Don’t Bet On Rent Reductions In The DFW Industrial Market

The coronavirus crisis pushed the real estate market to a screeching halt in March and even negatively impacted the red-hot Dallas-Fort Worth industrial market, but online sales growth has made the asset class more resilient and less likely to offer price discounts even in the wake of the pandemic, market experts tell Bisnow. 

Two experts speaking at Bisnow’s “AllianceTexas Mobility Innovation Zone and the Future of America’s Supply Chain” webinar Tuesday said DFW industrial buyers and investors may be waiting for much cheaper industrial asset prices, but they are unlikely to get them even if other asset prices take a post-coronavirus hit. 

“I’m not so sure we are going to see a reduction in rents,” Hillwood Senior Vice President Tony Creme said. “I’ve heard there are some tenants who pulled back thinking there is going to be a huge reduction in rent going forward, and they want to try and take advantage of that. I am not sure we are going to see that. COVID-19 is actually fueling the industrial market and creating more demand for industrial space, which will drive rents up.” 

Online demand for products gained more traction as people quarantined at home. The shutdowns eventually turned into a major boon for the industrial sector that supplies the cold storage, distribution hubs and manufacturing and storage facilities that hold the e-commerce delivery chain together. 

DFW industrial buyers waiting for industrial land on the cheap may be fooling themselves. There are virtually no discounts when it comes to DFW industrial sites even if the nature of the economic slowdown suggests haircuts on rents and purchase prices should be expected. 

“I think the conclusion that I have drawn and have really seen is that good sites are really hard to come by,” Stream Realty Partners‘ Seth Koschak said. “So if the site has not already been acquired … you are dealing with a seller that doesn’t need to sell it for the most part.”

The DFW industrial market is slowly but surely returning to its pre-coronavirus activity levels. 

“We are almost at if not slightly above pre-COVID inquiry levels in terms of guys needing space and inquiring and putting buildings on surveys,” Koschak said.