Industrial Sublease Market Swells in DFW

Dallas-Fort Worth’s office market isn’t the only commercial sector with a mountain of space to fill.

Over 14 million square feet of industrial space flooded North Texas’ sublease market last year, the Dallas Morning News reported, citing real estate firm Newmark Group.

That’s more than the 11 million square feet of office sublease space in DFW, a surprising reality given the wave of office distress that’s starting to permeate that asset class.

An additional 69 million square feet of DFW warehouse space was vacant at year end.

DFW stands among U.S. metros grappling with the highest surplus of available warehouse space. Nationwide, more than 150 million square feet of warehouse is up for grabs.

Newmark analysts attribute this surge to various factors, such as rising interest rates, inflation, and dwindling consumer demand, prompting businesses to consolidate operations. The increase of industrial sublease listings could also stem from the pandemic-fueled remote-work era, which is still posing challenges for landlords throughout the region.

Despite the surplus, North Texas’ industrial market remains dynamic, with over 28 million square feet of net leased warehouse space last year, the outlet reported. That includes expansions and relocations.

In addition, the region had nearly 40 million square feet of warehouse space under construction by the end of 2023, making it one of the fastest-growing industrial markets in the country.

During the initial years of the pandemic, industrial developers across the nation ramped up production in response to a rise of e-commerce. In October 2022, DFW led the nation with nearly 67 million square feet of industrial projects under construction.

Demand for warehouse space started to drop last year, but it was still higher than pre-pandemic levels.

—Quinn Donoghue