity in DFW.

In Q4 2016, vacancy ticked upward by 24 basis points to 6.0% due to vacant speculative projects being delivered to market. The current vacancy rate is still well below historical market averages which are around 9.0% vacancy. Demand continued to outpace supply for the year, despite the small uptick in vacancy seen during Q4 2016. The market absorbed 2.5 million sq. ft. more than was delivered throughout the year. Occupier demand remains robust with a full pipeline of prospective tenants looking at space in the market, and transaction and advisory professionals expect the large vacant speculative projects to be leased early in 2017.

With just under 19 million sq. ft. now underway, vacancy may see its course tick up even further in mid- to late-2017 as even more new product delivers. Stay tuned as CBRE Research monitors this Texas-sized construction pipeline that is one of the largest in the U.S.

Figure 5: Net Absorption and Vacancy Rate


0

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Q1 Q2

Q3 Q4

Total Annual Net Absorption Vacancy Rate

Absorption (MSF) Vacancy Rate (%)

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10121416182022

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08Q2

2009

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2010

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16

Q4 20

16

Flex Industrial Overall Vacancy Rate

%

MARKETVIEW




CAPITAL MARKETS

Strong fundamentals continued to drive DFW industrial absorption and low vacancy, especially in the interior submarkets. Class A assets continued to perform well throughout 2016 and cap rates have remained at all-time lows. According to CBRE market professionals, cap rates on stabilized Class A product are currently about 4.75%-5.25%. Additionally, there are active investors pursuing both small and larger sized transactions. CBRE has seen cap rates among Class B assets remaining relatively consistent, with a wide spread that is very dependent on overall functionality. Cap rates on the most functional Class B assets can be as low as 6.25% and as high as 8.25% for the less functional Class B properties. CBRE analysts expect institutional investor activity to remain strong but expect cap rate compression to level off slightly given the generally slowing rental rate growth and current amount of construction activity in the market.

Tenant Building(s) Submarket SF

American Tire Distributors 300 Freedom Dr North Fort Worth 756,000

Chewy.com 7243 Grady Niblo Rd South Dallas

663,000

Rooms To Go 2251 E Bardin Rd Great Southwest/Arlington 234,100

CarbonLITE Recycling 4685 Mountain Creek Pkwy South Dallas 230,664

TriMark 2801 S Valley Pkwy DFW Airport 249,500

Figure 9: Select Local Lease Transactions

Building(s) Submarket SF

Union Bower Business Park South Stemmons 302,848

119 Regal Row South Stemmons 230,710

Koll Coppell Business Center DFW Airport 281,000

1200 Forum Way S South Fort Worth 130,000

630 North Fwy South Fort Worth 246,000

Figure 8: Select Local Sale Transactions


MARKETVIEW DALLAS/FORT WORTH INDUSTRIAL

CONTACTS

Robert C. Kramp Director, Research & Analysis [email protected] E. Michelle Miller Research Operations Manager [email protected]

Lauren Paris Senior Research Analyst +1 214 9796587 [email protected] Miller Hamrick Research Coordinator +1 214 9796532 [email protected]

CBRE OFFICES

CBRE Dallas 2100 McKinney Ave., Suite 700 Dallas, TX 75201

To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/research-and-reports.


MARKETVIEW INSERT

Vacancy rate at lowest level since 2000 as market sees record occupier demand



*Arrows indicate change from previous quarter. Figure 1: Net Absorption by Submarket

DFW POPULATION GROWTH HAS HELPED

FUEL RECORD INDUSTRIAL DEMAND

As major corporations continue to relocate to North Texas, they bring along with them their employees, jobseekers, and ancillary service providers. An estimated 360 people move to Dallas/Fort Worth everyday. This population boom has helped facilitate the exceptional fundamentals seen in the Dallas/Fort Worth industrial market. DFW has an area population of just over seven million, which is projected to grow by 9.0% through 2021, according to Nielson Claritas, making it an attractive location for e-commerce and third party logistics (3PL) companies seeking to reach their customers with same-day or next-day service. In addition, 25 million consumers can be reached within a day’s driving time.


• Industrial occupiers in Dallas/Fort Worth took down 8.9 million sq. ft. during the third quarter of 2016.

• Third quarter 2016 set the ten year record for the highest level of quarterly absorption.

• The total vacancy rate continues to compress, down 63 basis points (bps) to 5.8%.

• Developers delivered 5.2 million sq. ft. of industrial space to the market, with three million sq. ft., or 57%, pre-leased.

• The Great Southwest/Arlington submarket has the highest amount of active construction, with 5.8 million sq. ft. under construction in the submarket.

• South Dallas is still a hub for leasing activity, with 1.9 million sq. ft. absorbed during the third quarter of 2016, the highest amount among the nine industrial submarkets.

Vacancy Rate 5.8%



Completions 5.2 MSF

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DFW Airport East Dallas Great SW/Arlington North Ft Worth Northeast Dallas Northwest Dallas South Dallas South Ft Worth South Stemmons

Q1 2016 Q2 2016 Q3 2016 Q4 2016 2016 YTD Total Net Absorption

MSF

MARKETVIEW INSERT

5678910111213

02468

10121416182022

Q3 20

07Q1

2008

Q3 20

08Q1

2009

Q3 20

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2010

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15Q1

2016

Q3 20

16

Under Construction Direct Vacancy Rate

MSF


Figure 2: Net Absorption, Construction and Vacancy Rate

Figure 3: Asking Rate, NNN Avg. Annual Figure 4: Construction

Source: CBRE Research, Q3 2016. Source: CBRE Research, Q3 2016.

Figure 5: Construction and Direct Vacancy Rate


Figure 6: Vacancy Rates


Vacancy Rate (%)


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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD 2016

Direct Net Absorption Total Net Absorption Delivered Construction Direct Vacancy Rate

MSF Vacancy Rate (%)

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Industrial Flex/R&D

$/SF

02468

101214161820

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YTD 2

016


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YTD 2

016

Direct Vacancy Rate Total Vacancy Rate

%


MARKETVIEW INSERT DALLAS/FORT WORTH INDUSTRIAL





Area Bldg. Count

Total (SF)

% of Market

Direct (SF)

Direct (%)

Total (%)

Qtr. Direct

Qtr. Total

2016 YTD Total

Under Const.

Qtr. Deliveries

2016 YTD Deliveries

DFW Airport E DFW/Las Colinas 362 51,709,268 7.0 2,535,506 4.9 5.0 1,545,967 1,540,021 2,744,743 1,052,496 - 971,303 W DFW/Grapevine 310 17,812,923 2.4 1,145,204 6.4 6.8 251,066 181,066 55,883 - - - DFW Airport Total 672 69,522,191 9.4 3,680,710 5.3 5.4 1,797,033 1,721,087 2,800,626 1,052,496 0 971,303 East Dallas - Central E Dallas 427 17,279,746 2.3 651,312 3.8 3.9 -76,000 -76,000 -227,952 - - - East Dallas/Mesquite 285 18,941,273 2.6 1,991,111 10.5 10.5 39,581 39,581 239,908 - - - East Dallas Total 712 36,221,019 4.9 2,642,423 7.3 7.4 -36,419 -36,419 11,956 0 0 0 Northeast Dallas Allen/McKinney 190 11,399,716 1.5 152,319 1.3 1.3 103,039 103,039 487,773 130,211 - 144,710 NE Dallas/Garland 842 45,963,217 6.2 2,462,478 5.4 6.7 350,045 89,981 409,868 407,350 - - Plano 355 19,556,505 2.7 759,540 3.9 4.4 130,682 119,000 151,349 - - 216,720 Richardson 308 17,007,834 2.3 1,020,115 6.0 6.1 53,153 84,815 265,876 - - - Rockwall 58 2,505,401 0.3 36,542 1.5 1.5 458 458 -3,742 175,000 - - Northeast Dallas Total 1,753 96,432,673 13.1 4,430,994 4.6 5.3 637,377 397,293 1,311,124 712,561 0 361,430 Northwest Dallas Denton 177 9,565,201 1.3 228,928 2.4 2.4 48,228 48,228 103,628 1,259,877 - 170,270 Lewisville 220 24,747,171 3.4 1,434,014 5.8 5.8 902,570 902,570 1,026,955 675,931 - 765,367 Metropolitan/Addison 453 20,947,383 2.8 1,104,811 5.3 5.3 185,180 185,180 260,907 - - - N Stemmons/Valwood 657 48,435,511 6.6 2,752,221 5.7 5.7 517,330 567,246 1,222,986 204,000 337,933 1,176,493 NW Dallas Outlying 27 2,908,755 0.4 33,000 1.1 1.1 -17,000 -17,000 6,603 - - - Northwest Dallas Total 1,534 106,604,021 14.4 5,552,974 5.2 5.2 1,636,308 1,686,224 2,621,079 2,139,808 337,933 2,112,130 South Dallas Red Bird/Airport 188 18,880,214 2.6 889,324 4.7 4.7 148,802 148,802 1,709,539 709,470 230,664 1,967,947 SE Dallas/I-45 234 26,612,602 3.6 2,423,462 9.1 9.1 606,405 606,405 1,704,963 1,003,733 227,230 1,480,850 SW Dallas/US 67 150 14,818,471 2.0 2,339,439 15.8 15.8 1,094,437 1,094,437 1,773,622 3,002,580 1,223,896 2,340,518 South Dallas Total 572 60,311,287 8.2 5,652,225 9.4 9.4 1,849,644 1,849,644 5,188,124 4,715,783 1,681,790 5,789,315 South Stemmons East Brookhollow 195 9,179,240 1.2 50,192 0.5 0.6 77,431 77,431 88,041 - - - E Hines North 635 20,211,731 2.7 632,201 3.1 3.1 -62,631 -38,631 205,478 - - - Eastern Lonestar/Tpke 289 24,331,466 3.3 653,668 2.7 2.7 49,397 49,397 687,084 810,441 - 259,672 North Trinity 404 10,575,679 1.4 518,802 4.9 4.9 -23,976 -23,976 881 - - 23,826 West Brookhollow 996 40,623,831 5.5 954,500 2.3 2.5 241,186 188,398 342,457 - - - W Hines North 193 6,900,690 0.9 131,645 1.9 3.0 28,065 -47,818 42,622 - - - Western Lonestar/Tpke 93 8,748,268 1.2 3,167,383 36.2 36.2 -27,900 197,598 90,780 - - - South Stemmons Total 2,805 120,570,905 16.3 6,108,391 5.1 5.2 281,572 402,399 1,457,343 810,441 0 283,498 Great SW/Arlington Arlington 392 17,642,462 2.4 981,222 5.6 5.9 71,728 71,728 -13,249 1,443,766 683,380 683,380 Lower Great Southwest 422 35,088,063 4.8 867,295 2.5 2.5 1,182,413 1,232,413 1,507,014 430,188 768,587 1,002,687 Upper Great Southwest 490 46,405,088 6.3 2,622,551 5.7 5.7 -121,918 -49,717 1,000,475 3,875,938 - 1,419,354 Great SW/Arlington Total 1,304 99,135,613 13.4 4,471,068 4.5 4.6 1,132,223 1,254,424 2,494,240 5,749,892 1,451,967 3,105,421 North Fort Worth Meacham Fld/Fossil Creek 394 37,332,607 5.1 1,777,931 4.8 5.0 1,727,856 1,626,751 2,649,620 1,430,599 1,440,000 2,724,877 NE Tarrant Alliance 205 36,562,342 5.0 4,446,378 12.2 12.2 -475,437 -475,437 1,615,807 2,248,775 286,253 945,035 West Tarrant 60 4,013,853 0.5 0 0.0 0.0 0 0 32,450 - - - North Fort Worth Total 659 77,908,802 10.6 6,224,309 8.0 8.1 1,252,419 1,151,314 4,297,877 3,679,374 1,726,253 3,669,912 South Fort Worth East Fort Worth 618 22,794,962 3.1 990,101 4.3 4.4 200,694 201,519 309,345 301,500 - - Mansfield 81 3,992,911 0.5 179,640 4.5 4.5 29,143 29,143 31,907 - - - N Central Fort Worth 303 10,511,183 1.4 495,688 4.7 4.7 -1,372 1,128 3,984 - - - S Central Tarrant County 259 22,001,810 3.0 306,219 1.4 1.4 212,000 212,000 910,569 - - - S Central Fort Worth 266 9,837,498 1.3 458,803 4.7 4.7 -853 -853 -90,281 - - - SW Tarrant 76 1,919,723 0.3 41,114 2.1 2.1 0 0 21,600 - - - South Fort Worth Total 1,603 71,058,087 9.6 2,471,565 3.5 3.5 439,612 442,937 1,187,124 301,500 0 0 Dallas Total 8,048 489,662,096 66.4 28,067,717 5.7 5.9 6,165,515 6,020,228 13,390,252 9,431,089 2,019,723 9,517,676 Fort Worth Total 3,566 248,102,502 33.6 13,166,942 5.3 5.4 2,824,254 2,848,675 7,979,241 9,730,766 3,178,220 6,775,333 Dallas/Fort Worth Total 11,614 737,764,598 100.0 41,234,659 5.6 5.8 8,989,769 8,868,903 21,369,493 19,161,855 5,197,943 16,293,009



Figure 8: Industrial Total Quarterly Market Summary



Area Bldg. Count

Total (SF)

% of Market

Direct (SF)

Direct (%)

Total (%)

Qtr. Direct

Qtr. Total

2016 YTD Total

Under Const.

Qtr. Deliveries

2016 YTD Deliveries

DFW Airport E DFW/Las Colinas 244 45,437,641 7.2 1,963,500 4.3 4.4 1,530,870 1,530,870 2,732,231 1,052,496 - 971,303 W DFW/Grapevine 213 15,775,259 2.5 995,859 6.3 6.8 256,147 186,147 39,262 - - - DFW Airport Total 457 61,212,900 9.7 2,959,359 4.8 5.0 1,787,017 1,717,017 2,771,493 1,052,496 0 971,303 East Dallas Central E Dallas 292 13,856,032 2.2 492,449 3.6 3.7 -76,000 -76,000 -228,519 - - - East Dallas/Mesquite 213 16,515,110 2.6 1,181,795 7.2 7.2 29,920 29,920 226,011 - - - East Dallas Total 505 30,371,142 4.8 1,674,244 5.5 5.6 -46,080 -46,080 -2,508 0 0 0 Northeast Dallas Allen/McKinney 140 9,242,502 1.5 79,406 0.9 0.9 4,766 4,766 444,643 94,211 - 121,835 NE Dallas/Garland 536 38,326,277 6.1 2,170,730 5.7 7.2 305,366 51,466 232,132 407,350 - - Plano 193 13,698,906 2.2 434,072 3.2 3.8 104,603 87,921 97,596 - - 137,020 Richardson 82 8,636,560 1.4 120,577 1.4 1.4 -17,378 -17,378 107,205 - - - Rockwall 49 2,224,611 0.4 36,542 1.6 1.6 458 458 -5,542 - - - Northeast Dallas Total 1,000 72,128,856 11.4 2,841,327 3.9 4.9 397,815 127,233 876,034 676,561 0 258,855 Northwest Dallas Denton 141 7,817,600 1.2 183,456 2.3 2.4 48,250 48,250 129,850 1,259,877 - 170,270 Lewisville 145 22,048,255 3.5 1,043,030 4.7 4.7 876,236 876,236 1,003,177 548,931 - 765,367 Metropolitan/Addison 217 12,544,474 2.0 289,249 2.3 2.3 119,659 119,659 -2,729 - - - N Stemmons/Valwood 472 42,551,806 6.8 2,278,414 5.4 5.4 488,300 541,616 1,020,479 204,000 337,933 1,176,493 NW Dallas Outlying 26 2,891,430 0.5 33,000 1.1 1.1 -17,000 -17,000 4,540 - - - Northwest Dallas Total 1,001 87,853,565 13.9 3,827,149 4.4 4.4 1,515,445 1,568,761 2,155,317 2,012,808 337,933 2,112,130 South Dallas Red Bird/Airport 155 18,238,481 2.9 875,948 4.8 4.8 148,802 148,802 1,709,957 709,470 230,664 1,967,947 SE Dallas/I-45 193 25,701,412 4.1 2,411,398 9.4 9.4 606,405 606,405 1,668,563 1,003,733 227,230 1,480,850 SW Dallas/US 67 95 13,652,907 2.2 2,315,832 17.0 17.0 1,094,437 1,094,437 1,759,995 3002580 1,223,896 2,340,518 South Dallas Total 443 57,592,800 9.1 5,603,178 9.7 9.7 1,849,644 1,849,644 5,138,515 4,715,783 1,681,790 5,789,315 South Stemmons East Brookhollow 135 7,480,833 1.2 12,724 0.2 0.2 86,000 86,000 79,874 - - - E Hines North 407 14,583,849 2.3 389,015 2.7 2.7 -69,715 -45,715 132,655 - - - Eastern Lonestar/Tpke 235 22,620,219 3.6 550,650 2.4 2.4 55,633 55,633 702,570 810,441 - 259,672 North Trinity 253 6,025,583 1.0 209,582 3.5 3.5 -15,865 -15,865 59,051 - - 11,700 West Brookhollow 771 33,296,994 5.3 679,965 2.0 2.1 282,086 267,086 381,085 - - - W Hines North 116 4,853,488 0.8 26,521 0.5 2.1 11,877 -64,006 11,710 - - - Western Lonestar/Tpke 69 8,379,474 1.3 3,156,983 37.7 37.7 -17,500 207,998 89,080 - - - South Stemmons Total 1,986 97,240,440 15.4 5,025,440 5.2 5.3 332,516 491,131 1,456,025 810,441 0 271,372 Great SW/Arlington Arlington 299 15,103,550 2.4 841,769 5.6 6.0 70,961 70,961 37,818 1,443,766 683,380 683,380 Lower Great Southwest 317 32,263,420 5.1 715,772 2.2 2.2 1,157,286 1,207,286 1,315,343 430,188 768,587 1,002,687 Upper Great Southwest 378 42,325,570 6.7 2,042,317 4.8 4.9 -121,350 -49,169 956,664 3,875,938 - 1,419,354 Great SW/Arlington Total 994 89,692,540 14.2 3,599,858 4.0 4.1 1,106,897 1,229,078 2,309,825 5,749,892 1,451,967 3,105,421 North Fort Worth Meacham Fld/Fossil Creek 344 35,221,572 5.6 1,548,881 4.4 4.7 1,726,116 1,625,011 2,664,800 1,430,599 1,440,000 2,724,877 NE Tarrant Alliance 162 34,275,172 5.4 4,434,048 12.9 12.9 -476,937 -476,937 1,615,237 2,248,775 286,253 945,035 West Tarrant 48 3,713,021 0.6 0 0.0 0.0 0 0 28,700 - - - North Fort Worth Total 554 73,209,765 11.6 5,982,929 8.2 8.3 1,249,179 1,148,074 4,308,737 3,679,374 1,726,253 3,669,912 South Fort Worth East Fort Worth 474 18,658,725 3.0 854,791 4.6 4.6 187,182 188,007 292,099 301,500 - - Mansfield 69 3,318,512 0.5 176,260 5.3 5.3 25,700 25,700 23,205 - - - N Central Fort Worth 245 9,241,621 1.5 438,167 4.7 4.7 4,168 4,168 10,494 - - - S Central Tarrant County 205 20,266,593 3.2 230,132 1.1 1.1 189,162 189,162 908,846 - - - S Central Fort Worth 202 8,168,561 1.3 335,275 4.1 4.1 -4,703 -4,703 -83,628 - - - SW Tarrant 58 1,328,221 0.2 41,114 3.1 3.1 0 0 21,600 - - - South Fort Worth Total 1,253 60,982,233 9.7 2,075,739 3.4 3.4 401,509 402,334 1,172,616 301,500 0 0 Dallas Total 5,392 406,399,703 64.5 21,930,697 5.4 5.6 5,836,357 5,707,706 12,394,876 9,268,089 2,019,723 9,402,975 Fort Worth Total 2,801 223,884,538 35.5 11,658,526 5.2 5.3 2,757,585 2,779,486 7,791,178 9,730,766 3,178,220 6,775,333 Dallas/Fort Worth Total 8,193 630,284,241 100.0 33,589,223 5.3 5.5 8,593,942 8,487,192 20,186,054 18,998,855 5,197,943 16,178,308



Figure 9: Flex Total Quarterly Market Summary



Area Bldg. Count

Total (SF)

% of Market

Direct (SF)

Direct (%)

Total (%)

Qtr. Direct

Qtr. Total

2016 YTD Total

Under Const.

Qtr. Deliveries

2016 YTD Deliveries

DFW Airport E DFW/Las Colinas 118 6,271,627 5.8 572,006 9.1 9.2 15,097 9,151 821,628 - - - W DFW/Grapevine 97 2,037,664 1.9 149,345 7.3 7.3 -5,081 -5,081 -175,213 - - - DFW Airport Total 215 8,309,291 7.7 721,351 8.7 8.8 10,016 4,070 646,415 0 0 0 East Dallas Central E Dallas 135 3,423,714 3.2 158,863 4.6 4.6 0 0 -201,189 - - - East Dallas/Mesquite 72 2,426,163 2.3 809,316 33.4 33.4 9,661 9,661 416,598 - - - East Dallas Total 207 5,849,877 5.4 968,179 16.6 16.6 9,661 9,661 215,409 0 0 0 Northeast Dallas Allen/McKinney 50 2,157,214 2.0 72,913 3.4 3.2 98,273 98,273 378,625 - - 22,875 NE Dallas/Garland 306 7,636,940 7.1 291,748 3.8 3.9 44,679 38,515 682,044 36,000 - - Plano 162 5,857,599 5.4 325,468 5.6 5.9 26,079 31,079 -2,571 - - 79,700 Richardson 226 8,371,274 7.8 899,538 10.7 11.0 70,531 102,193 162,096 - - - Rockwall 9 280,790 0.3 0 0.0 0.0 0 0 0 - - - Northeast Dallas Total 753 24,303,817 22.6 1,589,667 6.5 6.7 239,562 270,060 1,220,194 36,000 0 102,575 Northwest Dallas Denton 36 1,747,601 1.6 45,472 2.6 2.6 -22 -22 -49,090 - - - Lewisville 75 2,698,916 2.5 390,984 14.5 14.5 26,334 26,334 -107,189 127,000 - - Metropolitan/Addison 236 8,402,909 7.8 815,562 9.7 9.8 65,521 65,521 25,683 - - - N Stemmons/Valwood 185 5,883,705 5.5 473,807 8.1 8.1 29,030 25,630 665,876 - - - NW Dallas Outlying 1 17,325 0.0 0 0.0 0.0 0 0 21,563 - - - Northwest Dallas Total 533 18,750,456 17.4 1,725,825 9.2 9.3 120,863 117,463 556,843 127,000 0 0 South Dallas Red Bird/Airport 33 641,733 0.6 13,376 2.1 2.1 0 0 484,470 - - - SE Dallas/I-45 41 911,190 0.8 12,064 1.3 1.3 0 0 77,880 - - - SW Dallas/US 67 55 1,165,564 1.1 23,607 2.0 2.0 0 0 300,780 - - - South Dallas Total 129 2,718,487 2.5 49,047 1.8 1.8 0 0 863,130 0 0 0 South Stemmons East Brookhollow 60 1,698,407 1.6 37,468 2.2 2.3 -8,569 -8,569 -56,885 - - - E Hines North 228 5,627,882 5.2 243,186 4.3 4.3 7,084 7,084 143,712 - - - Eastern Lonestar/Tpke 54 1,711,247 1.6 103,018 6.0 6.0 -6,236 -6,236 604,304 - - - North Trinity 151 4,550,096 4.2 309,220 6.8 6.8 -8,111 -8,111 25,393 - - 12,126 West Brookhollow 225 7,326,837 6.8 274,535 3.7 4.3 -40,900 -78,688 56,004 - - - W Hines North 77 2,047,202 1.9 105,124 5.1 5.1 16,188 16,188 97,605 - - - Western Lonestar/Tpke 24 368,794 0.3 10,400 2.8 2.8 -10,400 -10,400 25,230 - - - South Stemmons Total 819 23,330,465 21.7 1,082,951 4.6 4.8 -50,944 -88,732 895,363 0 0 12,126 Great SW/Arlington Arlington 93 2,538,912 2.4 139,453 5.5 5.5 767 767 -114,449 - - - Lower Great Southwest 105 2,824,643 2.6 151,523 5.4 5.4 25,127 25,127 109,117 - - - Upper Great Southwest 112 4,079,518 3.8 580,234 14.2 14.3 -568 -548 540,399 - - - Great SW/Arlington Total 310 9,443,073 8.8 871,210 9.2 9.3 25,326 25,346 535,067 0 0 0 North Fort Worth Meacham Fld/Fossil Creek 50 2,111,035 2.0 229,050 10.9 10.9 1,740 1,740 291,418 - - - NE Tarrant Alliance 43 2,287,170 2.1 12,330 0.5 0.5 1,500 1,500 1,584,884 - - - West Tarrant 12 300,832 0.3 0.0 0.0 0 0 28,750 - - - North Fort Worth Total 105 4,699,037 4.4 241,380 5.1 5.1 3,240 3,240 1,905,052 0 0 0 South Fort Worth East Fort Worth 144 4,136,237 3.8 135,310 3.3 3.3 13,512 13,512 17,097 - - - Mansfield 12 674,399 0.6 3,380 0.5 0.5 3,443 3,443 19,396 - - - N Central Fort Worth 58 1,269,562 1.2 57,521 4.5 4.7 -5,540 -3,040 -2,040 - - - S Central Tarrant County 54 1,735,217 1.6 76,087 4.4 4.6 22,838 22,838 90,914 - - - S Central Fort Worth 64 1,668,937 1.6 123,528 7.4 7.4 3,850 3,850 -77,503 - - - SW Tarrant 18 591,502 0.6 0 0.0 0.0 0 0 21,600 - - - South Fort Worth Total 350 10,075,854 9.4 395,826 3.9 4.0 38,103 40,603 69,464 0 0 0 Dallas Total 2,656 83,262,393 77.5 6,137,020 7.4 7.5 329,158 312,522 4,397,354 163,000 0 114,701 Fort Worth Total 765 24,217,964 22.5 1,508,416 6.2 6.3 66,669 69,189 2,513,933 0 0 0 Dallas/Fort Worth Total 3,421 107,480,357 100.0 7,645,436 7.1 7.2 395,827 381,711 6,911,287 163,000 0 114,701

MARKETVIEW

Big D boom: industrial market sees record quarterly demand



Vacancy Rate 5.8%




Completions 5.2 MSF



DFW POPULATION GROWTH HAS HELPED FUEL

RECORD INDUSTRIAL DEMAND

As major corporations continue to relocate to North Texas, they bring along with them their employees, jobseekers, and ancillary service providers. An estimated 360 people move to Dallas/Fort Worth everyday. This population boom has helped facilitate the exceptional fundamentals seen in the Dallas/Fort Worth industrial market. DFW has an area population of just over seven million, which is projected to grow by 9.0% through 2021, according to Nielson Claritas, making it an attractive location for e-commerce and third party logistics (3PL) companies seeking to reach their customers with same-day or next-day service. In addition, 25 million consumers can be reached within a day’s driving time.

• Industrial occupiers in Dallas/Fort Worth took down8.9 million sq. ft. during Q3 2016.

• Q3 2016 set the ten year record for the highest levelof quarterly absorption.

• The total vacancy rate continues to compress, down63 basis points (bps) to 5.8%.

• Developers delivered 5.2 million sq. ft. of industrialspace to the market, with three million sq. ft., or57%, pre-leased.

• The Great Southwest/Arlington submarket has thehighest amount of active construction, with 5.8million sq. ft. under construction in the submarket.

• South Dallas is still a hub for leasing activity, with1.9 million sq. ft. absorbed during the Q3 2016,the highest amount among the nine industrialsubmarkets.

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MARKETVIEW



Figure 3: DFW Industrial Market 3Q 2016 CBRE


Source: U.S. Bureau of Economic Analysis, September 2016. CBRE Research, Q3 2016.

DALLAS/FORT WORTH: BOOM TOWN USA According to the Federal Reserve Bank of Dallas’ September DFW Economic Indicators release, Dallas/Fort Worth employment expanded at a swift annual rate of 4.1% through August 2016. However, August employment growth was not evenly distributed throughout the Metroplex. While Dallas job growth was a vigorous 5.3%, employment growth in Fort Worth was a much more demure 1.1% year-over-year increase. Job growth over the summer was broad across all sectors with construction and mining growing 5.2% year-over-year, likely due to the construction boom in DFW according to Federal Reserve economists. So far this year, Dallas has outperformed all other Texas metro areas, a testament to its diverse economy.

TEXAS ECONOMY CONTINUES TO EXPAND According to the September Texas Workforce Commission release, Texas added a seasonally adjusted 190,000 jobs year-over-year in August 2016. This represents a 1.6% increase in jobs added to the state’s economy. The Texas unemployment rate did increase slightly over the summer to 4.7%, but is still a stronger reading than the nation’s 4.9% unemployment rate. Education and health services, and leisure and hospitality were the strongest performing sectors each with 3.9% growth year-over-year, while financial activities posted a respectable 3.4% growth. Manufacturing jobs contracted 3.3% year-over-year, a result of low oil prices and reduced demand for U.S. exports overseas.

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U.S. GDP DFW Industrial Vacancy Rate

GDP ($, in billions) Vacancy Rate (%)

Market

Net Rentable

Area (SF)

Available (SF)

Avail. Rate (%)

Direct Vacancy

(SF)

Direct Vacancy

Rate (%)

Total Vacancy

(SF)

Total Vacancy

Rate (%)



(SF)


(SF)

YTD 2016 Total

Absorption (SF)


Industrial Flex

DFW Airport 69,522,191 6,212,405 8.9 3,680,710 5.3 3,788,682 5.4 4.40 8.52 1,797,033 1,721,087 2,800,626

East Dallas 36,221,019 3,859,534 10.7 2,642,423 7.3 2,662,423 7.4 4.00 8.88 -36,419 -36,419 11,956


Northwest Dallas 106,604,021 7,939,669 7.4 5,552,974 5.2 5,579,689 5.2 4.84 9.30 1,636,308 1,686,224 2,621,079

South Dallas 60,311,287 7,484,530 12.4 5,652,225 9.4 5,652,225 9.4 3.47 8.00 1,849,644 1,849,644 5,188,124

South Stemmons 120,570,905 10,186,014 8.4 6,108,391 5.1 6,249,480 5.2 5.28 11.92 281,572 402,399 1,457,343

.

Great SW / Arlington 99,135,613 7,996,984 8.1 4,471,068 4.5 4,561,814 4.6 4.00 6.63 1,132,223 1,254,424 2,494,240

North Ft. Worth 77,908,802 8,623,319 11.1 6,224,309 8.0 6,325,414 8.1 4.05 9.26 1,252,419 1,151,314 4,297,877

South Ft. Worth 71,058,087 4,465,635 6.3 2,471,565 3.5 2,483,465 3.5 4.49 7.55 439,612 442,937 1,187,124

DALLAS TOTALS 489,662,096 44,648,300 9.1 28,067,717 5.7 29,089,216 5.9 4.63 9.73 6,165,515 6,020,228 13,390,252

FT.WORTH TOTALS 248,102,502 21,085,938 8.5 13,166,942 5.3 13,370,693 5.4 4.15 7.52 2,824,254 2,848,675 7,979,241

MARKET TOTALS 737,764,598 65,734,238 8.9 41,234,659 5.6 42,459,909 5.8 4.46 9.23 8,989,769 8,868,903 21,369,493


MARKETVIEW







Q3 2016 marked the 24th consecutive quarter of positive net absorption for the DFW industrial market as it posted 8.9 million sq. ft. in total absorption, and is the strongest quarterly absorption since the most recent economic recovery began. In fact, Q3 2016 had the best quarterly absorption in the past ten years, surpassing Q4 2013 by 974,955 sq. ft. which itself saw 7.9 million sq. ft. in absorption. Warehouse and distribution space led quarterly activity with just under 8.5 million sq. ft. of total net absorption, while flex space posted 381,711 sq. ft. of total net absorption. The submarket that posted the highest quarterly net absorption was South Dallas at 1.8 million sq. ft.

Deliveries for the third quarter totaled 5.2 million sq. ft. Pre-leasing activity remained very strong with 3.4 million sq. ft., or 57%, of Q3 2016 deliveries pre-committed. An estimated 19.2 million sq. ft. is currently under construction in DFW, down from the peak of Q1 2016, which was easily the highest level of construction activity ever seen in the market. Yet market demand continues to meet supply, for now. Under construction space is currently 23% is pre-leased, down from the 32% pre-committed rate seen at the end of the second quarter of 2016. Great Southwest/Arlington overtook South Dallas last quarter as the most active submarket with under construction activity. Currently there is 5.7 million sq. ft., or 30% of the total industrial development activity in DFW, of projects under construction in the Great Southwest/Arlington submarket.

In Q3 2016, vacancy continued to decline. Due to vigorous tenant demand, the total vacancy rate decreased by 63 bps to 5.8%. Resilient tenant demand despite a robust delivery pipeline has contributed to vacancy rate compression. Demand continued to outpace supply, again, as vacancy has compressed for five consecutive quarters. Also, the industrial development pipeline can be turned off much more quickly than other asset types due to the fact that industrial product takes less time to construct.

Still, with just over 19 million sq. ft. now underway, vacancy may reverse its five quarter compression trend and see its course tick up later on in 2016 or 2017 as more product delivers. Stay tuned as CBRE Research monitors this Texas-sized construction pipeline that is one of the largest in the U.S.



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MARKETVIEW




CAPITAL MARKETS

Strong fundamentals continued to drive DFW industrial absorption and low vacancy, especially in the interior submarkets. Class A assets continued to perform well through the Q3 2016 and cap rates have remained at all-time lows. According to the H1 2016 CBRE Cap Rate Survey, cap rates on stabilized Class A product are currently around 4.75%-5.25%. Additionally, there are active investors pursuing both small and larger sized transactions. CBRE has seen cap rates among Class B assets remaining relatively consistent, with a wide spread that is very dependent on overall functionality. Cap rates on the most functional Class B assets can be as low as 6.25% and as high as 8.25% for the less functional Class B properties. CBRE analysts expect institutional investor activity to remain strong but expect cap rate compression to level off slightly given the generally slowing rental rate growth and current construction activity.


NFI 5012 W Danieldale Road South Dallas 1,128,000

Ozburn-Hessey Logistics 3845 Gifford Street South Stemmons 226,000

Ozburn-Hessey Logistics 3801-3875 La Reunion Parkway South Stemmons 191,000

SPM Flow Control 821 Railhead Road North Fort Worth 169,000

Décor Group 2301 Crown Court DFW Airport 120,000



1200 Lakeside Parkway Northwest Dallas 477,000

2751 Northern Cross North Fort Worth 446,000

1901 Royal Lane South Stemmons 281,000

2700 Story Road West DFW Airport 260,000

11070 Grader Place Northeast Dallas 246,000



MARKETVIEW



CONTACTS

Robert C. Kramp Director, Research & Analysis [email protected]

E. Michelle Miller Research Operations Manager [email protected]

Lauren Paris Senior Research Analyst +1 214 9796587 [email protected]

Miller Hamrick Research Coordinator +1 214 9796532 [email protected]

CBRE OFFICES


To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/research-and-reports.

MARKETVIEW

All eyes on construction and industrial demand keeps pace



Vacancy Rate6.4%


Avg. Asking Rate$4.35

Net Absorption6.6 MSF

Completions6.2 MSF



CONSTRUCTION PIPELINE REMAINS MEASURE

TO WATCH IN DFW

An estimated 20.7 million sq. ft. of industrial product remained under construction in Dallas/Fort Worth, with about 32.0% of this product preleased. However, demand continued to meet this new supply. During the second quarter of 2016, the Metroplex absorbed 6.6 million sq. ft. while 6.2 million sq. ft. was added to the market as newly delivered product. Vacancy rates continued to compress, and average asking rates continued to climb, albeit at gentle rates for both metrics. Industrial developers are following rooftops, and this robust demand is a direct result of Dallas/Fort Worth’s population boom – an estimated 360 people move to North Texas each day, adding to the nation’s fourth most populous metro area.

• Industrial occupiers in Dallas/Fort Worth took down

6.6 million sq. ft. during the second quarter of

2016.

• Second quarter 2016 set the ten year record for the

highest level of absorption during a second quarter,

and is the highest quarterly absorption since the

fourth quarter of 2013, which saw 7.9 million sq. ft.

absorbed – the ten year market record.

• Total Vacancy rate continued steady compression,

down 30 basis points to 6.4%.

• Developers delivered 6.2 million sq. ft. of industrial

space to the market, with 3.4 million sq. ft., or

55.0%, pre-leased.

• South Dallas remained as a hub of activity, with 2.6

million sq. ft. absorbed during the second quarter of

2016.

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MARKETVIEW





Source: U.S. Bureau of Economic Analysis, June 2016. CBRE Research, Q2 2016.

DALLAS/FORT WORTH STILL SHINES BRIGHTAccording to the Federal Reserve Bank of Dallas’ June DFW Economic Indicators release, Dallas/Fort Worth employment was up 2.7% year-to-date through May 2016, which was twice the national growth rate of 1.3% during the same period. Unemployment in the Metroplex remains at multiyear lows, a reflection of the region’s tight job market. The top three contributors to job growth year-to-date remain financial services, education and health services, and trade, transportation and utilities sectors. This group accounted for a combined 28,400 jobs added to the local economy. Loses in construction and mining continued, and was down by 4.7%; or 4,000 jobs.

TEXAS ECONOMY CONTINUES TO EXPAND According to the May Texas Workforce Commission release, Texas added a seasonally adjusted 171,800 jobs year-over-year in May 2016. This represents a 1.5% increase in jobs added to the state’s economy. The Texas unemployment rate has held steady at 4.4% and is still a stronger reading than the nation’s 4.7% unemployment rate. According to the Federal Reserve Bank of Dallas’ June Texas Economic indicators release, exports remain down – 6.5% year-over-year through April – a result of lower oil prices, weak global demand, and a generally strong dollar. Housing remains hot in the Lone Star State, with the Federal Housing Finance Agency’s House Price Index for Texas up 7.1% year-over-year.

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U.S. GDP ($, in billions) DFW Industrial Vacancy Rate


Market

Net Rentable

Area(SF)

Available(SF)

Avail.Rate(%)

Direct Vacancy

(SF)

Direct Vacancy

Rate(%)

Total Vacancy

(SF)

Total Vacancy

Rate(%)

Asking Rates Q2 2016Direct Net

Absorption(SF)

Q2 2016Total Net

Absorption(SF)

YTD 2016Total

Absorption (SF)

Average Annual($/SF)

Industrial Flex

DFW Airport 69,508,280 7,825,894 11.3 5,408,904 7.8 5,440,930 7.8 4.33 7.82 519,399 532,753 1,079,539

East Dallas 36,268,739 3,628,848 10.0 2,519,904 6.9 2,539,904 7.0 3.57 10.10 -141,130 -141,130 48,375

Northeast Dallas 96,816,834 8,701,000 9.0 5,322,020 5.5 5,811,619 6.0 4.32 8.80 -140,371 -113,211 913,831

Northwest Dallas 106,296,082 9,152,314 8.6 6,806,449 6.4 6,883,080 6.5 4.77 8.58 631,848 715,450 934,855

South Dallas 58,676,453 7,473,182 12.7 6,084,418 10.4 6,084,418 10.4 3.72 8.00 2,518,073 2,550,473 3,338,480

South Stemmons 120,344,926 9,110,213 7.6 6,500,959 5.4 6,762,875 5.6 4.86 12.32 542,837 288,421 1,054,944


North Ft. Worth 76,489,151 9,336,807 12.2 6,010,475 7.9 6,010,475 7.9 4.24 9.26 1,229,551 1,250,151 3,146,563

South Ft. Worth 71,804,817 3,881,668 5.4 2,812,769 3.9 2,827,994 3.9 4.53 9.49 655,488 662,939 744,187

DALLAS TOTALS 487,911,314 45,891,451 9.4 32,642,654 6.7 33,522,826 6.9 4.41 9.71 3,930,656 3,832,756 7,370,024

FT.WORTH TOTALS 245,941,082 20,069,489 8.2 13,024,622 5.3 13,342,338 5.4 4.24 8.64 2,856,614 2,767,984 5,130,566

MARKET TOTALS 733,852,396 65,960,940 9.0 45,667,276 6.2 46,865,164 6.4 4.35 9.47 6,787,270 6,600,740 12,500,590


MARKETVIEW







The second quarter of 2016 marks the 23rd consecutive quarter of positive net absorption for the DFW industrial market as it posted 6.6 million sq. ft. in total absorption, and the strongest absorption for a second quarter of the year since the most recent economic recovery. In fact, the second quarter of 2016 was the second best quarterly absorption in the past ten years, after fourth quarter 2013 which saw 7.9 million sq. ft. absorbed. Warehouse and distribution space led quarterly activity with just over 5.9 million sq. ft. of total net absorption, while flex space posted 713,552 sq. ft. of total net absorption. The submarket that posted the highest quarterly net absorption was South Dallas at 2.6 million sq. ft. Two million sq. ft. of this absorption was due to pre-leased deliveries.

Deliveries for the quarter totaled 6.2 million sq. ft. Pre-leasing activity remained very strong with 3.4 sq. ft., or 55.0%, of the 6.2 million sq. ft. of second quarter deliveries pre-leased. An estimated 20.7 million sq. ft. is currently under construction in DFW, down from the first quarter of 2016 which was easily the highest level of activity ever seen in the market. Yet market demand continued to meet supply – of the space under construction, 32.0% is pre-leased. Great Southwest/Arlington overtook South Dallas this quarter as the most active submarket with under construction activity, and 30.0% of projects under construction in DFW are located in the Great Southwest/Arlington submarket.

In the second quarter of 2016, vacancy continued to compress. Due to robust tenant demand, the total vacancy rate decreased by 30 bps to 6.4%. Strong tenant demand despite an increase in deliveries has contributed to the relatively stable vacancy rate. Demand continued to outpace supply - for now - as vacancy has compressed for four consecutive quarters. Also, the industrial development pipeline can be turned off much more quickly than other asset types due to the fact that industrial product takes less time to construct.

Still, with just over 20.7 million sq. ft. now underway, vacancy may reverse its twelve month compression and see its course tick up later on in 2016 as more product delivers. Stay tuned as CBRE Research monitors this Texas-sized construction pipeline that is one of the largest in the U.S.



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MARKETVIEW



*RenewalSource: CBRE Research, Q2 2016.

CAPITAL MARKETS

According to Real Capital Analytics data, the second quarter of 2016 saw a 20.0% increase in DFW sales volume from the previous quarter. Competition for well -located assets remains solid as investment activity has picked up in the second quarter of 2016.

Strong fundamentals continued to drive DFW industrial absorption and low vacancy, especially in the interior submarkets. Class A assets continued to perform well through the first quarter of 2016 and cap rates have remained at all-time lows. According to the second half 2015 CBRE Cap Rate Survey, cap rates on class A product are currently around 4.75%-5.25%. Additionally, there are active investors pursuing both small and larger sized transactions. CBRE has seen a cap rates among Class B assets remaining relatively consistent, with a wide spread that is very dependent on overall functionality. Cap rates on the most functional Class B assets can be as low as 6.0% and as high as 8.0% for the less functional Class B properties. CBRE analysts expect institutional investor activity to remain strong but expect cap rate compression to level off slightly given the slowing rental rate growth and construction activity.


Rheem* 1875 Waters Ridge Dr Northwest Dallas 650,000

Mother Parkers Tea & Coffee 1101 Everman Pkwy South Fort Worth 417,600

MARS Petcare* 2200 Danieldale Rd South Dallas 393,900

FedEx Ground 3901 Adler Rd South Stemmons 362,500

Marco Company 1000 Terminal Rd Great Southwest/Arlington 318,000



6601 Oak Grove Rd South Fort Worth 615,000

Riverpoint Commerce Center Great Southwest/Arlington 602,800

6445 Will Rogers Blvd South Fort Worth 585,000

Gateway East Business Park Northeast Dallas 517,500

7301 Trinity Blvd South Fort Worth 448,500


Source: Real Capital Analytics, CBRE Research, Q2 2016.

MARKETVIEW INSERT

Dallas/Fort Worth industrial market continues to set records



*Arrows indicate change from previous quarter.Figure 1: Net Absorption by Submarket

CONSTRUCTION PIPELINE REMAINS

MEASURE TO WATCH IN DFW

An estimated 20.7 million sq. ft. of industrial product remained under construction in Dallas/Fort Worth, with about 32.0% of this product preleased. However, demand continued to meet this new supply. During the second quarter of 2016, the Metroplex absorbed 6.6 million sq. ft. while 6.2 million sq. ft. was added to the market as newly delivered product. Vacancy rates continued to compress, and average asking rates continued to climb, albeit at gentle rates for both metrics. Industrial developers are following rooftops, and this robust demand is a direct result of Dallas/Fort Worth’s population boom – an estimated 360 people move to North Texas each day, adding to the nation’s fourth most populous metro area.


• Industrial occupiers in Dallas/Fort Worth took down

6.6 million sq. ft. during the second quarter of 2016.

• Second quarter 2016 set the ten year record for the

highest level of absorption during a second quarter,

and is the highest quarterly absorption since the

fourth quarter of 2013, which saw 7.9 million sq. ft.

absorbed – the ten year market record.

• Total Vacancy rate continued steady compression,

down 30 basis points to 6.4%.

• Developers delivered 6.2 million sq. ft. of industrial

space to the market, with 3.4 million sq. ft., or

55.0%, pre-leased.

• South Dallas remained as a hub of activity, with 2.6

million sq. ft. absorbed during the second quarter of

2016.

Vacancy Rate6.4%



Completions6.2 MSF

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MSF

MARKETVIEW INSERT

5678910111213

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Under Construction Direct Vacancy Rate

MSF


Figure 2: Net Absorption, Construction and Vacancy Rate

Figure 3: Asking Rate, NNN Avg. Annual Figure 4: Construction

Source: CBRE Research, Q2 2016. Source: CBRE Research, Q2 2016.

Figure 5: Construction and Direct Vacancy Rate




Vacancy Rate (%)


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%







AreaBldg.Count

Total(SF)

% ofMarket

Direct (SF)

Direct (%)

Total(%)

Q2 2016Direct

Q2 2016Total

2016 YTDTotal

UnderConst.

Q2 2016Deliveries

2016 YTD Deliveries

DFW AirportE DFW/Las Colinas 361 51,837,144 7.1 4,012,634 7.7 7.8 426,582 439,936 1,204,722 747,553 107,782 971,303W DFW/Grapevine 310 17,671,136 2.4 1,396,270 7.9 7.9 92,817 92,817 -125,183DFW Airport Total 671 69,508,280 9.5 5,408,904 7.8 7.8 519,399 532,753 1,079,539 747,553 107,782 971,303

East DallasCentral E Dallas 428 17,327,446 2.4 575,312 3.3 3.4 33,804 33,804 -151,952East Dallas/Mesquite 285 18,941,293 2.6 1,944,592 10.3 10.3 -174,934 -174,934 200,327East Dallas Total 713 36,268,739 4.9 2,519,904 6.9 7.0 -141,130 -141,130 48,375

Northeast DallasAllen/McKinney 188 11,399,003 1.6 252,898 2.2 2.2 175,845 175,845 384,734 130,211 144,710 144,710NE Dallas/Garland 843 45,961,858 6.3 2,874,972 6.3 7.0 -345,013 -278,743 319,887 407,350Plano 357 19,648,760 2.7 962,222 4.9 5.4 -28,830 -64,863 32,349 216,720Richardson 316 17,430,012 2.4 1,194,928 6.9 7.1 63,627 60,550 181,061Rockwall 58 2,377,201 0.3 37,000 1.6 1.6 -6,000 -6,000 -4,200 175,000Northeast Dallas Total 1,762 96,816,834 13.2 5,322,020 5.5 6.0 -140,371 -113,211 913,831 712,561 144,710 361,430

Northwest DallasDenton 176 9,565,201 1.3 277,156 2.9 2.9 68,350 86,668 55,400 1,259,877 170,270 170,270Lewisville 222 24,775,341 3.4 2,336,584 9.4 9.4 269,008 269,008 124,385 675,931 345,787 765,367Metropolitan/Addison 453 20,948,568 2.9 1,289,991 6.2 6.2 234,696 271,096 75,727N Stemmons/Valwood 655 48,098,217 6.6 2,886,718 6.0 6.1 55,691 84,575 655,740 541,933 838,560NW Dallas Outlying 27 2,908,755 0.4 16,000 0.6 0.6 4,103 4,103 23,603Northwest Dallas Total 1,533 106,296,082 14.5 6,806,449 6.4 6.5 631,848 715,450 934,855 2,477,741 516,057 1,774,197

South DallasRed Bird/Airport 187 18,672,506 2.5 807,462 4.3 4.3 1,075,849 1,075,849 1,560,737 947,817 1,066,420 1,737,283SE Dallas/I-45 226 25,185,476 3.4 1,843,080 7.3 7.3 1,060,478 1,092,878 1,098,558 4,226,476 1,253,620 1,253,620SW Dallas/US 67 148 14,818,471 2.0 3,433,876 23.2 23.2 381,746 381,746 679,185 1,116,622 1,116,622South Dallas Total 561 58,676,453 8.0 6,084,418 10.4 10.4 2,518,073 2,550,473 3,338,480 5,174,293 3,436,662 4,107,525

South StemmonsEast Brookhollow 198 9,240,587 1.3 188,383 2.0 2.1 50,776 49,558 10,610E Hines North 635 20,211,948 2.8 569,570 2.8 2.9 197,912 173,912 244,109Eastern Lonestar/Tpke 290 24,354,472 3.3 726,183 3.0 3.0 27,897 27,897 637,687 292,200 259,672North Trinity 407 10,655,264 1.5 508,076 4.8 4.8 87,894 87,894 24,857 23,826West Brookhollow 997 40,463,325 5.5 1,209,554 3.0 3.0 53,383 49,683 154,059W Hines North 193 6,897,321 0.9 159,710 2.3 2.3 24,525 24,525 90,440Western Lonestar/Tpke 93 8,522,009 1.2 3,139,483 36.8 39.5 100,450 -125,048 -106,818

South Stemmons Total 2,813 120,344,926 16.4 6,500,959 5.4 5.6 542,837 288,421 1,054,944 292,200 283,498Great SW/Arlington

Arlington 391 16,971,082 2.3 369,570 2.2 2.6 -135,684 -62,851 -84,977 1,122,746Lower Great Southwest 420 34,339,153 4.7 1,281,121 3.7 4.1 496,535 356,991 274,601 1,198,775 234,100 234,100Upper Great Southwest 485 46,336,879 6.3 2,550,687 5.5 5.7 610,724 560,754 1,050,192 3,874,946 1,175,354 1,419,354Great SW/Arlington Total 1,296 97,647,114 13.3 4,201,378 4.3 4.6 971,575 854,894 1,239,816 6,196,467 1,409,454 1,653,454

North Fort WorthMeacham Fld/Fossil Creek 392 36,202,224 4.9 2,065,787 5.7 5.7 720,671 741,271 1,022,869 2,270,599 608,617 1,284,877NE Tarrant Alliance 203 36,273,074 4.9 3,944,688 10.9 10.9 501,430 501,430 2,091,244 2,535,028 658,782West Tarrant 60 4,013,853 0.5 0 0.0 0.0 7,450 7,450 32,450North Fort Worth Total 655 76,489,151 10.4 6,010,475 7.9 7.9 1,229,551 1,250,151 3,146,563 4,805,627 608,617 1,943,659

South Fort WorthEast Fort Worth 620 22,924,971 3.1 1,190,795 5.2 5.2 73,338 84,789 107,826 301,500Mansfield 81 3,993,511 0.5 168,705 4.2 4.2 -6,542 -6,542 2,764N Central Fort Worth 304 10,529,043 1.4 494,316 4.7 4.7 10,326 10,326 2,856S Central Tarrant County 262 22,113,710 3.0 518,219 2.3 2.4 611,204 607,204 698,569S Central Fort Worth 266 10,323,859 1.4 399,620 3.9 3.9 -32,838 -32,838 -89,428SW Tarrant 76 1,919,723 0.3 41,114 2.1 2.1 0 0 21,600South Fort Worth Total 1,609 71,804,817 9.8 2,812,769 3.9 3.9 655,488 662,939 744,187 301,500




Figure 8: Industrial Total Quarterly Market Summary



AreaBldg.Count

Total(SF)

% ofMarket

Direct (SF)

Direct (%)

Total(%)

Q2 2016Direct

Q2 2016Total

2016 YTDTotal

UnderConst.

Q2 2016Deliveries

2016 YTD Deliveries

DFW AirportE DFW/Las Colinas 242 45,460,986 7.3 3,425,531 7.5 7.6 401,056 414,410 1,201,361 747,553 107,782 971,303W DFW/Grapevine 212 15,620,068 2.5 1,252,006 8.0 8.0 58,032 58,032 -146,885DFW Airport Total 454 61,081,054 9.8 4,677,537 7.7 7.7 459,088 472,442 1,054,476 747,553 107,782 971,303

East DallasCentral E Dallas 289 13,783,108 2.2 416,449 3.0 3.1 41,237 41,237 -152,519East Dallas/Mesquite 212 16,393,638 2.6 1,125,615 6.9 6.9 -192,890 -192,890 196,091East Dallas Total 501 30,176,746 4.8 1,542,064 5.1 5.1 -151,653 -151,653 43,572

Northeast DallasAllen/McKinney 139 9,241,334 1.5 84,172 0.9 0.9 167,685 167,685 439,877 94,211 121,835 121,835NE Dallas/Garland 533 37,913,293 6.1 2,427,011 6.4 7.3 -437,073 -370,803 180,666 407,350Plano 192 13,542,331 2.2 482,043 3.6 4.1 20,264 -10,769 9,675 137,020Richardson 83 8,666,632 1.4 103,199 1.2 1.2 62,615 62,615 124,583Rockwall 49 2,096,411 0.3 37,000 1.8 1.8 -6,000 -6,000 -6,000 175,000Northeast Dallas Total 996 71,460,001 11.5 3,133,425 4.4 5.0 -192,509 -157,272 748,801 676,561 121,835 258,855

Northwest DallasDenton 140 7,817,600 1.3 231,706 3.0 3.0 90,350 108,668 81,600 1,259,877 170,270 170,270Lewisville 143 22,029,134 3.5 1,919,266 8.7 8.7 264,736 264,736 126,941 548,931 345,787 765,367Metropolitan/Addison 217 12,545,677 2.0 408,908 3.3 3.3 57,873 94,273 -122,388N Stemmons/Valwood 468 42,205,636 6.8 2,360,345 5.6 5.8 -67,288 -38,404 478,863 541,933 838,560NW Dallas Outlying 26 2,891,430 0.5 16,000 0.6 0.6 2,040 2,040 21,540Northwest Dallas Total 994 87,489,477 14.0 4,936,225 5.6 5.7 347,711 431,313 586,556 2,350,741 516,057 1,774,197

South DallasRed Bird/Airport 152 17,912,406 2.9 794,086 4.4 4.4 1,076,267 1,076,267 1,561,155 947,817 1,066,420 1,737,283SE Dallas/I-45 185 24,274,286 3.9 1,831,016 7.5 7.5 1,038,578 1,038,578 1,062,158 4,226,476 1,253,620 1,253,620SW Dallas/US 67 92 13,524,382 2.2 3,410,269 25.2 25.2 373,262 373,262 665,558 1,116,622 1,116,622South Dallas Total 429 55,711,074 8.9 6,035,371 10.8 10.8 2,488,107 2,488,107 3,288,871 5,174,293 3,436,662 4,107,525

South StemmonsEast Brookhollow 136 7,479,762 1.2 159,484 2.1 2.1 45,874 45,874 -6,126E Hines North 405 14,521,794 2.3 319,300 2.2 2.4 131,827 107,827 178,370Eastern Lonestar/Tpke 234 22,613,955 3.6 629,401 2.8 2.8 32,147 32,147 646,937 292,200 259,672North Trinity 251 6,013,304 1.0 193,717 3.2 3.2 64,653 64,653 74,916 11,700West Brookhollow 768 32,930,184 5.3 948,051 2.9 2.9 16,995 14,495 113,999W Hines North 115 4,834,137 0.8 38,398 0.8 0.8 9,412 9,412 75,716Western Lonestar/Tpke 66 7,892,615 1.3 3,139,483 39.8 42.6 85,700 -139,798 -118,918

South Stemmons Total 1,975 96,285,751 15.4 5,427,834 5.6 5.9 386,608 134,610 964,894 292,200 271,372Great SW/Arlington

Arlington 298 14,432,170 2.3 229,350 1.6 2.0 -63,222 9,611 -33,143 1,122,746Lower Great Southwest 315 31,514,880 5.1 1,104,471 3.5 3.9 330,073 190,529 108,057 1,198,775 234,100 234,100Upper Great Southwest 373 42,259,236 6.8 1,971,021 4.7 4.9 585,270 512,820 1,005,833 3,874,946 1,175,354 1,419,354Great SW/Arlington Total 986 88,206,286 14.1 3,304,842 3.7 4.1 852,121 712,960 1,080,747 6,196,467 1,409,454 1,653,454

North Fort WorthMeacham Fld/Fossil Creek 342 34,091,189 5.5 1,834,997 5.4 5.4 725,091 745,691 1,039,789 2,270,599 608,617 1,284,877NE Tarrant Alliance 160 33,988,216 5.4 3,930,858 11.6 11.6 505,110 505,110 2,092,174 2,535,028 658,782West Tarrant 48 3,713,021 0.6 0 0.0 0.0 3,700 3,700 28,700North Fort Worth Total 550 71,792,426 11.5 5,765,855 8.0 8.0 1,233,901 1,254,501 3,160,663 4,805,627 608,617 1,943,659

South Fort WorthEast Fort Worth 476 18,788,734 3.0 1,041,973 5.5 5.6 81,197 92,648 104,092 301,500Mansfield 69 3,318,512 0.5 161,882 4.9 4.9 -12,495 -12,495 -2,495N Central Fort Worth 246 9,259,481 1.5 442,335 4.8 4.8 7,826 7,826 6,326S Central Tarrant County 208 20,378,493 3.3 419,294 2.1 2.1 629,406 629,406 719,684S Central Fort Worth 201 8,637,289 1.4 254,609 2.9 2.9 -15,205 -15,205 -78,925SW Tarrant 58 1,328,221 0.2 41,114 3.1 3.1 0 0 21,600South Fort Worth Total 1,258 61,710,730 9.9 2,361,207 3.8 3.8 690,729 702,180 770,282 301,500




Figure 9: Flex Total Quarterly Market Summary



AreaBldg.Count

Total(SF)

% ofMarket

Direct (SF)

Direct (%)

Total(%)

Q2 2016Direct

Q2 2016Total

2016 YTDTotal

UnderConst.

Q2 2016Deliveries

2016 YTD Deliveries

DFW AirportE DFW/Las Colinas 119 6,376,158 6.1 587,103 9.2 9.2 25,526 25,526 812,477W DFW/Grapevine 98 2,051,068 1.9 144,264 7.0 7.0 34,785 34,785 -170,132DFW Airport Total 217 8,427,226 8.0 731,367 8.7 8.7 60,311 60,311 642,345

East Dallas 0.0Central E Dallas 139 3,544,338 3.4 158,863 4.5 4.8 -7,433 -7,433 -201,189East Dallas/Mesquite 73 2,547,655 2.4 818,977 32.1 32.1 17,956 17,956 406,937East Dallas Total 212 6,091,993 5.8 977,840 16.1 16.2 10,523 10,523 205,748

Northeast DallasAllen/McKinney 49 2,157,669 2.1 168,726 7.8 7.8 8,160 8,160 280,352 36,000 22,875 22,875NE Dallas/Garland 310 8,048,565 7.6 447,961 5.6 5.6 92,060 92,060 643,529Plano 165 6,106,429 5.8 480,179 7.9 8.2 -49,094 -54,094 -33,650 79,700Richardson 233 8,763,380 8.3 1,091,729 12.5 13.0 1,012 -2,065 59,903Rockwall 9 280,790 0.3 0.0 0.0 0 0Northeast Dallas Total 766 25,356,833 24.1 2,188,595 8.6 8.9 52,138 44,061 950,134 36,000 22,875 102,575

Northwest DallasDenton 36 1,747,601 1.7 45,450 2.6 2.6 -22,000 -22,000 -49,068Lewisville 79 2,746,207 2.6 417,318 15.2 15.2 4,272 4,272 -133,523 127,000Metropolitan/Addison 236 8,402,891 8.0 881,083 10.5 10.6 176,823 176,823 -39,838N Stemmons/Valwood 187 5,892,581 5.6 526,373 8.9 8.9 122,979 122,979 640,246NW Dallas Outlying 1 17,325 0.0 0.0 0.0 2,063 2,063 21,563Northwest Dallas Total 539 18,806,605 17.9 1,870,224 9.9 10.0 284,137 284,137 439,380 127,000

South DallasRed Bird/Airport 35 760,100 0.7 13,376 1.8 1.8 -418 -418 484,470SE Dallas/I-45 41 911,190 0.9 12,064 1.3 1.3 21,900 54,300 77,880SW Dallas/US 67 56 1,294,089 1.2 23,607 1.8 1.8 8,484 8,484 300,780South Dallas Total 132 2,965,379 2.8 49,047 1.7 1.7 29,966 62,366 863,130

South StemmonsEast Brookhollow 62 1,760,825 1.7 28,899 1.6 1.7 4,902 3,684 -48,316E Hines North 230 5,690,154 5.4 250,270 4.4 4.4 66,085 66,085 136,628Eastern Lonestar/Tpke 56 1,740,517 1.7 96,782 5.6 5.6 -4,250 -4,250 610,540North Trinity 156 4,641,960 4.4 314,359 6.8 6.8 23,241 23,241 33,504 12,126West Brookhollow 229 7,533,141 7.2 261,503 3.5 3.5 36,388 35,188 134,692W Hines North 78 2,063,184 2.0 121,312 5.9 5.9 15,113 15,113 81,417Western Lonestar/Tpke 27 629,394 0.6 0.0 0.0 14,750 14,750 35,630

South Stemmons Total 838 24,059,175 22.9 1,073,125 4.5 4.5 156,229 153,811 984,095 12,126Great SW/Arlington

Arlington 93 2,538,912 2.4 140,220 5.5 5.5 -72,462 -72,462 -115,216Lower Great Southwest 105 2,824,273 2.7 176,650 6.3 6.3 166,462 166,462 83,990Upper Great Southwest 112 4,077,643 3.9 579,666 14.2 14.3 25,454 47,934 540,947Great SW/Arlington Total 310 9,440,828 9.0 896,536 9.5 9.5 119,454 141,934 509,721

North Fort WorthMeacham Fld/Fossil Creek 50 2,111,035 2.0 230,790 10.9 10.9 -4,420 -4,420 289,678NE Tarrant Alliance 43 2,284,858 2.2 13,830 0.6 0.6 -3,680 -3,680 1,583,384West Tarrant 12 300,832 0.3 0.0 0.0 3,750 3,750 28,750North Fort Worth Total 105 4,696,725 4.5 244,620 5.2 5.2 -4,350 -4,350 1,901,812

South Fort WorthEast Fort Worth 144 4,136,237 3.9 148,822 3.6 3.6 -7,859 -7,859 3,585Mansfield 12 674,999 0.6 6,823 1.0 1.0 5,953 5,953 15,953N Central Fort Worth 58 1,269,562 1.2 51,981 4.1 4.5 2,500 2,500 1,000S Central Tarrant County 54 1,735,217 1.6 98,925 5.7 5.9 -18,202 -22,202 68,076S Central Fort Worth 65 1,686,570 1.6 145,011 8.6 8.6 -17,633 -17,633 -81,353SW Tarrant 18 591,502 0.6 0.0 0.0 0 0 21,600South Fort Worth Total 351 10,094,087 9.6 451,562 4.5 4.6 -35,241 -39,241 28,861

Dallas Total 2,704 85,707,211 81.4 6,890,198 8.0 8.1 593,304 615,209 4,084,832 163,000 22,875 114,701Fort Worth Total 766 19,534,915 18.6 1,348,098 6.9 7.0 84,213 102,693 2,444,744 0 0 0Dallas/Fort Worth Total 3,470 105,242,126 100.0 8,238,296 7.8 7.9 677,517 717,902 6,529,576 163,000 22,875 114,701

MARKETVIEW INSERT DALLAS / FORT WORTH INDUSTRIALMARKETVIEW INSERT



CONTACTS




Miller HamrickResearch Coordinator +1 214 [email protected]

CBRE OFFICES



MARKETVIEW

Construction volume is Big D measure to watch in 2016



Vacancy Rate6.7%




Completions4.9 MSF



3PLs AND E-COMMERCE DRIVING DEMAND

Third party logistics companies (3PLs) and e-commerce

are making Dallas/Fort Worth’s one of the nation’s

global supply chain’s contenders as these occupiers

represented 2.4 million sq. ft., or 40.7% of this quarter’s

absorption, while e-commerce fulfillment centers

accounted for two million sq. ft., or about 35.3% during

the same 90-day time-span. Clearly the tidal shift in the

way Americans shop has changed the way retailers get

goods to their customers and Dallas/Fort Worth is in the

nation’s transportation's crosshairs where the industrial

market continues to benefit from this trend. A

geographic central U.S. location and its own population

density of nearly seven million residents make it a

premier location for 3PL and e-commerce occupiers and

the construction pipeline is trailing Metroplex rooftops.

• Dallas/Fort Worth’s industrial market saw occupiers

take down 5.9 million sq. ft. in the past 90 days.

• This makes Q1 2016 absorption the second-highest

level first quarter absorption in DFW since July

2009, a high-water mark since during the economic

recovery.

• Q1 2016 saw 4.9 million sq. ft. in deliveries, with

53% of deliveries pre-leased.

• An estimated 21.4 million sq. ft. of space remains

under construction, with 42% of this space pre-

leased.

• 3PL and e-commerce occupiers are the market’s

juggernauts this year, accounting for 76% of total

net absorption to-date, a direct result of Big D’s

population boom.

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Q2 20

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Q4 20

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Q1 20

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Vacancy Rate (%)MSF

MARKETVIEW




Source: Bureau of Labor Statistics, CBRE Research, Q1 2016.


Source: U.S. Bureau of Economic Analysis, March 2016.CBRE Research, Q1 2016.

METROPLEX SEEING UNEVEN JOBS GROWTHAccording to the Federal Reserve Bank of Dallas’ March

DFW Economic Indicators release, Dallas employment was

up 4.3% year-over-year in January, while Fort Worth saw

only 0.4% growth during the same period. Although Dallas is

not immune entirely to the impact of low oil prices, it will

likely continue to see net positive job gains and out perform

the state average in 2016 according to Federal Reserve

economists. Fort Worth, which has more exposure to mining

and energy than Dallas, has seen weaker job growth.

However, concentrations of area manufacturing, specifically

related to defense and government contracts, provide many

higher paying jobs that seem stable in near-term forecasts.

DESPITE OIL GLUT, TEXAS ECONOMY IS GROWING According to the Federal Reserve Bank of Dallas’ latest

Texas Economic Indicators release, the state’s economy

maintained positive job growth at a 2.4% annualized growth

rate in January, outpacing the nation’s growth of 1.5%, by

nearly a full percentage point. Unemployment dipped to

4.5% from 4.6% where the state’s rate remains below the

U.S. of 4.9%. The sector experiencing the most rapid

expansion in January was financial activities with an eyebrow

raising 8.2% expansion. To no surprise, the state’s exports

declined 5.7% during the Q4 2015 representing a 7.8%

contraction from a year ago as there continues to be

weakness in machinery and coal and petroleum products

which plunged by more than 15% each during the final 90

days of last year, according to Federal Reserve economists.

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MARKETVIEW





MANUFACTORING RELOCATION DESTINATION

Kubota Tractor Corp., a Japan-based manufacturer of farm and construction equipment, recently began construction of its new U.S. headquarters in Grapevine which will comprise a 125,000 sq. ft. office and a 68,000 sq. ft. R&D facility with room to expand. This relocation from Southern California will ultimately bring 400 new jobs to North Texas. Adjacent to Kubota, Mercedes–Benz began clearing its own site for a new regional 254,000 sq. ft. Parts Distribution Center (PDC) to support spare parts distribution for its dealer network. The facility will also include a 59,000 sq. ft. Learning & Performance Center (LPC), a high-tech training facility for southwest Mercedes-Benz dealership technicians.

There are several automobile manufacturers with a presence in Dallas/Fort Worth. BMW has a regional parts distribution facility in South Dallas, while General Motors has a site in Arlington that manufactures large SUVs. Lower gasoline prices has translated into increased demand for larger vehicles, and GM is investing $1.4 billion to expand the Arlington plant by one million sq. ft., the largest such investment by General Motors in the U.S.

U.S. CROSSROADS: NORTH TEXAS PRIMARY TRANSPORTATION & LOGISTICS HUB

Demand for industrial space in Dallas/Fort Worth is driven by the region’s economic output and also by its physical location and the presence of several physical trade transportation networks of road, rail and air cargo routes.

Four major interstates converge in the Metroplex, providing direct access to the U.S. - Mexican Border and ports on the Gulf Coast. Three of the nation’s Class I rail operators have a total of five intermodal facilities in North Texas. Fort Worth’s Alliance Airport, which is also home to FedEx’s southwest hub, saw a year-over-year increase in cargo volume of 4.9% from 2013 to 2014 according to the FAA. Meanwhile, DFW Airport, the region’s gateway to the world and the 10th busiest airport in the U.S. by cargo weight, saw a 2.6% increase in cargo moved during the same time period.

Dallas/Fort Worth’s central U.S. location, pro-business environment, world-class international airport, and its population of nearly seven million (the Southern United States’ largest urban agglomeration) lends itself to being a major logistics hub on a global scale.

© 2016 CBRE, Inc. |

Market

Net Rentable

Area(SF)

Available(SF)

Avail.Rate(%)

Direct Vacancy

(SF)

Direct Vacancy

Rate(%)

Total Vacancy

(SF)

Total Vacancy

Rate(%)


Absorption(SF)

Q1 2016Total Net

Absorption(SF)

YTD 2016Total

Absorption (SF)


Industrial Flex

DFW Airport 69,609,335 7,926,868 11.4 5,959,629 8.6 5,716,960 8.6 4.24 8.60 531,786 546,786 546,786

East Dallas 36,385,255 3,989,457 11.0 3,198,058 7.0 2,529,312 7.0 3.44 8.30 189,505 189,505 189,505

Northeast Dallas 96,567,981 9,802,432 10.2 6,715,042 5.4 5,202,925 5.9 4.88 8.47 1,106,450 1,027,042 1,027,042


South Dallas 55,323,209 6,433,861 11.6 4,810,417 9.8 5,400,892 9.8 3.57 8.00 788,007 788,007 788,007

South Stemmons 120,961,548 10,759,467 8.9 7,973,226 5.8 7,072,372 5.9 5.39 11.17 756,517 766,523 766,523

Great SW / Arlington 96,431,206 7,311,395 7.6 4,608,513 4.3 4,116,245 4.5 4.04 6.54 485,831 384,922 384,922

North Ft. Worth 75,875,562 9,875,695 13.0 7,983,482 8.7 6,631,409 8.8 3.59 9.26 1,896,412 1,896,412 1,896,412

South Ft. Worth 71,972,158 4,394,743 6.1 3,074,031 4.8 3,425,882 4.8 4.28 6.00 70,448 81,248 81,248

DALLAS TOTALS 484,580,775 49,003,400 10.1 36,404,033 6.9 33,331,870 7.0 4.54 9.26 3,629,304 3,537,268 3,537,268

FT.WORTH TOTALS 244,278,926 21,581,833 8.8 15,666,026 5.8 14,173,536 5.9 3.96 6.84 2,452,691 2,362,582 2,362,582

MARKET TOTALS 728,859,701 70,585,233 9.7 52,070,059 6.5 47,505,406 6.7 4.33 8.72 6,081,995 5,899,850 5,899,850

MARKETVIEW







Q1 2016 marks the 22nd consecutive quarter of positive net absorption for the DFW industrial market as it posted 5.9 million sq. ft. in total absorption, and the second highest for a first quarter of the year since the most recent economic recovery. Warehouse and distribution space led quarterly activity with just over 5.8 million sq. ft. of total net absorption, while flex space posted 88,176 sq. ft. of total net absorption. The submarket that posted the highest Q1 2016 net absorption was North Fort Worth at 1.9 million sq. ft. Just over one million sq. ft. of the North Fort Worth absorption was due to an e-commerce fulfillment center that had taken occupancy in the Alliance area during the quarter.

Deliveries for the quarter totaled 4.9 million sq. ft. Pre-leasing activity remained very strong with 2,577,672 sq. ft., or 53%, of the 4.9 million sq. ft. of Q1 deliveries preleased. An estimated 21.4 million sq. ft. is currently under construction in DFW, easily the highest level of activity ever seen in the market. Yet market demand continues to meet supply – of the space under construction, 42% is pre-leased. South Dallas remains popular among developers with 38.7% of under construction space located in the submarket.

In Q1 2016, vacancy continued to compress. Due to robust tenant demand, particularly from e-commerce and third party logistics (3PL) users, the vacancy rate decreased by 9 bps to 6.7 %.

Strong tenant demand despite an increase in deliveries has contributed to the relatively stable vacancy. Demand is outpacing supply - for now - as vacancy has compressed for three consecutive quarters. Also, the industrial development pipeline can be turned off much more quickly than other asset types due to the fact that industrial product takes less time to construct.

Still, with just over 21.4 million sq. ft. now underway – less than half pre-leased – vacancy may reverse its nine month compression and see its course tick up later on in 2016 as more product delivers. Stay tuned as CBRE Research monitors this Texas-sized construction pipeline that is one of the largest in the U.S.



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MARKETVIEW




CAPITAL MARKETS

According to Real Capital Analytics data, Q1 2016 saw private buyers as the most active with 45% of DFW sales volume. Institutional buyers followed with 36% of the sales volume. Dallas/Fort Worth figures are on par with the total U.S. trends, considering these two groups of buyers were also the most active nationally.

Strong fundamentals continue to drive DFW industrial absorption and low vacancy, especially in the interior submarkets. Class A assets continued to perform well through the first quarter of 2016 and cap rates have remained at all-time lows. According to the second half 2015 CBRE Cap Rate Survey, cap rates on class A product are currently around 4.75%-5.25%. Additionally, there are active investors pursuing both small and larger sized transactions but CBRE has seen a slight increase in cap rates among some class B assets, and are priced near 5.75%-6.25% according to the most recent CBRE Cap Rate Survey. CBRE analysts expect institutional investor activity to remain strong but expect cap rate compression to level off slightly given the slowing rental rate growth and construction activity.


Bed Bath & Beyond 2900 S Valley Pkwy Northwest Dallas 800,000

Mission Foods 2404 W Pioneer Pkwy Great Southwest / Arlington 766,000

Nestlé* 13600 Independence Pkwy North Fort Worth 524,000

At Home 4040 Forrest Ln Northeast Dallas 352,076

OHL 2010 January Ln Great Southwest / Arlington 347,015

Office Depot 2220 N State Hwy 360 Great Southwest / Arlington 295,000



1303 W Pioneer Pkwy Great Southwest / Arlington 860,445

2722 S Jupiter Rd Northeast Dallas 420,200

15101 Grand River Rd Great Southwest / Arlington 327,000

150 Turtle Creek Blvd South Stemmons 159,938


Source: Real Capital Analytics, CBRE Research, Q1 2016.

MARKETVIEW



CONTACTS





CBRE OFFICES



MARKETVIEW

Occupiers and Developers topping out new DFW records

Dallas / Fort Worth Industrial, Q4 2015


Vacancy Rate6.8%



Net Absorption5,255,300

Completions2,698,065



E-COMMERCE: DRIVING OCCUPIER DEMAND

The convergence of technology and real estate cannot be

understated: it affects the way real estate is studied

through the proliferation of “Big Data,” but also which

companies are occupying it and how. According to the

U.S. Census Bureau, Q3 2015 e-commerce sales were

estimated to have increased 15.1% year-over-year, and

e-commerce accounted for 7.4% of total sales. Occupier

demand is ultimately customer driven, and the American

consumer now expects next-day, if not same-day, delivery

of their online purchases. This shift in consumer patterns

has led to greater industrial demand, more industrial

infill development, and increased sophistication of

industrial buildings. And with nearly 40 million sq. ft. of

demand and new construction this past year and next,

DFW’s industrial sector seems at the heart of it all.

EXECUTIVE SUMMARY

• Dallas / Fort Worth year-to-date absorption totaled

18 million sq. ft.

• 2015 absorption was the second-highest level

experienced in the DFW market since the most

recent economic recovery.

• Q4 2015 saw 2.7 million sq. ft. in deliveries, with

year-to-date deliveries totaling 19.6 million sq. ft.

• 2015 saw the highest amount of deliveries to the

Dallas / Fort Worth industrial market since the

economic recovery.

• An estimated 19.7 million sq. ft. of space remains

under construction, with 36% of this space pre-

leased.

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MARKETVIEW


DALLAS / FORT WORTH INDUSTRIAL




Source: U.S. Bureau of Economic Analysis, December 2015.CBRE Research, Q4 2015.

YET NORTH TEXAS STILL SEES SWIFT GROWTH The Dallas / Fort Worth Economy continued to expand at a

relatively rapid pace with 3% annual employment growth, per

the Federal Reserve Bank of Dallas’s December DFW

Economic Indicators release. Comparatively, the U.S

employment growth was 1.8 % and Texas has slowed to

1.3% annual growth. The strongest sectors locally: education

and health services; leisure and hospitality, and trade,

transportation and utilities with 5.4%, 5.5%, and 4.7%

employment growth year-to-date through November,

respectively. Interestingly, employment growth has been

uneven in the Metroplex. Through November, annual new

jobs grew in Dallas by 4.1% while Fort Worth etched out only

a mere 20 bps. However, overall unemployment in Dallas /

Fort Worth remains at historic lows suggesting a tightening

in the labor market and demand for new workers.

TEXAS ECONOMY SEES MODEST GROWTH IN WAKE OF 70% PRICE SLUMP IN CRUDE OIL According to the Federal Reserve Bank of Dallas’s December

Texas Economic Indicators release, the Texas Economy

managed to maintain positive job growth at a 1.3%

annualized growth rate year-to-date through November

despite the bad headlines from the oil patch. Still,

unemployment edged up to 4.6% from 4.4%. No surprise

that oil and gas experienced the largest job losses with a

17.5% employment contraction year-to-date (through

November). The sector that has experienced the most rapid

expansion has been education and health services at 4.3%

growth. Texas exports declined 3.8% in October, which

represents a 6.6% decrease in exports year-over-year.

Weakness in Texas exports is a result of lower oil prices and

a strong dollar, according to Federal Reserve economists.

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MARKETVIEW





DALLAS/FORT WORTH ECONOMIC UPDATE: CORPORATE EXPANSION, HOUSING ADD LIFT

DFW’s industrial market continues to benefit from positive national and local market robust fundamentals. Despite low oil prices and the contraction of the oil and gas sector, DFW appears well hedged due to the region’s diverse economy, which shows its heft in that were its own country, the Metroplex’s economic output would rank it 23rd in the world, just behind Taiwan. Much of this output is doubtlessly due to the 21 Fortune 500 companies headquartered in North Texas, not to mention several high profile corporate relocations that are done or in the pipeline.

According to the Federal Reserve Bank of Dallas’s December DFW Economic Indicators release, home prices in the Metroplex continue to trend upward, appreciating 11% in Dallas and 8.6% in Fort Worth year-over-year. Single family and multifamily starts have both increased with single family permits up 26% and multifamily permits up 31.2% year-over-year. Residential construction however, for the time being, has managed to stay ahead of demand as apartment rents have also been trending upward.

INDUSTRIAL MARKET IS MAJOR U.S. TRANSPORTATION & LOGISTICS HUB

Demand for industrial space in Dallas / Fort Worth is driven not only by the region’s economic output but also by its physical location and the presence of several transportation networks.

Four major interstates converge in the Metroplex, providing direct access to the U.S. - Mexican Border and ports on the Gulf Coast. Three of the nation’s Class I rail operators have a total of five intermodal facilities in North Texas. Fort Worth’s Alliance Airport, which is also home to FedEx’s Southwest hub, saw a year-over-year increase in cargo volume of 4.85% from 2013 to 2014 according to the FAA. Meanwhile, DFW Airport, the region’s gateway to the world and the 10th busiest airport in the U.S. by cargo weight, saw a 2.55% increase in cargo moved during the same time period.

Dallas / Fort Worth’s central U.S. location, pro-business environment, world-class international airport, and its population of nearly 7 million (the Southern United States’ largest urban agglomeration) lends itself to being a major logistics hub on a global scale.

© 2015 CBRE, Inc. |

Market

Net Rentable

Area(SF)

Available(SF)

Avail.Rate(%)

Direct Vacancy

(SF)

Direct Vacancy

Rate(%)

Total Vacancy

(SF)

Total Vacancy

Rate(%)


Absorption(SF)

Q3 2015Total Net

Absorption(SF)

2015 Total

Absorption (SF)


Industrial Flex

DFW Airport 68,646,480 7,802,003 11.4 6,196,435 8.2 5,716,960 8.3 4.78 9.01 1,185,421 1,458,871 1,716,942

East Dallas 36,434,613 3,780,575 10.4 3,198,058 7.8 2,862,524 7.9 3.11 10.56 361,774 341,774 96,169



South Dallas 54,667,346 5,937,262 10.9 4,810,417 9.7 5,308,088 9.7 3.32 8.00 870,003 870,003 4,989,389

South Stemmons 120,942,629 11,180,919 9.2 7,973,226 6.2 7,566,606 6.3 4.73 10.32 417,626 412,415 2,133,223


North Ft. Worth 74,879,102 8,466,469 11.3 7,983,482 9.6 7,200,170 9.6 3.56 9.26 141,028 141,028 95,774

South Ft. Worth 71,937,216 5,677,210 7.9 3,074,031 4.9 3,563,063 5.0 3.88 10.13 209,620 209,469 212,668

DALLAS TOTALS 481,767,545 48,172,058 10.0 36,404,033 6.9 33,683,192 7.0 4.38 9.26 4,056,052 4,344,249 15,018,669

FT.WORTH TOTALS 243,120,941 21,696,277 8.9 15,666,026 6.2 15,324,553 6.3 3.84 8.56 881,813 911,051 2,976,023

MARKET TOTALS 724,888,486 69,868,335 9.6 52,070,059 6.7 49,007,745 6.8 4.32 8.87 4,937,865 5,255,300 17,994,692

MARKETVIEW







Q4 2015 marks the 21st consecutive quarter of positive net absorption for the DFW industrial market as it posted 5.3 million sq. ft. in total market absorption. With the three previous quarters’ impressive combined 12.7 million sq. ft. of absorption, the year-to-date total reached just under 18 million sq. ft., eclipsing 2014 absorption. In fact, 2015 had the second-strongest absorption since the economic recovery, and only 750,000 sq. ft. short of the 18.7 million sq. ft. market all-time record absorption experienced in 2013. Warehouse and distribution space led quarterly activity with just over 5 million sq. ft. of total net absorption, while flex space also posted 200,000 sq. ft. of total net absorption. The submarket that posted the highest Q4 2015 net absorption was DFW Airport at 1.5 million sq. ft.

Deliveries for the quarter totaled 2.7 million sq. ft., bringing year-to-date deliveries to 19.6 million sq. ft., easily the highest amount delivered to market since the economic downturn. Pre-leasing activity remained strong with 930,000, or 34%, of the 2.7 million sq. ft. of Q4 deliveries preleased. For 2015 deliveries, the pre-leased rate averaged 45%. An estimated 19.7 million sq. ft. is currently under construction in the market. Of this under construction space, 36 % is pre-leased. South Dallas remains popular among developers with 32.7 % of under construction space located in the submarket.

In Q4 2015, vacancy continued to compress. Due to robust tenant demand, particularly from e-commerce and third party logistics (3PL) users, the vacancy rate decreased by 50 bps to 6.8 % -effectively undoing the uptick in vacancy rates seen earlier in the year.

Strong tenant demand despite an increase in deliveries has contributed to the relatively stable vacancy. Demand is outpacing supply - for now - as vacancy has compressed for two consecutive quarters. Also, the industrial development pipeline can be turned off much more quickly than other asset types due to the fact that industrial product takes less time to construction. Still, with nearly 20 million sq. ft. now underway – less than half pre-leased – vacancy may reverse its six month compression and see its course northbound in 2016 as the product delivers. Stay tuned.



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MARKETVIEW




Figure 8: Select Local CBRE Sale Transactions

CAPITAL MARKETS

The capital markets landscape in Dallas / Fort Worth Q4 2015 based on trailing 12-month data reported by Real Capital Analytics. The median cap rate for Dallas / Fort Worth was slightly higher, at 7.3%, compared to the national median of 6.8%. These cap rates are based on deals that have been confirmed, approximated or assumed by local professionals and gathered by Real Capital Analytics. Q4 2015 saw cross-border buyers as the most active with 41% of DFW sales volume. Institutional buyers followed with 26% of the sales volume. Dallas / Fort Worth figures are on par with the total U.S. trends, considering international buyers accounted for 36% of national industrial sales volume.

Treasury rates have seen a slight increase - and are likely to go higher if stock indexes become much more bearish during 2016 but will still remain very low, providing buyers with a continued attractive lending environment. Strong fundamentals continue to drive DFW industrial absorption and low vacancy, especially in the interior submarkets. Investor interest is now covering the full spectrum of asset quality and location. For the best quality assets in the best locations, cap rates on Class A, multi-tenant product are below the previous low water mark from 2007 as investors are continuing to project rental rate growth over the next three years. Additionally, there are active investors pursuing both small and larger sized transactions. CBRE analysts expect institutional investor activity to remain strong but cap rate compression to level off slightly given the slowing rental rate recovery, construction activity, and rise in interest rates.


Core DFW Portfolio Dallas / Fort Worth 989,878

River Park 1000 & DFW Airport Dallas / Fort Worth 547,179

Turnpike Industrial Portfolio South Stemmons 529103

Prime Industrial Portfolio Dallas / Fort Worth 318,240


Niagara Bottling 4685 Mountain Creek Pkwy South Dallas 630,000

Samsung Electronics America 400 Dividend Dr DFW Airport 552,225

WorldPac 1700 Lakeside Pkwy Northwest Dallas 462,779

Standard Motor Products* 1801 Waters Ridge Northwest Dallas 415,000

Excel Inc 15001 Heritage Pkwy North Fort Worth 391,744

Figure 9: Select Local CBRE Lease Transactions


MARKETVIEW



CONTACTS





CBRE OFFICES


To learn more about CBRE Research,or to access additional research reports,please visit the Global Research Gateway at www.cbre.com/researchgateway.

MARKETVIEW

Demand year-to-date near 2014’s total



Vacancy Rate 7.3%



Net Absorption 2,568,639

Completions 4,403,103



LOCATION: LONGTERM OCCUPIER DRIVER

DFW’s location and its population of nearly 7 million, the Southern United States’ largest urban agglomeration, lends itself to being a major distribution hub on a national scale. Four major interstates converge in the Metroplex, providing direct access to the U.S. - Mexican Border and ports on the Gulf Coast. Three of the nation’s Class I rail operators have a total of five intermodal facilities in North Texas. Fort Worth Alliance Airport, which is also home to FedEx’s Southwest hub, saw a year-over-year increase in cargo volume of 4.85% from 2013 to 2014 according to the FAA. Meanwhile DFW Airport, the regions’ gateway to the world and the 10th busiest airport in the U.S. by cargo weight, saw a 2.55% increase in cargo moved during the same time period.

20TH CONSECUTIVE QUARTER POSITIVE

DEMAND GROWTH

Q3 2015 absorption was 2.6 million sq. ft., yielding a year-to-date total of nearly 12.7 million sq. ft.

VACANCY REMAINS LEVEL

While the overall net absorption for the third quarter was less impressive than the previous two quarters of 2015, Q3 deliveries were nearly 47% preleased. The direct and total vacancy rates as of end of Q3 2015 sat at 7.2% and 7.3%, respectively, a slight 5 basis point (bps) decrease from the previous quarter.

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MARKETVIEW



Market

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Available (SF)

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Direct Vacancy

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Total Vacancy

Rate (%)



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(SF)

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Absorption (SF)


Industrial Flex DFW Airport 68,846,614 9,821,677 14.3 6,196,435 9.0 6,530,265 9.5 4.40 7.95 134,054 229,179 258,071

East Dallas 36,440,547 4,214,230 11.6 3,198,058 8.8 3,198,058 8.8 3.41 8.96 486,873 486,873 -245,605

Northeast Dallas 97,655,126 10,734,260 11.0 6,715,042 6.9 7,125,103 7.3 4.62 8.03 -428,587 -738,655 1,200,382

Northwest Dallas 104,609,462 10,367,738 9.9 7,510,855 7.2 7,685,672 7.3 4.48 8.00 584,112 447,188 3,621,378

South Dallas 53,345,148 6,802,027 12.8 4,810,417 9.0 4,842,817 9.1 3.41 8.00 1,457,189 1,457,189 4,119,386

South Stemmons 121,193,081 10,028,618 8.3 7,973,226 6.6 7,985,521 6.6 4.87 10.26 438,130 428,010 1,720,808


North Ft. Worth 75,371,204 9,283,446 12.3 7,983,482 10.6 8,004,082 10.6 3.60 9.26 -425,286 -445,886 -45,254

South Ft. Worth 71,813,152 5,404,027 7.5 3,074,031 4.3 3,107,356 4.3 3.58 5.66 114,132 84,107 3,199

DALLAS TOTALS 482,089,978 51,968,550 10.8 36,404,033 7.6 37,367,436 7.8 4.68 8.68 2,671,771 2,309,784 10,674,420

FT.WORTH TOTALS 243,141,029 22,403,407 9.2 15,666,026 6.4 15,850,840 6.5 3.81 6.57 319,480 258,855 2,064,972

MARKET TOTALS 725,231,007 74,371,957 10.3 52,070,059 7.2 53,218,276 7.3 4.31 8.14 2,991,251 2,568,639 12,739,392





INSPITE OF CRUDE OIL PRICE SLUMP, TEXAS ECONOMY HOLDS STEADY According to the Federal Reserve Bank of Dallas’ Texas Manufacturing Outlook Survey, overall factory activity was essentially unchanged in September. The production index, a key measure of manufacturing conditions in the state, remained near zero at 0.9 suggesting that output stabilized for a second consecutive month following several months of declines. Texas’ economy continues to add jobs, and local and state unemployment is still below the U.S. level. The most pronounced employment rally for the quarter was the construction industry, which grew at an 8.8% annualized rate in July after several months of declines, most likely a result of the extended rainy season experienced earlier in the year that delayed many already-planned construction projects.

REAL GDP CONTINUES TO EXPERIENCE GAINS North Texas and DFW’s south central location at the convergence points of several interstates and railroads lends itself to being a strong distribution hub, and the region’s industrial market continues to be a beneficiary of strong national GDP growth over the past few years. After a third revision, real GDP experienced an increase of 0.6% growth for the first quarter, and the national gross domestic product increased 3.9% during the second quarter of 2015. According to the Bureau of Economic Analysis the acceleration in real GDP was primarily due to increases in personal consumption expenditures and exports, while imports decreased during the same period. An uptick in state and local government spending partially offset decreases in federal government spending to help bolster national GDP growth for 2015.

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MARKETVIEW





UNEMPLOYMENT RATE

Annual seasonally-adjusted, nonfarm employment growth in DFW was 3.2% from August 2014 to August 2015 for a net increase of 104,100 jobs. Simultaneously, the unemployment rate in DFW fell approximately 10 bps from Q2 2015 to 3.8% at the end of July 2015. Meanwhile, the collective Texas unemployment rate decreased by 20 bps, effectively undoing the unemployment increase seen during Q2 2015. Texas and DFW are still outpacing the U.S. which recorded a 5.1% unemployment rate for August 2015. Indicative of a stronger economy, both Texas and DFW have consistently outperformed the national unemployment rate since January of 2007.

Underpinning DFW’s historically strong labor market trends, the region contains an ample supply of well-educated workers and has maintained strong population growth, both of which contribute to the area's healthy economy. DFW has an estimated population of 6.9 million, the Southern United States’ largest urban agglomeration, and a 33% increase since 2000. According to Claritas, the DFW population is projected to add another 500,000 residents over the next five years, to reach 7.4 million residents by 2020. This five-year growth rate of 7.1% outpaces the national growth rate of 3.5% for the same timeframe.

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© 2015 CBRE, Inc. |

MARKETVIEW







Q3 2015 marks the 20th consecutive quarter of positive net absorption for the DFW industrial market as it posted 2.6 million sq. ft. in total market absorption. With the two previous quarters’ impressive combined 10.2 million sq. ft. of absorption, the year-to-date total reached just over 12.7 million sq. ft., putting 2015 year-to-date a mere 115,795 sq. ft. away from the total absorption level for all of 2014. Due to DFW’s focus on fulfillment centers and logistics, it’s no surprise that warehouse/distribution space led quarterly activity with 2.5 million sq. ft. of net absorption, while flex space also posted a modest 55,570 sq. ft. of total net absorption. The submarket that posted the highest Q3 2015 net absorption was once again South Dallas at 1.4 million sq. ft. Deliveries for the quarter totaled 4.4 million sq. ft., higher than the amount of completions from last quarter, but only a little more than half of Q1 2015 when DFW posted the highest amount of quarterly new inventory in CBRE’s tracked history. Preleasing activity remained steady with 2 million of the 4.4 million sq. ft., or 47%, of Q3 deliveries preleased. Despite the robust volume of deliveries so far for 2015, the pipeline remains strong with 18.4 million sq. ft. currently under construction. The pre-leased rate for space under construction decreased from 36% in Q2 2015 to 26% in Q3 2015, as a result of large preleased deliveries. However, a healthy 4.8 million sq. ft. under construction is preleased. In Q3 2015, the vacancy rate continued to flatten. Due to robust tenant demand, particularly from e-commerce and third party logistics (3PL) users, the total vacancy rate has experienced a leveling out following an uptick seen in vacancy over the last three quarters. In fact, the vacancy rate decreased by 5 bps to 7.3% but remained relatively unchanged overall. The stable vacancy rate can be attributed to strong tenant demand despite large vacant deliveries and a handful of large space consolidations and some industrial users users exiting the Dallas/Fort Worth market completely.



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Figure 8: Select CBRE Institutional Sale Transactions

The capital markets landscape in DFW continues to display strong velocity based on trailing 12-month data reported by Real Capital Analytics. In Q3 2015, DFW recorded a 46% increase in sales volume and 42% rise in transacted square footage, at $2.98 billion and 54.4 million sq. ft., respectively, for the prior 12 month period through Q3 2015. Foreign and institutional capital remains the most active buyer type for 2015 year-to-date, comprising 33% and 37% of DFW total sales volume respectively compared to 31% and 17% nationally. Both investment volume and leasing activity continue to benefit from DFW's location and status as an inland port.


Prologis Park 20/35 South Dallas 3,406,594

Texas Industrial Portfolio Multiple 938,679

Frank ford Trade Center Northwest Dallas 562,243

1415 N Cockrell Hill South Stemmons 318,240

Winzer Distribution Facility Northeast Dallas 119,107


Confidential e-Commerce User Alliance Center North 2 North Fort Worth 1,002,620

Falken Tire Wildlife Commerce Park 3 Great Southwest/Arlington 540,000

Farmer’s Brothers Coffee NEC I-35 & SH 114 North Fort Worth 537,000

Kuhne + Nagel 2555 S Valley Pwky Northwest Dallas 529,155

Ashley Furniture 5151 Samuell Blvd East Dallas 442,000

Daimler Trucks North America RiverPoint Commerce Center Great Southwest / Arlington 271,777



MARKETVIEW



CONTACTS


Lauren Paris Senior Research Analyst +1 214 9796587 [email protected] Miller Hamrick Research Coordinator +1 214 9796532 [email protected]

CBRE OFFICES


To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway.

MARKETVIEW

Occupier demand stakes 15-year record; new construction follows suit



Vacancy Rate 7.4%


Avg. Asking Rate 4.11 $/SF


Completions 3.8 MSF



DALLAS/FORT WORTH BENEFITS FROM

STRONG DEMOGRAPHICS AND LOCATION

DFW’s supply of well-educated workers and strong population growth make it an attractive market for employers. With a current estimated population of 6.8 million, the Metroplex is the largest metropolitan area in Texas and the fourth largest in the U.S. DFW serves as a regional and national hub for logistics and distribution on global supply chains due to its central location and status as an inland port. In turn, North Texas provides businesses a logistical advantage because of its accessibility to other dense metros by rail, truck, and air.

DFW POSTS POSITIVE ABSORPTION FOR

19TH CONSECUTIVE QUARTER

For the 19th straight quarter, the DFW Metroplex posted positive

net absorption. Q2 2015 absorption was 4.2 million sq. ft.,

yielding a year-to-date total of nearly 10.2 million sq. ft., the

highest mid-year absorption for DFW since 2000.

VACANCY RATES REMAIN RELATIVELY FLAT

During Q2 2015, vacancy within newly delivered projects resulted in a slight increase in overall vacancy, albeit a relatively flat change. The direct and total vacancy rates as of mid-year 2015 sat at 7.3% and 7.4%, respectively.

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MARKETVIEW



Market

Net Rentable

Area (SF)

Available (SF)

Avail. Rate (%)

Direct Vacancy

(SF)

Direct Vacancy

Rate (%)

Total Vacancy

(SF)

Total Vacancy

Rate (%)



(SF)


(SF)

2015 YTD Total

Absorption (SF)


Industrial Flex DFW Airport 68,402,746 9,047,151 13.2 5,838,679 8.5 6,267,634 9.2 4.35 8.39 112,591 -187,364 28,892

East Dallas 36,487,432 4,881,346 13.4 3,684,931 10.1 3,684,931 10.1 3.42 12.39 -1,023,350 -1,015,350 -732,478



South Dallas 52,514,313 6,334,247 12.1 5,279,041 10.1 5,311,441 10.1 3.38 6.02 2,677,264 2,677,264 2,662,197

South Stemmons 121,440,805 12,200,569 10.0 8,550,356 7.0 8,552,531 7.0 4.83 9.71 64,926 89,088 1,292,798 Great SW / Arlington 95,260,657 8,402,411 8.8 4,918,896 5.2 4,959,560 5.2 4.23 6.39 200,305 235,456 1,486,393

North Ft. Worth 75,301,955 9,471,841 12.6 7,456,818 9.9 7,456,818 9.9 3.72 9.26 875,885 875,885 400,632

South Ft. Worth 72,154,925 5,056,570 7.0 3,236,163 4.5 3,239,463 4.5 3.77 5.66 -177,806 -178,606 -80,908

DALLAS TOTALS 480,354,152 53,031,227 11.0 37,031,178 7.7 37,632,594 7.8 4.26 8.36 3,414,616 3,251,394 8,364,636

FT.WORTH TOTALS 242,717,537 22,930,822 9.5 15,611,877 6.4 15,655,841 6.5 3.93 6.68 898,384 932,735 1,806,117

MARKET TOTALS 723,071,689 75,962,049 10.5 52,643,055 7.3 53,288,435 7.4 4.11 8.25 4,313,000 4,184,129 10,170,753





INDICES INDICATE CONTRACTION, OUTLOOK MORE OPTIMISTIC The Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas reported the June production index as the fourth consecutive month of contraction. Despite the stall in growth, the June index of -6.5 was 52% higher than the previous month. The capacity utilization and shipments indices also reflected upward movement over the month, suggesting the rate of decline may be slowing. Some survey respondents reported oil price uncertainty and weather conditions as factors of the recent decline in various categories. However, expectations for future business activity edged up from 4.9 to 8.1, with positive indices for future production at 35.2, future capacity utilization at 31.7 and future company outlook at 13.4.

REAL GDP REVISED UPWARD, RESULTING IN SMALLER ANNUALIZED DECLINE DFW has benefitted from strong GDP growth at the national level in recent years. Based on the Bureau of Economic Analysis' third estimate for Q1 2015 real GDP growth nationally, overall economic activity experienced a small decline at an annualized rate of -0.2%, although this is an upward revision from initial estimates. This stall in growth was attributed to severe winter weather, muted foreign demand and reduced activity in the energy industry. The upward revision was predominantly driven by personal consumption expenditures, along with nonresidential fixed investment, residential investment, inventories and state and local government purchases.

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MARKETVIEW





UNEMPLOYMENT RATE

Annual seasonally adjusted, nonfarm employment growth in DFW was 3.2% from May 2014 to May 2015 for a net increase of 103,800 jobs. Simultaneously, the unemployment rate in DFW fell approximately 10 bps from Q1 2015 to 3.9% at the end of May 2015. Meanwhile, the collective Texas unemployment rate increased by 10 bps, the first monthly increase for the state since August 2009. Texas and DFW are still outpacing the U.S. which recorded a 5.5% unemployment rate for May 2015. Indicative of a stronger economy, both Texas and DFW have consistently outperformed the national unemployment rate since January of 2007.

Underpinning DFW’s historically strong labor market trends, the region encompasses an ample supply of well-educated workers and has maintained strong population growth, both contributing to the area's healthy economy. DFW has an estimated population of 6.9 million, a 33% increase from 2000. According to Claritas, the DFW population is projected to add another 500,000 residents over the next five years, to reach 7.4 million residents by 2020. This five-year growth rate of 7.1% outpaces the national growth rate of 3.5% for the same timeframe.

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USA Texas DFW Total DFW Jobs


MARKETVIEW







Q2 2015 marks the 19th consecutive quarter of positive net absorption for the DFW industrial market as it posted 4.2 million sq. ft. in total market absorption. Combined with last quarter’s even more considerable growth, the year-to-date total reached just under 10.2 million sq. ft., a mid-year absorption total not exceeded in DFW since 2000. Once again, warehouse/distribution space led quarterly activity with 3.7 million sq. ft. of net absorption, while flex space also posted a positive figure of 532,532 sq. ft. The submarket that posted the highest Q2 2015 net absorption was South Dallas at 2.7 million sq. ft. Northwest Dallas also had a significant quarterly absorption figure, at 1.3 million sq. ft. Deliveries totaled 3.8 million sq. ft. in Q2 2015, less than half the amount of completions from last quarter, when DFW posted the highest amount of quarterly new inventory in CBRE’s tracked history. The most notable pre-leased delivery in Q2 2015 was Georgia Pacific’s 1.6 million sq. ft. build-to-suit in Hutchins, which falls within the South Dallas submarket. Because of the fewer deliveries and steady amount of starts, the under construction pipeline remained relatively flat over the quarter, totaling just over 14 million sq. ft. of projects underway. The pre-leased rate for space under construction rose from 20% in Q1 2015 to 36% in Q2 2015. Because of the continuation of speculative completions, the total vacancy rate has experienced an uptick over the last three quarters. In Q2 2015, this increase was marginal as the vacancy rate rose by only 2 bps to a mid-year level of 7.4%. The most improved vacancy rate was in Northwest Dallas where vacancy decreased by 140 bps to sit at 5.3% at quarter end, followed by South Dallas, with a vacancy reduction of 120 bps and mid-year rate of 10.1%. Five of the nine submarkets experienced a decline in vacancy from Q1 2015 to Q2 2015.



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Source: CBRE Research, Q2 2015


The capital markets landscape in DFW continued to display strong velocity based on trailing 12-month data reported by Real Capital Analytics. In Q2 2015, DFW recorded a 23% increase in sales volume and 42% rise in transacted square footage, at $2.7 billion and 52 million sq. ft., respectively, for the prior 12 month period through Q2 2015. Foreign capital remains the most active buyer type for 2015 year-to-date, comprising 56% of DFW total sales volume compared to 42% of the national metric. Healthy demand for industrial assets (across all geographies and product types) continued

through Q2 2015. In fact, there is nearly 5 times as much capital in the market pursuing industrial acquisitions compared to available properties on the market. Investor interest is now covering the full spectrum of asset quality and location. Cap rates on Class A, multi-tenant product are below the previous low water mark from 2007 as investors are projecting strong rental rate growth over the next three years. CBRE expects institutional investors to continue the trend of activity and pricing throughout 2015, with pricing remaining aggressive due to the relative lack of quality product on the market. Both investment volume and leasing activity continue to benefit from DFW's status as an inland port.

Buyer/Seller Building(s) Submarket SF

Confidential / Hillwood Commerce 45 South Dallas 1,500,830

Confidential / Clarion Pioneer 360 Great SW/Arlington 1,163,465

Confidential / Sealy Companies Texas Industrial Portfolio (Dallas Portion) Multiple 938, 679

Cabot Properties / Duke Texas Dugan Portfolio Multiple 762, 631

Undisclosed / High Street Realty Company, LLC GSW & Alliance Industrial Portfolio Great SW/Arlington 739,701

LaSalle / Hines REIT DFW Trade Center DFW Airport 643,429


Kimberly-Clark Mountain Creek Business Center South Dallas 874,160

NFI ProLogis Park 20/35 South Dallas 653,582

R.R. Donnelley Trammell Crow Penn Distribution Center South Dallas 514,950

Menlo Logistics* 14900 Frye Road Great Southwest/Arlington 494,938

Ozburn-Hessey Logistics* 101 Sunridge Boulevard South Dallas 336,000

Owens & Minor* 550 Lakeside Parkway Northwest Dallas 223,332



*Renewal

MARKETVIEW



CONTACTS


Lauren Paris Senior Research Analyst +1 214 9796587 [email protected]

CBRE OFFICES



MARKETVIEW

Q1 2015 saw DFW industrial deliver over 8.6 million sq. ft.



Vacancy Rate 7.3%


Avg. Asking Rate 4.17 $/SF


Completions 8.6 MSF



DALLAS/FORT WORTH BENEFITS FROM STRONG DEMOGRAPHICS AND LOCATION DFW’s supply of well-educated workers and strong population growth make it an attractive market for

employers. With a current estimated population of 6.8 million, the Metroplex is the largest MSA in Texas and the

fourth largest in the United States. Located centrally, DFW is situated to act as a regional and national logistics and

distribution hub. In turn, this location provides businesses a logistical advantage because of its accessibility to other

markets by rail, truck, and air.

VACANCY RATES RISE During Q1 2015, vacancy within newly delivered

projects resulted in an increase in overall vacancy. Both the direct and total vacancy rates rose by 50 basis points

(bps) and 40 basis points (bps) respectively to sit at 7.3%.

DFW POSTS POSITIVE ABSORPTION FOR 18TH

CONSECUTIVE QUARTER For the 18th straight quarter, the DFW Metroplex has

posted positive net absorption. Q1 2015 net absorption was 6.0 million sq. ft. compared to 2.3 million sq. ft. in

Q4 2014.

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MARKETVIEW



Market

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Area (SF)

Available (SF)

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(SF)

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Rate (%)

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(SF)

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Rate (%)



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Absorption (SF)

2015 YTD Total

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Industrial Flex DFW Airport 69,108,557 7,942,731 11.5 5,976,485 8.6 6,105,485 8.8 4.50 7.70 226,256 216,256 216,256

East Dallas 35,834,647 3,676,280 10.3 1,908,581 5.3 1,916,581 5.3 4.09 5.80 290,872 282,872 282,872



South Dallas 50,782,949 7,107,574 14.0 5,696,912 11.2 5,729,312 11.3 3.38 6.02 (15,067) (15,067) (15,067)

South Stemmons 121,659,767 13,080,560 10.8 8,771,853 7.2 8,798,190 7.2 4.55 8.52 1,048,627 1,203,710 1,203,710

Great SW / Arlington 95,250,158 8,919,760 9.4 5,048,071 5.3 5,123,886 5.4 4.36 7.13 1,326,752 1,250,937 1,250,937

North Ft. Worth 73,350,309 8,788,467 12.0 6,439,463 8.8 6,439,463 8.8 3.95 9.26 (475,253) (475,253) (475,253)

South Ft. Worth 72,549,798 5,879,190 8.1 3,218,357 4.4 3,220,857 4.4 3.64 5.49 95,198 97,698 97,698

DALLAS TOTALS 479,048,820 52,146,453 10.9 37,691,627 7.9 38,129,821 8.0 4.21 7.60 4,761,933 5,113,242 5,113,242

FT.WORTH TOTALS 241,149,530 23,587,417 9.8 14,705,891 6.1 14,784,206 6.1 4.07 8.38 946,697 873,382 873,382

MARKET TOTALS 720,199,085 75,733,870 10.5 52,397,513 7.3 52,914,027 7.3 4.17 8.07 5,708,630 5,986,624 5,986,624




Source: U.S. Bureau of Economic Analysis, December 2014. CBRE Research, Q1 2015.

INDICES REMAINED FLAT WITH OPTIMISTIC OUTLOOK

According to the Texas Manufacturing Outlook Survey, conducted by the Federal Reserve Bank of Dallas,

manufacturing conditions in the first quarter experienced no growth for the second consecutive month. While the

production index for February of 2015 remained positive at 0.7, new orders decreased by 12.2%. This lack of

growth stems primarily from manufacturing seasonality and the effects of oil prices on various manufacturing

industries. Historically, the first quarter averages lower production and new order indices. Despite staid growth,

February 2015 witnessed both forward looking indicators increasing with a higher future company outlook index, at

11.8 compared last month at 2.5, and general business activity, at 5.5 compared to last month at -6.4 implying

growth into later 2015.

REAL GDP INCREASED AGAIN DFW has benefitted from strong GDP growth. Per the

Bureau of Economic Analysis' second estimate for Q4

2014 real GDP growth, overall economic activity increased by 2.2% annualized quarterly rate. Initial

estimates had placed fourth quarter growth at 2.6%, but private inventory investments did not increase as much as

anticipated. Additionally, nonresidential fixed investment increased further than expected. GDP increases in the

fourth quarter were primarily due to positive contributions from personal consumption expenditures, nonresidential fixed investment, state and local government spending,

private inventory investment and residential fixed

investment.

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MARKETVIEW





UNEMPLOYMENT RATE

Seasonally adjusted, annual employment growth in DFW was 4.4% from December 2013 to December 2014 for a net increase of 136,600 jobs. The unemployment rate in DFW as a result fell 20 (bps) during Q4 2014 to 4.6%. The Texas unemployment rate fell faster, which posted at 4.6%. Texas and DFW are still outpacing the U.S. which recorded a 5.6% unemployment rate. Indicative of the stronger state economy, Texas and DFW have consistently outperformed the national unemployment rate throughout the recession and recovery.

Underpinning these strong labor market trends, DFW contains both an ample supply of well-educated workers and has maintained strong population growth, contributing to the area's healthy economy. DFW has an estimated population of 6.8 million, a 33% increase from 2000. According to Claritas, the DFW population is projected to grow further over the next five years at a rate of 8.6%. Comparatively, the national five-year projected population growth rate is only 3.5%. If employment trends continue, DFW job growth should be able to absorb the new influx, even as DFW market increases in population.

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MARKETVIEW







Q1 2015 marks the 18th consecutive quarter of positive net absorption for the DFW industrial market. This quarter saw 6.0 million sq. ft. in absorption, split between existing inventory and delivered pre-leased space. This is a remarkable figure considering that over the past 9 years the average first quarter absorption is only 2.7 million sq. ft. If this positive absorption pace continues , DFW is on track for another historical year. Once again, warehouse/ distribution space led activity this quarter with 5.8 million sq. ft. of net absorption, while flex space also posted a positive figure of 107,192 sq. ft. The submarket that posted the highest quarterly net absorption was Northwest Dallas at 1.8 million sq. ft. Not too far behind was Northeast Dallas which posted a Q1 2015 figure of 1.5 million sq. ft. Deliveries totaled 8.6 million sq. ft. in Q1 2015, a 46% increase from last quarter. This marks the most delivered square footage in DFW in CBRE’s tracked history. The most notable pre-leased delivery was Nebraska Furniture Mart’s 1.3 million sq. ft. industrial space. New deliveries dropped the under construction pipeline to 14.4 million sq. ft. Over the last year, speculative development has accounted for a majority of the space underway. Continuing this trend, speculative construction accounts for 82% of construction. Currently, completion of these new projects will provide options to accommodate the needs of new, expanding and relocating operations. Despite 18 consecutive quarters of positive net absorption, recent deliveries of vacant completions over the last two quarters have pushed the historically low direct and total vacancy rates up slightly to 7.3%. The most improved vacancy rate was in East Dallas which decreased by 270 (bps) to sit at a current 5.3%. The submarkets with the tightest vacancy rates remained in the western and southern areas of the region. Notable is Fort Worth’s overall vacancy rate of 6.6%.



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2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015

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%

MARKETVIEW





The capital markets landscape in DFW became slightly more aggressive versus last quarter based on trailing 12-month data reported by Real Capital Analytics. In Q1 2015, DFW saw the average price per sq. ft. increase by 31%, whereas the national average decreased by 7%. Healthy demand for industrial assets continued through Q1 2015, with nearly 5 times as much capital in the market pursuing industrial acquisitions compared to available properties on the market. Q1 2015, saw foreign capital as the most active with 53% of DFW sales volume compared to 62% of national industrial sales volume.

Investor interest is now covering the full spectrum of asset quality and location. Cap rates on Class A, multi-tenant product are below the previous low water mark from 2007 as investors are projecting strong rental rate growth over the next three years. CBRE expects institutional investors to continue the trend of activity and pricing throughout 2015. Both investment volume and leasing activity continue to benefit from DFW's status as an inland port.


LaSalle Investment Management/Hillwood Investment Properties Commerce 45 South Dallas 1,500,000

GIC (Govt of Singapore) JV Global Logistic Properties / IndCor Properties 2802 Virgo Ln South Stemmons 164,500

Eth Investment Group LLC / MHM Redbird LLC 5050 Investment Dr South Dallas 148,402

GIC (Govt of Singapore) JV Global Logistic Properties / IndCor Properties 1100 Valwood Pkwy Northwest Dallas 141,025

Aligned Energy Holdings LLC / FG Summit LP 2800 Summit Ave Northeast Dallas 108,072

Conti Partners / NTA Holdings Ltd 1470 Avenut T Great Southwest/ Arlington 102,732


Uline Inc 980 Bethel Rd DFW Airport 950,000

Coasters* 14801 Grand River Rd Great Southwest/Arlington 405,636

MI Windows DFW Airport North Distribution Center Northwest Dallas 400,000

Penske 730 Trinity Blvd Great Southwest/Arlington 350,000

Genco 4601 Langdon Rd South Dallas 324,984

Stitch Fix 1421 Cockrell Hill Rd South Stemmons 316,000



*Renewal **Expansion

MARKETVIEW



CONTACTS

Lynn Cirillo Research Operations Manager [email protected]

Lauren Paris Senior Research Analyst +1 214 9796587 [email protected] Lexi Zager Research Coordinator +1 214 9796532 [email protected]

CBRE OFFICES



MARKETVIEW

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2014 saw DFW industrial deliver the most sq. ft. since 2008



Vacancy Rate 6.9%


Asking Rates 4.12 $/SF


Completions 6 MSF


Source: U.S. Bureau of Economic Analysis, December 2014 CBRE Research, Q4 2014.

the DFW industrial market demonstrate strong and continued demand. DALLAS/FORT WORTH BENEFITS FROM STRONG DEMOGRAPHICS AND LOCATION DFW’s supply of well-educated workers and strong

population growth make it a competitive demographic force. With a current estimated population of 6.8 million,

the Metroplex is the largest MSA in Texas and the fourth largest in the United States. Located centrally, DFW is

situated to act as a regional and national logistics and distribution hub. In turn, this location provides businesses

a logistical advantage because of its accessibility to other markets by both rail and truck.

VACANCY RATES RISE During Q4 2014, the Dallas/Fort Worth Industrial

market experienced its first uptick in vacancy in two years. Both the direct and total vacancy rates rose 60

basis points to 6.8% and 6.9% respectively, compared to Q3 2014 figures. The vacancy rate increased primarily

due to vacant delivered construction.

DFW POSTS POSITIVE ABSORPTION FOR 17TH CONSECUTIVE QUARTER

For the 17th straight quarter, the DFW Metroplex has posted a positive net absorption. Q4 2014 net

absorption was 2.3 million sq. ft. compared to 3.8 million sq. ft. in Q3 2014. These positive numbers for

MARKETVIEW



Market

Net Rentable

Area (SF)

Available (SF)

Avail. Rate (%)

Direct Vacancy

(SF)

Direct Vacancy

Rate (%)

Total Vacancy

(SF)

Total Vacancy

Rate (%)



(SF)

Q4 2014 Total Net

Absorption (SF)

2014 Total

Absorption (SF)


Industrial Flex DFW Airport 66,272,613 5,892,229 8.9 3,534,647 5.3 3,653,647 5.5 4.85 7.65 285,925 304,275 1,557,296

East Dallas 36,448,540 4,744,018 13.0 2,917,301 8.0 2,917,301 8.0 4.09 5.80 409 409 64,060



South Dallas 50,262,629 6,079,744 12.1 5,118,593 10.2 5,150,993 10.2 3.09 6.00 167,964 167,964 3,537,359

South Stemmons 121,157,920 13,562,327 11.2 9,327,362 7.7 9,508,782 7.8 4.65 8.29 256,724 122,260 (1,653,307)


North Ft. Worth 71,555,527 6,103,524 8.5 4,038,524 5.6 4,038,524 5.6 3.99 9.26 219,914 219,914 1,573,894

South Ft. Worth 72,391,096 6,681,123 9.2 3,330,855 4.6 3,335,855 4.6 3.60 5.78 (513,231) (512,931) 110,764

DALLAS TOTALS 473,122,252 52,503,617 11.1 35,884,850 7.6 36,674,353 7.8 4.15 7.65 1,965,310 1,879,873 7,496,210

FT.WORTH TOTALS 237,871,241 22,532,284 9.5 12,148,663 5.1 12,153,663 5.1 4.04 8.36 349,626 405,338 5,365,403

MARKET TOTALS 710,993,493 75,035,901 10.6 48,033,513 6.8 48,828,016 6.9 4.12 8.11 2,314,936 2,285,211 12,861,613



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Vacancy Rate (%) GDP ($, in billions)

GDP ($, in billions)

DFW Industrial Vacancy Rate



INDICES CONTINUE TO POINT TO POSITIVE OUTLOOK

According to the Texas Manufacturing Outlook Survey, conducted by the Federal Reserve Bank of Dallas,

manufacturing conditions in the fourth quarter remained favorable. The production index for November of 2014

remained positive at 6.0, but fell from the previous 13.7 in October. In tandem with this metric, the new order

index was positive for the 19th consecutive month, remaining positive at 5.6 in November from 14.2 the

month prior. Overall, these indices indicate improving conditions for Texas manufacturing. Other forward

looking indicators substantiate this claim. November 2014 witnessed a higher future company outlook index at

23.1 compared a year ago index at 20.9, implying further growth into 2015.

REAL GDP INCREASED AGAIN The DFW industrial market saw a rising vacancy rate

amid stronger GDP growth. Per the Bureau of Economic

Analysis' second estimate for Q3 2014 real GDP growth, overall economic activity increased by 4.6% annualized

quarterly rate. Initial estimates had placed third quarter growth at 3.5%, but private inventory investments did not

decrease as much as anticipated. Additionally, personal consumption expenditures and nonresidential fixed

investment increased further than expected. GDP increases in the third quarter were primarily due to positive contributions from personal consumption

expenditures, nonresidential fixed investment, federal

government spending, exports, residential fixed investment, and state and local government spending.

MARKETVIEW




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Job Count (M) Unemployment Rate (%)



UNEMPLOYMENT RATE

Seasonally adjusted, annual employment growth in DFW was 3.7% from October 2013 to October 2014 for a net increase of 115,800 jobs. The unemployment rate in DFW as a result fell 30 basis points (bps) during the third quarter to 4.8%. DFW fell faster than the Texas unemployment rate, which posted at 5.1%. Texas and DFW are still outpacing the U.S. which recorded a 5.8% unemployment rate. Indicative of the stronger state economy, Texas and DFW have consistently outperformed the national unemployment rate throughout the recession and recovery.

Underpinning these strong labor market trends, Dallas/Fort Worth contains both an ample supply of well-educated workers and has maintained strong population growth, contributing to the area's healthy economy. DFW has an estimated population of 6.8 million, a 33% increase from 2000. According to Claritas, the DFW population is projected to grow further over the next five years at a rate of 8.6%. Comparatively, the national five-year projected population growth rate is only 3.5%. If employment trends continue, DFW job growth should be able to absorb the new influx, even as DFW market increases in population.

MARKETVIEW







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Q4 2014 marks the 17th consecutive quarter of positive net absorption for the DFW industrial market. This quarter saw 2.3 million sq. ft. in absorption, split between existing inventory and delivered pre-leased space. This quarter witnessed a

continued trend from the previous quarter in which a substantial portion of absorption came from move-ins in the 50,000 sq. ft. to 200,000 sq. ft. range. Given that in 2012 and 2013 most of the absorption was primarily from large build-to-suit and big box space, this marks a departure in tenants desired space range and also explains the lower quarterly absorption figure, despite continued move-ins. Once again, warehouse/ distribution space led activity this quarter with 2.0 million sq. ft. of net absorption, while flex space also posted a positive figure of 207,705 sq. ft. The submarket that posted the most quarterly net absorption was Northeast Dallas at 1.2 million sq. ft.

Deliveries totaled 6.0 million sq. ft. in Q4 2014, a 20% increase from last quarter’s 5.0 million sq. ft. This marks the most completion square footage in DFW since Q4 2001. Notable deliveries included two speculative buildings totaling a million sq. ft. apiece; one completed in South Dallas and the other in Northwest Dallas. This quarter saw under construction dip back down to 17.2 million sq. ft. compared to last quarter’s market high total of 19.5 million sq. ft. With a current pre-leasing figure of 33% and roughly 11 million sq. ft. of users in the market, this figure is likely to rise in 2015.With supply extremely limited across all size ranges coupled with growing demand, the completion of these projects will deliver much needed new space to the market. Driven down by 17 consecutive quarters of positive net absorption, vacancy rates remain at historically low figures. This quarter, however, saw vacancy rates rise. Direct vacancy increased to 6.8% and total vacancy sits one basis point higher at 6.9%. Despite continued positive absorption, the vacancy rate rose as a direct result of some vacant completions. The most improved vacancy rate was in South Stemmons which decreased by 30 basis points to sit at a current 7.7%. The submarkets with the tightest vacancy rates remained in the western and southern areas of the region. Notable are all of Fort Worth’s submarkets with an average total vacancy rate of 5.2%.


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Absorption (MSF)

Q1 Q2 Q3 Q4 Total Annual Net Absorption Vacancy Rate

Vacancy Rate (%)


MARKETVIEW





The capital markets landscape in DFW became slightly more aggressive versus last quarter based on trailing 12-month data reported by Real Capital Analytics. The median cap rate for DFW was slightly lower, at 6.9%, compared to the national median of 7.0%. These cap rates are based on deals that have been confirmed, approximated or assumed by local professionals and gathered by Real Capital Analytics. Q4 2014, similar to last quarter, saw private buyers as the most active with 43% of DFW sales volume. Institutional buyers followed closely with 34% of the sales volume. DFW figures are on par with the total U.S. trends, considering private buyers accounted for 40% of national industrial sales volume. Healthy demand for industrial assets continued through year-end 2014, with almost 5 times as much capital in the market pursuing industrial acquisitions as compared to available properties

on the market. Treasury rates have remained low, providing buyers with a continued attractive lending environment. Strong fundamentals continue to drive absorption and low vacancy rates, especially in the interior submarkets. Investor interest is now covering the full spectrum of asset quality and location. For the best quality assets in the best locations, cap rates on Class A, multi-tenant product are below the previous low water mark from 2007 as investors are projecting strong rental rate growth over the next three years. Additionally, there are active investors pursuing both small and larger sized transactions. CBRE expects institutional investors to continue the trend of activity and pricing into 2015. Both investment volume and leasing activity

continue to benefit from DFW's status as an inland port.


James Campbell Company / Weeks Robinson Properties DFW Industrial Portfolio DFW Wide 2,034,164

Industrial Property Trust / Oakmont Industrial Group Oakmont Class A DFW Industrial DFW Wide 1,275,954

TRBP Ltd / SST Truck Co LLC 4040 Forest Ln Northeast Dallas 582,968

Hines JV AEW Capital Mgmt / Lone Star Funds 6601 N Belt Line Rd DFW Airport 404,777

Industrial Property Trust / Brookfield Asset Mgmt 14900 Trinity Blvd Great Southwest/ Arlington 310,000

Miller Creek Holdings LLC / Sears Roebuck & Co 3101 W Miller Road Northeast Dallas 293,231


Ulta Inc. Mountain Creek & I-20 South Dallas 670,000

GM 2305 W Marshall Dr Great Southwest/Arlington 667,635

Delta Logistics 4040 Forest Ln Northeast Dallas 411,576

Office Depot 735 E Trinity Blvd Great Southwest/Arlington 260,711

Exel, Inc. Nicholson Distribution Center East Dallas 211,396

Kroger 1421 North Cockrell Hill South Stemmons 145,972



MARKETVIEW



CONTACTS

Lynn Cirillo Research Operations Manager [email protected]

Lauren Paris Senior Research Analyst +1 214 9796587 [email protected] Lexi Zager Research Coordinator +1 214 9796532 [email protected]

CBRE OFFICES



CBRE Global Research and Consulting

Dallas/Fort Worth Industrial MarketView Q3 2014

Vacancy rates stabilizeThe Dallas/Fort Worth industrial market experienced stable vacancy rate conditions during Q3 2014. Both the direct and total vacancy rates remained the same at 6.2% and 6.3%, respectively, compared to Q2 2014 figures. The vacancy rate was flat due primarily to vacant delivered construction.

DFW posts positive absorption for 16th consecutive quarterFor the 16th straight quarter, the DFW Metroplex has posted a positive net absorption. Q3 2014 absorption saw a substantial 3.8 million sq. ft. compared to 2.4 million sq. ft. in Q2 2014. The positive and stable numbers for the DFW industrial market demonstrate not only the strength of the market’s recovery, but also indicate future growth.

Indices point to positive outlook According to the Texas Manufacturing Outlook Survey, conducted by the Federal Reserve Bank of Dallas, manufacturing conditions in the third quarter remained favorable. The production index for August of 2014 remained positive at 6.8, but fell from the previous 19.1 in July. In tandem with this metric, the new order index was positive for the 16th consecutive month, remaining positive at 2.2 in April from 13.0 the month prior. Overall, these indices indicate further improving conditions for Texas manufacturing. Other forward looking indicators substantiate this claim. August 2014 witnessed a high future company outlook index at 30.1 compared to July’s index at 24.4, implying further growth into 2014 and 2015.

Real GDP increased The DFW industrial market maintained a low vacancy rate while GDP increased. The second quarter witnessed an increase in U.S. GDP growth. Per the Bureau of Economic Analysis’ second estimate for Q2 2014 real GDP growth, overall economic activity increased by 4.2% annualized quarterly rate. Initial estimates had originally pegged the second quarter growth at 4.0%, but an increase in nonresidential fixed investment was larger than initially anticipated.

GDP increases in the second quarter were primarily due to positive contributions from personal consumption expenditures, private inventory investment, exports, nonresidential fixed investment, state and local government spending, and residential fixed investment.

Dallas/Fort Worth benefits from strong demographics and locationDFW’s supply of well-educated workers and strong population growth make it a competitive demographic force. With a current estimated population of 6.8 million, the Metroplex is the largest MSA in Texas and the fourth largest in the United States. Located centrally, DFW is situated to act as a regional and national logistics and distribution hub. In turn, this location provides businesses a logistical advantage because of its accessibility to other markets by both rail and truck.

ASKING RATES$4.10 per Sq. Ft.

NET ABSORPTION3.8 Million Sq. Ft.

DFW INDUSTRIAL DELIVERS A SOLID QUARTER ONCE AGAIN.

UNDERCONSTRUCTION19.5 Million Sq. Ft.

DELIVERED CONSTRUCTION5.0 Million Sq. Ft.

UNEMPLOYMENT5.1%

TOTAL VACANCY6.3%

6%

7%

8%

9%

10%

11%

12%

$13,500

$14,000

$14,500

$15,000

$15,500

$16,000

$16,500

$17,000

$17,500

Q1 2

008

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014

0000's

Vacancy Rate GDP



Source: U.S. Bureau of Economic Analysis, September 2014.CBRE Research, Q3 2014.


Directional arrows based on change from the previous quarter. Data reflects market totals.

GDP0000’s

© 2014, CBRE, Inc.

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INDUSTRIAL THIRD QUARTERMARKETVIEW

MarketNet Rentable

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Total Vacant Sq. Ft.

Total Vacancy

Rate

Annual Average Asking

Lease Rate Per Sq. Ft.

Q3 2014 Direct Net Absorption

Q3 2014 Total Net

Absorption

YTD 2014Total

AbsorptionIndustrial Flex

DFW Airport 65,683,669 5,958,921 9.1% 3,659,391 5.6% 3,796,741 5.8% $4.86 $7.59 714,400 750,131 1,253,021

East Dallas 36,400,340 4,193,616 11.5% 2,891,261 7.9% 2,891,261 7.9% $4.09 $5.80 (457,203) (457,203) 63,651

Northeast Dallas 97,267,522 12,433,438 12.8% 7,412,919 7.6% 7,639,956 7.9% $4.54 $7.50 1,434,894 1,436,578 2,450,408

Northwest Dallas 101,024,042 10,522,083 10.4% 6,976,272 6.9% 7,236,595 7.2% $4.27 $7.04 461,086 449,846 255,429

South Dallas 48,328,472 5,217,822 10.8% 3,336,858 6.9% 3,369,258 7.0% $2.99 $6.00 1,044,953 1,044,953 3,369,395

South Stemmons 120,922,825 13,688,760 11.3% 9,630,752 8.0% 9,677,708 8.0% $4.58 $8.23 (2,205,399) (2,217,590) (1,775,567)

Great SW / Arlington 93,826,106 9,529,975 10.2% 4,456,939 4.8% 4,512,351 4.8% $4.31 $7.34 1,381,447 1,446,117 2,982,390

North Ft. Worth 69,912,040 5,617,304 8.0% 2,716,373 3.9% 2,716,373 3.9% $4.00 $9.26 1,321,662 1,331,742 1,353,980

South Ft. Worth 72,320,885 5,502,331 7.6% 2,761,674 3.8% 2,766,974 3.8% $3.51 $5.79 11,778 6,478 623,695

DALLAS TOTALS 469,626,870 52,014,640 11.1% 33,907,453 7.2% 34,611,519 7.4% $4.19 $7.72 992,731 1,006,715 5,616,337

FT.WORTH TOTALS 236,059,031 20,649,610 8.7% 9,934,986 4.2% 9,995,698 4.2% $3.93 $8.40 2,714,887 2,784,337 4,960,065

MARKET TOTALS 705,685,901 72,664,250 10.3% 43,842,439 6.2% 44,607,217 6.3% $4.10 $8.14 3,707,618 3,791,052 10,576,402

Unemployment RateSeasonally adjusted, annual employment growth in DFW was 3.7% from July 2013 to July 2014 for a net increase of 115,500 jobs. The unemployment rate in DFW as a result fell 10 basis points (bps) during the third quarter to 5.1%. For the second consecutive quarter, DFW and Texas posted the same unemployment rate. Texas and DFW are still outpacing the U.S. which recorded a 6.2% rate. Indicative of the stronger state economy, Texas and DFW have consistently outperformed the national unemployment rate throughout the recession and recovery.

Underpinning these strong labor market trends, Dallas/Fort Worth contains both an ample supply of well-educated workers and has maintained strong population growth, contributing to the area’s healthy economy. DFW has an estimated population of 6.8 million, a 33% increase from 2000. According to Claritas, the DFW population is projected to grow further over the next five years at a rate of 8.6%. Comparatively, the national five-year projected population growth rate is only 3.5%. If employment trends continue, DFW job growth should be able to absorb the new influx, even as DFW market increases in population.


Source: Bureau of Labor Statistics, September 2014.


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8,500

13,500

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2006 2007 2008 2009 2010 2011 2012 2013 2014

Absorption Sq. Ft. Vacancy Rate

000's


Q3 2014 marks the 16th consecutive quarter of positive net

absorption for the DFW industrial market. Posting 3.8 million

sq. ft., the bulk of Q3 2014 absorption was due to the

completions of two large build-to-suits for LG and Proctor &

Gamble at 1.2 million sq.ft and 1.4 million sq.ft respectively.

This quarter witnessed a continued trend from the previous

quarter in which a substantial portion of absorption came from

move-ins in the 50,000 sq. ft. to 200,000 sq. ft. range. Given

that in recent quarters most absorption has primarily consisted

of large build-to-suit and big box space, this marks a departure

from recent quarters in tenants desired space range.

Considering the industrial market’s seasonality, the relatively

high figures demonstrate not only the strength of the market’s

recovery, but also indicate the sustainability of demand going

forward. Once again, warehouse/distribution space led activity

this quarter with 3.3 million sq. ft. of net absorption, while flex

space also posted a positive figure of 523,752 sq. ft. The

submarket that posted the most net absorption over the quarter

was Great Southwest/Arlington at 1,446,117 sq. ft. Not far

behind were Northeast Dallas and North Fort Worth which

posted 1,436,578 sq. ft. and 1,331,742 sq. ft. respectively.

Deliveries totaled 5.0 million sq. ft. in Q3 2014, an increase

from last quarter’s 2.0 million sq. ft. This marks the most

completion square footage since Q4 2008. With a majority of

these projects initially slated as speculative projects, the delivery

pre-leased rate was an impressive 73.2%. Notable pre-leased

deliveries included LG’s North Fort Worth facility and Proctor &

Gambles’ South Dallas build-to-suit. This quarter under

construction reached a new post recession high. At a current

total of 19.5 million sq. ft., construction activity has not been

this robust since the late 1990s. Once again speculative

projects are leading under construction activity. 2014 has

decisively seen speculative projects usurp build-to-suits in terms

of space underway. With an extremely limited supply across all

size ranges and growing demand, the completion of these

projects will deliver much needed new space to the Dallas/Fort

Worth industrial market.

Driven down by 16 consecutive quarters of positive net

absorption, vacancy rates remain at historically low figures. The

direct vacancy rate is extremely low at 6.2% and total vacancy is

one basis point higher at 6.3%. The vacancy rate has stabilized

for the first time in 16 quarters. This is due to one large move

out from the former highly specialized and dated Vought space

as well as some vacant completions. By removing this one

property direct and total vacancy would have decreased further

to 5.8% and 5.9%, respectively. The submarkets with the tightest

vacancy rates remained in the western and southern areas of

the region. Notable are all of Fort Worth’s submarkets which

average a total vacancy rate of 4.2%.







0

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010

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011

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011

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011

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012

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012

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012

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013

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014



Absorption Sq. Ft.000’s

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Tenant Building(s) Submarket Sq. Ft.ATC Logistics 4801 Westport Parkway North Fort Worth 224,752

McClinton Energy 1850 Westpark Drive Great Southwest/Arlington 185,010

Calavo Growers 2600 McCree Road Northeast Dallas 149,000

Distribution International Southwest 2301 W Commerce Street South Stemmons 146,000

Fruit of the Earth Riverpark 1000 Great Southwest/Arlington 145,000

Hoya Optical 755 Regent DFW Airport 101,817

Buyer/Seller Building(s) Submarket Sq. Ft.Dart Container Corp / iStar Financial JV Angelo Gordon 4444 W Ledbetter Drive South Dallas 1,304,000

USAA Real Estate / Principal Real Estate Investors OBO CalSTRS 201 S I-45 South Dallas 737,500

Cabot Properties / Trident Capital Group (MA) 1301 Joel East Road South Fort Worth 282,116

Generation Trade / 18-8 Investments LLC 2102 E Union Bower Road South Stemmons 148,413

Cobalt Industrial REIT / Flood Flood & Smith Properties Ltd 2009 Country Club Drive Northwest Dallas 142,428

Spero Partners LP / Holt Lunsford Commercial 1001 S Jupiter Road Northeast Dallas 140,960

The capital markets landscape in DFW became slightly more aggressive versus last quarter based on trailing 12-month data reported by Real Capital Analytics. The median cap rate for DFW was slightly lower, at 6.9%, compared to the national median of 7.1%. These cap rates are based on deals that have been confirmed, approximated or assumed by local professionals and gathered by Real Capital Analytics.

Q3 2014, similar to last quarter, saw private buyers as the most active with 42% of DFW sales volume. Institutional buyers followed closely with 39% of the sales volume. DFW figures are on par with the total U.S. trends, considering private buyers accounted for 42% of national industrial sales volume.

The robust demand for industrial assets has continued in 2014, buoyed by an aggressive lending environment and some of the most favorable industrial fundamental performance the market has experienced. Vacancy rates are at “all time” lows in many sub-markets, and rental rate growth is beginning to occur in in-fill locations.

The relatively low cost of debt continues to be a catalyst for aggressive pricing. Investor interest now covering the full spectrum of asset quality and location. For the best quality assets in the best locations, cap rates on Class A, multi-tenant product are below the previous low water mark from 2007 as investors are projecting strong rental rate growth over the next three years.



Additionally, there are active investors pursuing both small and larger sized transactions.

CBRE expects institutional investors to continue the trend of activity and pricing throughout the remainder of 2014.

Both investment volume and leasing activity continue to benefit from DFW’s unique status as an inland port.





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GLOBAL RESEARCH AND CONSULTING This report was prepared by the CBRE U.S. Research Team which forms part of CBRE Global Research and Consulting – a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe.

DISCLAIMER

Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

Lynn CirilloResearch Operations ManagerCBRE Americas Research2800 Post Oak, Suite 2300Houston, TX 77056e: [email protected]

Lauren Paris Senior Research AnalystCBRE Dallas Research2100 McKinney Ave, Suite 700 Dallas, TX 75201t: +1 214 979 6587 e: [email protected]

Lexi Zager Research CoordinatorCBRE Dallas Research2100 McKinney Ave, Suite 700 Dallas, TX 75201t: +1 214 979 6532 e: [email protected]

CONTACTSFor more information about this Dallas/Fort Worth Industrial MarketView, please contact:

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Dallas/Fort Worth Industrial MarketView Q2 2014

MV - Page 1DFW Industrial

Down 6.3% Up $4.07 Down 2.4 million sq. ft. Up 18.5 million sq. ft. Down 2.0 million sq. ft. Down 5.2% Q-o-QDirectional arrows based on change from the previous quarter. Data reflects market totals.

Figure 1: Nominal GDP and Vacancy

Positive indices persist

Real GDP decreased marginally

The DFW industrial market continues to show a declining vacancy rate and positive absorption. However, first quarter witnessed a slight decrease in U.S. GDP. Per the Bureau of Economic Analysis' second estimate for Q1 201 real GDP growth, overall economic activity decreased by 1.0% annualized quarterly rate. Initial estimates had originally pegged the first quarter growth at 0.1%, but decline in private inventory investment was larger than the first estimate anticipated. There was, however, a positive contribution from personal consumption expenditures, but this positivity could not wholly compensate for the negative contributions from exports, nonresidential fixed investment, state and local government, and personal consumption expenditures.

Dallas/Fort Worth benefits from strong demographics and locationDFW’s supply of well-educated workers and strong population growth make it a competitive demographic force. With a current estimated population of 6.7 million, the Metroplex is the largest MSA in Texas and the fourth largest in the United States. Located centrally, DFW is uniquely situated to act as the perfect logistics and distribution hub. In turn, this location provides businesses a logistical advantage because of its accessibility to other markets by both rail and truck.

According to the Texas Manufacturing Outlook Survey, conducted by the Federal Reserve Bank of Dallas, manufacturing conditions in the second quarter remained favorable. The production index for April 2014 rose to 24.7 from 17.1 in the previous month. In tandem with this metric, the new order index was positive for the twelfth consecutive month, increasing to 21.3 in April from 14.7 the month prior. Overall, these indices indicate further improving conditions for Texas manufacturing. Other forward looking indicators substantiate this claim. April 2014 witnessed a pleasantly high future company outlook index at 26.9. This marked an improvement since April 2013 by nearly doubling the year-over-year April company outlook of 14.7, implying further growth into 2014 and 2015.

Unemployment

Vacancy rates drop furtherThe Dallas/Fort Worth Industrial market witnessed a further downtick in vacancy during Q2 2014. Both the direct and total vacancy rates decreased, to 6.2% and 6.3% respectively, compared to Q1 2014 figures of 6.3% and 6.4%. This continued improvement in vacancy rates highlight DFW’s strong market fundamentals.

DFW posts positive absorption for 15th consecutive quarterFor the 15th straight quarter, the DFW Metroplex has posted a positive net absorption. Q2 2014 absorption witnessed a solid 2.4 million sq. ft. While lower than 4.4 million sq. ft. in Q1 2014, it emphasizes precisely how tight the market has become.

Total Vacancy Asking Rates Net Absorption Under Construction Delivered Construction

DFW industrial on a positive roll.

6%

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$13,500

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0000

's

Vacancy GDP


GDP ($, in billions, L) DFW Industrial Vacancy (R)

Vacancy rates drop furtherThe Dallas/Fort Worth Industrial market witnessed a further downtick in vacancy during Q2 2014. Both the direct and total vacancy rates decreased, to 6.2% and 6.3% respectively, compared to Q1 2014 figures of 6.3% and 6.4%. This continued improvement in vacancy rates highlight DFW’s strong market fundamentals.

DFW posts positive absorption for 15th consecutive quarterFor the 15th straight quarter, the DFW Metroplex has posted a positive net absorption. Q2 2014 absorption witnessed a solid 2.4 million sq. ft. While lower than 4.4 million sq. ft. in Q1 2014, it emphasizes precisely how tight the market has become.

Positive indices persist According to the Texas Manufacturing Outlook Survey, conducted by the Federal Reserve Bank of Dallas, manufacturing conditions in the second quarter remained favorable. The production index for April 2014 rose to 24.7 from 17.1 in the previous month. In tandem with this metric, the new order index was positive for the twelfth consecutive month, increasing to 21.3 in April from 14.7 the month prior. Overall, these indices indicate further improving conditions for Texas manufacturing. Other forward looking indicators substantiate this claim. April 2014 witnessed a pleasantly high future company outlook index at 26.9. This marked an improvement since April 2013 by nearly doubling the year-over-year April company outlook of 14.7, implying further growth into 2014 and 2015.

Real GDP decreased marginally The DFW industrial market continues to show a declining vacancy rate and positive absorption. However, first quarter witnessed a slight decrease in U.S. GDP growth. Per the Bureau of Economic Analysis’ second estimate for Q1 2014 real GDP growth, overall economic activity decreased by 1.0% annualized quarterly rate. Initial estimates had originally pegged the first quarter growth at 0.1%, but decline in private inventory investment was larger than the first estimate anticipated. There was, however, a positive contribution from personal consumption expenditures, but this positivity could not wholly compensate for the

negative contributions from exports, nonresidential fixed investment, state and local government, and private inventory investment.

Dallas/Fort Worth benefits from strong demographics and locationDFW’s supply of well-educated workers and strong population growth make it a competitive demographic force. With a current estimated population of 6.7 million, the Metroplex is the largest MSA in Texas and the fourth largest in the United States. Located centrally, DFW is uniquely situated to act as the perfect logistics and distribution hub. In turn, this location provides businesses a logistical advantage because of its accessibility to other markets by both rail and truck.

ASKING RATES$4.07 Per Sq. Ft.

NET ABSORPTION2.4 Million Sq. Ft.

DFW INDUSTRIAL ON A POSITIVE ROLL.

CONSTRUCTION18.5 Million Sq. Ft.

DELIVERIES2.0 Million Sq. Ft.

UNEMPLOYMENT5.2% Q-o-Q

TOTAL VACANCY6.3%


Figure 1: Nominal GDP and Vacancy

Directional arrows based on change from the previous quarter. Data reflects market totals.

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INDUSTRIAL SECOND QUARTERMARKETVIEW

MarketNet Rentable

AreaSq. Ft.

Available Sq. Ft.

Availability Rate

Direct Vacancy Sq. Ft.

Direct Vacancy

Rate

Total Vacant Sq. Ft.

Total Vacancy

Rate

Annual Average Asking

Lease Rate Per Sq. Ft.

Q2 2014 Direct Net Absorption

Q2 2014 Total Net

Absorption

YTD 2014Total

AbsorptionIndustrial Flex

DFW Airport 64,977,094 6,255,264 9.6% 3,906,047 6.0% 4,079,128 6.3% $4.62 $7.90 119,709 119,709 502,890

East Dallas 36,451,402 4,305,738 11.8% 2,464,058 6.8% 2,464,058 6.8% $4.15 $5.79 528,491 528,491 520,854

Northeast Dallas 97,286,470 12,487,919 12.8% 8,760,792 9.0% 8,989,513 9.2% $4.40 $7.68 505,608 565,810 1,013,830

Northwest Dallas 100,746,416 11,256,650 11.2% 7,338,798 7.3% 7,587,881 7.5% $4.38 $7.25 66,499 52,295 (194,417)

South Dallas 48,547,208 5,581,793 11.5% 2,981,811 6.1% 3,014,211 6.2% $2.99 $5.41 390,121 390,121 2,324,442

South Stemmons 120,988,872 15,674,799 13.0% 7,454,247 6.2% 7,489,012 6.2% $4.21 $7.88 217,296 213,187 442,023

Great SW / Arlington 92,636,130 9,506,273 10.3% 5,202,920 5.6% 5,323,002 5.7% $4.22 $7.40 476,158 528,076 1,536,273

North Ft. Worth 68,741,355 5,668,760 8.2% 2,838,035 4.1% 2,848,115 4.1% $3.96 $9.26 19,955 81,595 22,238

South Ft. Worth 72,338,431 5,524,489 7.6% 2,773,452 3.8% 2,773,452 3.8% $3.44 $5.20 (120,739) (120,739) 617,217

DALLAS TOTALS 468,997,462 55,562,163 11.8% 32,905,753 7.0% 33,623,803 7.2% $4.09 $7.50 1,827,724 1,869,613 4,609,622

FT.WORTH TOTALS 233,715,916 20,699,522 8.9% 10,814,407 4.6% 10,944,569 4.7% $3.85 $8.47 375,374 488,932 2,175,728

MARKET TOTALS 702,713,378 76,261,685 10.9% 43,720,160 6.2% 44,568,372 6.3% $4.07 $7.98 2,203,098 2,358,545 6,785,350

Unemployment RateSeasonally adjusted, annual employment growth in DFW was 3.5% from April 2013 to April 2014 for a net increase of 106,800 jobs. Thus, the unemployment rate in DFW logically fell 60 basis points (bps) during the second quarter to 5.2%. For the first time in 14 quarters, DFW and Texas posted the same unemployment rate. Texas and DFW are still outpacing the U.S. which recorded a 6.3% rate. Indicative of the stronger state economy, Texas and DFW have consistently outshined the national unemployment rate throughout the recession and recovery.

Underpinning these strong labor market trends, Dallas/Fort Worth contains both an ample supply of well-educated workers and has maintained a strong population growth, contributing to the area’s healthy economy. With an estimated population of 6.8 million, a 33% increase from 2000, DFW according to Claritas is projected to grow further at a rate of 8.6% over the next five years. Comparatively, the national five-year projected population growth rate is only 3.5%. If employment trends continue as they have been, DFW job growth should be able to absorb the new influx, even as DFW market increases in population.


Source: Bureau of Labor Statistics, June 2014.




Industrial Flex

DFW Airport 64,977,094 6,255,264 9.6% 3,906,047 6.0% 4,079,128 6.3% $4.62 $7.90 119,709 119,709

East Dallas 36,451,402 4,305,738 11.8% 2,464,058 6.8% 2,464,058 6.8% $4.15 $5.79 528,491 528,491

Northeast Dallas 97,286,470 12,487,919 12.8% 8,760,792 9.0% 8,989,513 9.2% $4.40 $7.68 505,608 565,810

Northwest Dallas 100,746,416 11,256,650 11.2% 7,338,798 7.3% 7,587,881 7.5% $4.38 $7.25 66,499 52,295

South Dallas 48,547,208 5,581,793 11.5% 2,981,811 6.1% 3,014,211 6.2% $2.99 $5.41 390,121 390,121

South Stemmons 120,988,872 15,674,799 13.0% 7,454,247 6.2% 7,489,012 6.2% $4.21 $7.88 217,296 213,187

Great SW / Arlington 92,636,130 9,506,273 10.3% 5,202,920 5.6% 5,323,002 5.7% $4.22 $7.40 476,158 528,076

North Ft. Worth 68,741,355 5,668,760 8.2% 2,838,035 4.1% 2,848,115 4.1% $3.96 $9.26 19,955 81,595

South Ft. Worth 72,338,431 5,524,489 7.6% 2,773,452 3.8% 2,773,452 3.8% $3.44 $5.20 (120,739) (120,739)

DALLAS TOTALS 468,997,462 55,562,163 11.8% 32,905,753 7.0% 33,623,803 7.2% $4.09 $7.50 1,827,724 1,869,613

FT.WORTH TOTALS 233,715,916 20,699,522 8.9% 10,814,407 4.6% 10,944,569 4.7% $3.85 $8.47 375,374 488,932

MARKET TOTALS 702,713,378 76,261,685 10.9% 43,720,160 6.2% 44,568,372 6.3% $4.07 $7.98 2,203,098 2,358,545


Figure 3: Unemployment and JobsUnemployment Rate

Seasonally adjusted, annual employment growth in DFW was 3.5% from April 2013 to April 2014 for a net increase of 106,800 jobs. Thus, the unemployment rate in DFW logically fell 60 basis points (bps) during the second quarter to 5.2%. For the first time in 14 quarters, DFW and Texas posted the same unemployment rate. Texas and DFW are still outpacing the U.S. which recorded a 6.3% rate. Indicative of the stronger state economy, Texas and DFW have consistently outshined the national unemployment rate throughout the recession and recovery.

Underpinning these strong labor market trends, Dallas/Fort Worth contains both an ample supply of well-educated workers and has maintained a strong population growth, contributing to the area's healthy economy. With an estimated population of 6.8 million, a 33% increase from 2000, DFW according to Claritas is projected to grow further at a rate of 8.6% over the next five years. Comparatively, the national five-year projected population growth rate is only 3.5%. If employment trends continue as they have been, DFW job growth should be able to absorb the new influx, even as DFW market increases in population.

Total VacancySq. Ft.

Total VacancyRate

Annual Average Asking Q2 2014 DirectNet Absorption

Q2 2014 TotalNet AbsorptionLease Rate Per Sq. Ft.

MarketNet Rentable

AreaSq. Ft.

AvailableSq. Ft.

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Sq. Ft.Direct Vacancy

Rate

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2013

Q4

2013

Q1

2013

Q2

2013

Unemployment

000's

Job Count

Source: Bureau of Labor Statistics, June 2014.



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Figure 4: Net Absorption and Vacancy



Q2 2014 marks the 15th consecutive quarter of positive net absorption for the DFW industrial market. Posting 2.4 million sq. ft., the bulk of Q2 2014 absorption was primarily comprised of move-ins in 50,000 sq. ft. to 200,000 sq. ft. range. Considering that in recent quarters most absorption has primarily consisted of large build-to-suit and big box space, this marks a departure from recent quarters in tenants desired space range. Considering the industrial market's typical seasonality, the relatively high figures demonstrate not only the strength of our recovery, but also indicate the sustainability of demand going forward. Once again, warehouse/ distribution space led activity this quarter with 2.4 million sq. ft. of net absorption, while flex space posted a slightly negative figure of (52,701) sq. ft. The submarket that posted the most net absorption over the quarter was Northeast Dallas at 565,810 sq. ft. Not far behind were Great Southwest/Arlington and East Dallas which each posted around 528,000 sq. ft. positive absorption.

Deliveries totaled 2.0 million sq. ft. in Q2 2014, a slight slowdown from last quarter’s impressive 2.5 million sq. ft. Considering that most of the current quarters completions had initially been slated as speculative (spec) projects, the delivery pre-leased rate was an impressive 67.3%. Notable pre-leased deliveries included William Sonoma’s Great Southwest/ Arlington facility and the completion of Cummins Southern South Dallas build-to-suit. This quarter also saw under construction rev up further. At a current total of 18.5 million sq. ft., construction activity has not been this robust since the late 1990s. This quarter solidified the shift towards spec projects. Spec has decisively usurped build-to-suits in terms of space underway. Considering the extremely limited supply across all size ranges and growing demand, the completion of these projects will deliver much needed new space to the Dallas/Ft. Worth industrial market.

Driven down by 15 consecutive quarters of positive net absorption, vacancy rates remained at historically low figures. The direct vacancy rate is extremely low at 6.2% and total vacancy is not much higher at 6.3%. The submarkets with the tightest vacancy rates remained towards both the western and southern areas of the region. However, the most improved vacancy rates fell in markets on the eastern and northern parts of DFW. Notable is East Dallas’s most improved vacancy rate after dropping 130 basis points to 6.8%. This is due to a short term for Georgia Pacific as they wait for their build-to-suit to complete.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Q4

2007

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Under Construction Sq. Ft. Delivered Construction Sq. Ft.

5%

6%

7%

8%

9%

10%

11%

12%

13%

14%

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014


6%

7%

8%

9%

10%

11%

12%

(1,500)

3,500

8,500

13,500

18,500

2006 2007 2008 2009 2010 2011 2012 2013 2014

Absorption Sq. Ft. Vacancy Rate


Q2 2014 marks the 15th consecutive quarter of positive net absorption for the DFW industrial market. Posting 2.4 million sq. ft., the bulk of Q2 2014 absorption was primarily comprised of move-ins in 50,000 sq. ft. to 200,000 sq. ft. range. Considering that in recent quarters most absorption has primarily consisted of large build-to-suit and big box space, this marks a departure from recent quarters in tenants desired space range. Considering the industrial market’s typical seasonality, the relatively high figures demonstrate not only the strength of our recovery, but also indicate the sustainability of demand going forward. Once again, warehouse/ distribution space led activity this quarter with 2.4 million sq. ft. of net absorption, while flex space posted a slightly negative figure of (52,701) sq. ft. The submarket that posted the most net absorption over the quarter was Northeast Dallas at 565,810 sq. ft. Not far behind were Great Southwest/Arlington and East Dallas which each posted around 528,000 sq. ft. positive absorption.

Deliveries totaled 2.0 million sq. ft. in Q2 2014, a slight slowdown from last quarter’s impressive 2.5 million sq. ft. Considering that most of the current quarters completions had initially been slated as speculative projects, the delivery pre-leased rate was an impressive 67.3%. Notable pre-leased deliveries included William Sonoma’s Great Southwest/ Arlington facility and the completion of Cummins Southern South Dallas build-to-suit. This quarter also saw under construction rev up further. At a current total of 18.5 million sq. ft., construction activity has not been this robust since the late 1990s. This quarter solidified the shift towards speculative projects. Speculative has decisively usurped build-to-suits in terms of space underway. Considering the extremely limited supply across all size ranges and growing demand, the completion of these projects will deliver much needed new space to the Dallas/Ft. Worth industrial market.

Driven down by 15 consecutive quarters of positive net absorption, vacancy rates remained at historically low figures. The direct vacancy rate is extremely low at 6.2% and total vacancy is not much higher at 6.3%. The submarkets with the tightest vacancy rates remained in the western and southern areas of the region. However, the most improved vacancy rates fell in markets on the eastern and northern parts of DFW. Notable is East Dallas’s most improved vacancy rate after dropping 130 basis points to 6.8%. This is due to a short term lease for Georgia Pacific as they wait for their South Dallas build-to-suit to complete.














0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Q4

2007

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014


5%

6%

7%

8%

9%

10%

11%

12%

13%

14%

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014


6%

7%

8%

9%

10%

11%

12%

(1,500)

3,500

8,500

13,500

18,500

2006 2007 2008 2009 2010 2011 2012 2013 2014

Absorption Sq. Ft. Vacancy









0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Q4

2007

Q1

2008

Q2

2008

Q3

2008

Q4

2008

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014


5%

6%

7%

8%

9%

10%

11%

12%

13%

14%

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014


6%

7%

8%

9%

10%

11%

12%

(1,500)

3,500

8,500

13,500

18,500

2006 2007 2008 2009 2010 2011 2012 2013 2014

Absorption Sq. Ft. Vacancy


000’s

000’s


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Tenant Building(s) Submarket Sq. Ft.Georgia Pacific Commerce 45 South Dallas 1,600,000

Transportation Safety Administration 1110 Northpoint Drive DFW Airport 310,000

LKQ 351 Lakeside Drive Northwest Dallas 230,000

AmCor Plastics 610 W Trinity Great Southwest/Arlington 200,000

Garden Ridge 2600 McCree Road Northeast Dallas 146,000

Benco 501 Lakeside Parkway Northwest Dallas 135,000

Buyer/Seller Building(s) Submarket Sq. Ft.Marswik Inc /LNR Partners 3000 Redbud Blvd Northeast Dallas 844,377

Stockbridge / Exeter Property Group Mesquite Business Center East Dallas 555,200

Realty Associates Fund /Brookhollow Commerce Center LP Commerce Center South Stemmons 554,444

Invesco/KBS REIT II Dallas Cowboys Distribution Center DFW Airport 400,123

Union Pacific Railroad/ Iris USA Inc 3401 Innovative Way East Dallas 389,005

Exeter Property Group / Industrial Income Trust Gillis Buildings 1 2 3 Northwest Dallas 309,459

The capital markets landscape in DFW became slightly more aggressive versus last quarter based on trailing 12-month data reported by Real Capital Analytics. The median cap rate for DFW was slightly lower, at 7.2%, compared to the national median of 7.3%. These cap rates are based on deals that have been confirmed, approximated or assumed by local professionals and gathered by Real Capital Analytics. Q2 2014, similarly to last quarter, saw private buyers as the most active with 47% of DFW sales volume. Institutional buyers followed with 27% of the sales volume. DFW figures are on trend with the total U.S., considering private buyers accounted for 44% of national industrial sales volume.

Although transaction activity remains strong, investors continue to closely monitor interest rates for the potential impact upward movement could have on commercial debt. For now, debt remains available and historically inexpensive for a wide array of asset profiles, keeping cap rates at historic lows. In certain infill submarkets, cap rates on Class A, multi-tenant product are below the previous low water mark from 2007 as investors are projecting strong rental rate growth over the next three years.

While there is substantial investor demand for Class A offerings, there are limited opportunities available, creating a frenzied, competitive environment that pushes up



pricing. CBRE expects institutional investors to become more active in the Class B space over the next year, as pressure mounts to place money in today’s market.

Both investment volume and leasing activity continue to benefit from DFW’s unique status as an inland port





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GLOBAL RESEARCH AND CONSULTING This report was prepared by the CBRE U.S. Research Team which forms part of CBRE Global Research and Consulting – a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe.

DISCLAIMER

Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

Lynn CirilloResearch Operations ManagerCBRE Americas Research2800 Post Oak, Suite 2300Houston, TX 77056e: [email protected]

Lauren Paris Senior Research AnalystCBRE Dallas Research2100 McKinney Ave, Suite 700 Dallas, TX 75201t: +1 214 979 6587 e: [email protected]

Lexi Zager Research CoordinatorCBRE Dallas Research2100 McKinney Ave, Suite 700 Dallas, TX 75201t: +1 214 979 6532 e: [email protected]

CONTACTSFor more information about this Dallas/Fort Worth Industrial MarketView, please contact:

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Documents

Demand tops 20 million sq. ft. for third consecutive year. · MARKETVIEW Demand tops 20 million sq. ft. for third consecutive year. Dallas/Fort Worth Industrial, Q4 2018 PRODUCT PIPELINE