Abstract
DFW’s industrial market remains incredibly strong, driven by population growth and solid demand. Vacancy declined to 8.3% as absorption continued to outpace deliveries, while rents rose across submarkets. Construction remains active with product remaining pre-leased, supporting landlord-favorable conditions despite varied pricing power.
Dallas Fort-Worth
ECONOMY
The U.S. economy entered 2026 with meaningful tailwinds to growth including expanded business investment tax incentives, larger personal tax refunds, significant ongoing artificial intelligence (AI) related business investment, and hoped for reshoring related increases in domestic investment.
Future economic growth depends on multiple factors including sustained job growth, sustained AI investment, increased domestic investment beyond AI, both trade and fiscal policy, favorable financial market conditions, and the Strait of Hormuz disruption with its varied potential impacts including on consumer spending power.
Dallas-Fort Worth’s (DFW) population growth is up 1.0%, adding more than 82,000 people in the past year, and 9.9%, adding more than 760,000 over the last five years.
National warehouse and storage employment continued its downward trend, decreasing by 49,000 positions compared with the same period last year.
AI development and investment in Texas is driving increased demand for logistics space, supported by the state’s abundant, relatively low-cost power, pro-business environment, and availability of scalable land. Markets such as Dallas–Fort Worth are particularly well positioned due to reliable power access through ERCOT, a central U.S. location that improves supply chain efficiency, and strong transportation infrastructure. As AI-related users expand, they require logistics space to support the storage, manufacturing, and distribution of components critical to data center development and operations, reinforcing Texas as a key hub for AI-driven industrial real estate demand.
VACANCY
DFW’s vacancy rate continued to decline in the first quarter of 2026, reaching 8.3%, a 50-basis point (bp) decrease from the prior quarter and down 120 bps year-over-year from Q1 2025. The current level remains 30 bps above the long-term average of 8.0%.
Vacancy rates are likely to keep falling if demand continues to exceed deliveries and speculative construction slows. Notably, one quarter of the current construction pipeline is already preleased.
Demand in South Dallas remains strong. The submarket saw a 15.3% vacancy rate in Q1 2024, largely due to newly delivered vacant space, however, robust leasing activity since then has reduced the rate by 690 bps.
SUBLEASE
Total sublease space available reached 12 million square feet (M SF), representing 1.1% of the overall inventory.
Sublease space of 200,000 SF and larger accounts for 45% of total sublease inventory across 14 available spaces. The largest on the market is JCPenney’s full building sublease in North Fort Worth, totaling 1.1M SF.
Total sublease availability has dropped by over 2M SF since the start of 2026 and remains roughly in line with last year’s levels.
Sublease space gives tenants an affordable, flexible way to enter the DFW market, offering options for various tenant types and flexible lease terms.
DEMAND
The demand seemed to pick up where it left off at the end of 2025, with strong leasing velocity, RFPs, and tour activity.
Q1 2026 recorded the highest level of net absorption in DFW since 2021, totaling 11.1M SF. This was primarily driven by four major move ins exceeding 1M SF each, along with eight additional buildings larger than 500,000 SF.
North Fort Worth/Alliance and East Dallas recorded the strongest absorption in Q1 2026, each exceeding 2.7M SF.
Leasing activity continues to outperform 2025 levels, reaching 20M SF, 17.8% higher from this time last year, despite a modest 10% decline from the previous quarter.
Activity is strong in most size ranges, with 100,000-200,000 SF being the slowest size range with a large quantity of available space.
3PL, AI and data center suppliers, energy, and consumer goods activity remain strong.
AI and data center suppliers have accounted for approximately one quarter of total absorption in the DFW market over the past two years. Based on active deals in the pipeline, this demand is expected to continue into 2026.
Deal velocity in the very large bulk range (900,000 SF+) continues to be very robust, with only two existing buildings over 900,000 SF available for immediate occupancy.
CONSTRUCTION
The construction pipeline declined slightly quarter-over-quarter, totaling 20.0M SF, of which 24% is pre-leased or build-to-suit (BTS).
Strong demand for bulk product has driven development activity, with four buildings exceeding 1.0M SF currently under construction (UC), including one BTS. Several additional projects are expected to break ground in Q2 2026. By comparison, in Q4 2022, DFW had 19 buildings larger than 1.0M SF under construction.
During the first quarter, DFW delivered 7.2M SF, which was 60% preleased, adding only 2.9M SF of speculative available product to the market.
The market experienced a rise in shallow bay construction under 200,000 SF, particularly within infill locations.
As vacancy continues to decline, particularly in primary sizes and locations, rising demand could drive new construction as supply struggles to keep pace. The market is already seeing early growth in BTS activity in the very large bulk range.
Data in this report was provided by KBC Advisors, St. Louis Federal Reserve, and CoStar.
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