Main markets for industrial construction activity in the South West

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At the height of the pandemic, e-commerce has had a remarkable run, becoming the lifeblood of the economy and of households that need to shop safely. The industrial building scene has witnessed a remarkable expansion, prompting developers to adhere to green building practices and energy-efficient features. An illustrative example is the partnership between Stream Realty Partners and Catalyse.

The national average in-place rent rose 4.7% year-over-year to April to $6.5 per square foot, while the vacancy rate was 4.7% in May, according to data from CommercialEdge. Overall, at the end of June, the industrial market totaled nearly 17.3 billion square feet of industrial space, while nearly 700 million square feet of space was under construction. The absolute leader of all markets was Dallas, followed by Phoenix (43 million square feet in progress) and the Inland Empire (37 million square feet).

In the ranking below, we will focus on the top five industrial construction markets in the South West, based on their construction pipelines. All five metros are in Texas, the combined markets will increase national industrial inventory by 100 million square feet.

Rank Market Pipeline under construction Current total stock Under construction as % of stock 2022 YTD Deliveries (June)
1 dallas 60 659 670 840 028 013 7.22% 14,864,921
2 Houston 21 210 192 547 769 412 3.87% 4,883,702
3 Austin 8,285,378 114 487 987 7.24% 6,916,336
4 El Paso 5,731,303 52,666,828 10.88% 0
5 San Antonio 3,978,626 116 414 818 3.42% 2,725,594
Data provided by CommercialEdge

1.Dallas

DFW has one of the largest industrial inventories in the country and the largest industrial construction pipeline, not only in the Southwest, but in the United States. At the end of June, the metro had more than 61 million square feet in progress, the equivalent of 7.2% of its total inventory, which is slightly more than 840 million square feet.

From 2022 to June, developers have delivered nearly 15 million square feet and, if the pace of deliveries remains constant, this year’s volume is on track to surpass 2021 (24.7 million square feet, or 3.1 % of inventory) and at least match 2020 (28.6 million square feet, or 3.7% of inventory).

Notable projects under construction include Stream Realty Partners’ 3.4 million square foot development in Mesquite, east of Dallas, and the 4.7 million square foot Texas chip fab. Instruments at Sherman.

2.Houston

Houston ranks second in this ranking with more than 21.2 million square feet of industrial space under construction. The figure equates to 3.9% of total inventory, which rose to 547.8 million square feet.

In the first half of 2022, nearly 4.9 million square feet of industrial space came online, or 0.9% of total inventory. While it’s too early to tell what proportion of the under construction inventory will be completed by the end of the year, previous years’ volumes have been similar and may end up exceeding this year’s volume: in 2021 , 19.6 million square feet of industrial building space, or 3.8% of total stock, has been delivered, while in 2020, 19.7 million square feet, or 3.9% of total stock , have been added.

Notable industrial developments in Houston include the 507,000 square foot warehouse for Article, a Canada-based online furniture company, and the TGS Cedar Port Industrial Park in Baytown, Texas. Covering over 15,000 acres, it is the largest planned industrial park serviced by rail and barge in the United States.

3.Austin

The sustained performance of the industrial market adds to Austin’s already notorious versatility. In June, the Texas capital had 8.3 million square feet of industrial space under construction, which, together with its 114.5 million square foot market, represents 7.2% of total inventory.

From 2022 to June, more than 6.9 million square feet have been brought online, already above the annual deliveries of 2021 (6.7 million square feet, or 6.7% of total inventory) and 2020 (2.1 million square feet, or 2.1% of total inventory).

Although Austin is one of the metros where Amazon is indefinitely putting plans to develop a distribution center in Round Rock on hold, the metro still has a big impact on the industrial market. Projects like Samsung’s Taylor semiconductor plant and Tesla’s Giga Texas have attracted more industrial development. Recently, Titan Development announced the 2.6 million square foot Hutto Mega TechCenter, and Alliance Industrial Co. is beginning construction of the 1.4 million square foot Kyle/35 Logistics Park.

Data provided by CommercialEdge

4. El Paso

Nestled between New Mexico and Mexico, El Paso shows growing industrial construction activity. As of mid-2022, the metro had some 5.7 million square feet of industrial space under construction, equivalent to 10.9% of stock, the highest percentage of stock in this ranking. Still, the metro’s industrial inventory is the smallest of the metros on this list, at just 52.7 million square feet.

No projects were completed in 2022 through June, but El Paso has seen incredible volume expansion over the past two years. Nearly 4 million square feet were delivered in 2021, or 8.1% of total inventory, compared to 234,000 square feet (just 0.5% of total inventory) in 2020.

5. San Antonio

With nearly 4 million square feet under construction, San Antonio rounds out the top five. This figure equates to 3.4% of total inventory, which currently totals over 116 million square feet.

As of June, developers had delivered more than 2.7 million square feet, already close to 3.1 million square feet of additional volume in 2021 (2.8% of inventory), and half the volume of 2020, when industrial inventory was increased by 4.5 million square feet. (4.3% of total stock).

Among the projects currently under construction is Cornerstone Commerce Center, VanTrust Real Estate’s 1 million square foot speculative development.

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