BREAKING DOWN THE DALLAS-FT WORTH IOS MARKET WITH DAVID GUINN AT DB2RE

Dallas remains a major economic and logistics hub in central Texas. Beyond the big hair and high school football, the area is one of the largest IOS markets in the country. We caught up with David Guinn, Director of Industrial at Davidson Bogel Real Estate for his take on the latest local trends in IOS. Clear eyes, full lots, can’t lose.

About the Firm

Davidson Bogel Real Estate (DB2RE) is a boutique land investment advisory group and brokerage firm headquartered in the Dallas-Fort Worth Metroplex. Founded by David Davidson, Jr. and Edward Bogel in 2015, the base principle of the company is exceptional client service with investment and development of land throughout Texas and Oklahoma as the focus. The DB2RE Industrial (DBI) team was founded by David Guinn in Q2 2020 and since its inception, their client’s have transacted over 2.5 million square feet of industrial buildings and over 400 acres of land with a total aggregate transaction value of over $400 million.

David, how did the IOS market first appear on your radar?

The DBI team was introduced to the IOS market in Q1 2021 by Alex Olshansky (principal at Zenith IOS), and we sourced five off-market IOS transaction in DFW totaling 86 acres. The sites were then used as a catalyst to help launch Zenith’s joint venture with JP Morgan for $775 million. Ever since then, the Davidson Bogel team has been hyper focused on this asset class stockpiling an exhaustive lease/sale comp database as well as a direct end-user database of over 200 companies, which has been instrumental in leasing local IOS assets. The DBI team has helped several of the largest investors in the US such as Zenith, Industrial Outdoor Ventures (IOV), Stonemont, Ambient Capital Partners, Semi Stow, and Imperium Capital.

Who are the largest IOS owners or buyers targeting DFW?

The major players are Zenith IOS, Industrial Outdoor Ventures, Ambient Capital Partners, Triten Real Estate Partners, Imperium Capital, Provident Realty, Semi Stow, the Amza Group, Transport Properties, and Alterra.

Tell us about the overall DFW market and IOS supply.

DFW remains a destination for corporate occupiers and job seekers alike. With over 4 million people employed, DFW’s population has increased by over 112,000 people, year-over-year, maintaining the long trend of population growth. With its continued increase in population, the DFW MSA is the 4^th largest in the country with a population over 7.6 million. As the urban centers are continuously expanding, so does the demand to securely store the ready-mix concrete trucks, 5-G equipment, light poles, trailers, and construction materials to support that infrastructure & growth.

Also – DFW currently leads the US in speculative industrial development with 64.5 million SF of new supply currently underway as of Q1 2023. Speculative developments of big box industrial typically maximize the amount of building square footage of their sites, resulting in many projects that have not delivered on an appropriate amount of trailer storage to satisfy eventual tenant needs. With the majority of the leasing demand for these spaces being led by ecommerce and logistics occupiers, there is a very real unmet need for additional space to securely store trucks, trailers, and equipment.

How do the DFW municipalities view IOS uses and how will that impact future supply?

There are over 100 different cities that make up the DFW metroplex, each with their own list of permitted uses, zoning classifications, and future land use plans. Understanding these differences is instrumental to what makes a successful IOS site.

As urban centers continue to expand, so does the more restrictive zoning these local municipalities are putting in place within traditional industrial areas that limit these necessary “dirty” uses from operating. Most entitled, functional, and infill sites of 10+ acres have been developed already into Class A industrial or rezoned to higher uses. Truly a shrinking asset class with growing demand. When it comes time for a renewal for users fortunate enough to be in these areas, tenants will be left with comparing their increased movement of goods cost vs X% increase in rent on income statements. The comparisons aren’t close!

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Which submarkets show the most IOS activity?

We are seeing lots of activity in East Hines Industrial submarket (specifically Northwest Highway/Goodnight Lane area in NW Dallas), East/West Brookhollow in Dallas, Valwood in Carrolton, and the Western Lonestar Turnpike in Dallas/Grand Prairie.

What is the tenant mix between national users versus local SMBs?

We don’t have exact figures, but we estimate national tenants take up about 40% of IOS space and local SMBs fill up the balance at 60%. One interesting factor locally is that only around 20% of IOS tenants are adequately represented by tenant rep brokers. If 80% of the market doesn’t have access to CoStar, it is critical for owners who buy vacant land to hire brokers with direct relationships with end users to shorten vacancy periods and secure leases.

What type of IOS is most lacking (truck terminal, contractor yards, ISF, cross-dock, etc)?

Infill, last-mile IOS/ISF sites with a minimum 10,000 SF building on 5+ acres. Sites with a shop are in extreme demand and in very low supply.

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