Tuesday, October 09, 2012
South Dallas County’s I-20 corridor sees boom in industrial market
With the turnaround in the economy and companies looking to expand their warehousing and distribution space, the Interstate 20 corridor in south Dallas County is becoming ground zero for the next building boom.
Earthmovers were busy at work this week on land on Danieldale Road just south of Interstate 20.
Prologis, one of the country’s largest industrial building developers and investors, has broken ground there on the next phase of its Prologis Park 20/35 business park in Lancaster.
Prologis is already building one large speculative warehouse.
And construction is expected to start soon on two neighboring industrial buildings that could house major distribution centers for food giant Quaker Oats Co. and luxury automaker BMW, real estate brokers say.
Altogether these projects will total more than 2 million square feet of construction. Prologis representatives did not provide details about the development.
“The market down here is really heating up,” said Ed Brady, economic development director for the city of Lancaster. “There’s nothing like having affordable land and good highway access for industrial development.”
The Prologis project is a stone’s throw from where cosmetics firm L’Oreal Group is planning a 513,000-square-foot distribution center in far south Dallas.
Developers and brokers are betting that south Dallas County will see a steady stream of industrial projects for the next few years.
“That southern sector is going to be a very busy spot,” said Jeff Turner, regional executive vice president for Indiana-based Duke Realty. “You are going to see some very large boxes built south.”
In recent years, Duke Realty has done three large warehouse deals in the Interstate 20 and Interstate 45 corridors in south Dallas County. And the big development firm has more land for additional buildings.
“We have three really nice sites in the southern sector and a lot of good interest,” Turner said. “The land down there right now is pretty well priced compared to the other locations where there isn’t much left and there is a big premium.
“As this business cycle improves, you will continue to see buildings getting done and a lot of them will be in this sector.”
Last year, Duke Realty completed Whirlpool Corp.’s 1 million-square-foot distribution center west of Interstate 45 in Wilmer.
And Home Depot has just finished its expansion into its huge new warehouse on Beckleymeade Avenue in Dallas. Home Depot last year more than doubled the size of its regional distribution center south of Interstate 20.
Earlier this year in the same area, Mobis, a Korean auto parts manufacturer, bought a 442,000-square-foot Lancaster industrial building that it is using for a regional warehouse.
“It’s just about to open,” Brady said. “It will be a parts distribution and training center.”
Brady said that the warehouse market along I-20 has gotten so tight that some of the big owners in the area can no longer accommodate large tenants who needed immediate space.
“They’ve probably had to walk away from a deal or two because they didn’t have space,” he said.
So far this year, expanding or relocating businesses have occupied more than 1.6 million square feet of warehouse space in the I-20 and southern I-45 corridors, according to commercial property firm Cushman & Wakefield.
And the percentage of vacant warehouse space in the area has been cut more than half in the last year.
L’Oreal Group plans to move into a building that will be constructed in Ridge Property Trust’s Ridge Logistics Center on Lancaster Road in far south Dallas.
The city of Dallas is providing more than $4 million in economic incentives to get the $20 million-plus deal going.
Officials with Ridge Property Trust still won’t talk about the project, even though Dallas officials have widely discussed the development.
The project is expected to kick off in the first quarter.
“The Home Depot deal was a real catalyst for that area,” said Karl Zavitkovsky, director of the Dallas economic development office. “You have big players looking for large distribution sites.
“That’s why we are investing sign money in infrastructure and getting sites shovel-ready,” Zavitkovsky said. “I think we’ll continue to see a lot of action there.”
And there’s no doubt that when a couple of big industrial deals land in a certain area of town, more large companies start looking at potential projects in the same neighborhood, he said.
“People get comfortable when other people have already done the due diligence,” Zavitkovsky said. “Our phones I wouldn’t say have been ringing off the hook, but we have been very busy.”
Longtime North Texas industrial market reps say they anticipate a surge in construction over the next year.
The Dallas area has about a 12 percent vacancy in industrial buildings, according to Cushman & Wakefield Inc.
So far this year, expanding and relocating businesses have leased almost 6 million square feet of warehouse and industrial space, almost double the net leasing of a year ago.
“Everybody has been talking about this boom in the market happening and, all of a sudden, bingo,” said Terry Darrow, managing director at Jones Lang LaSalle. “It’s what we’ve all been looking for, and now we have got it.
“Every piece of dirt I have has at least eight companies looking at it.”
Dallas Morning News