Abstract
DFW's industrial market remained strong as demand continued to outpace new supply. Vacancy declined to 8.1%, reflecting healthy tenant demand. Through the first half of 2026, net absorption has nearly matched the 20.7M SF recorded during all of 2025, underscoring the market's continued momentum.
Dallas Fort-Worth
ECONOMY
The economy continues to be supported by artificial intelligence (AI)-driven investment, though sustained growth will depend on whether new investment tax incentives in the One Big Beautiful Bill Act encourage broader business spending and hiring beyond AI. A wider expansion in capital investment could strengthen the economic outlook while creating additional opportunities for landlords and investors and increasing competition for logistics space.
Additional factors that could influence the economic outlook and demand for logistics space include domestic manufacturing investment, real wage growth, retail sales, trade policy, financial market conditions, and geopolitical developments.
Dallas-Fort Worth’s (DFW) population growth is up 1.2%, adding more than 104,580 people in the past year, and 9.4%, adding more than 807,000 over the last five years.
National warehouse and storage employment continued its downward trend, decreasing by 33,000 positions compared with the same period last year.
AI-driven growth continues to support demand for industrial space across Texas as data center and technology users expand. The state’s competitive power availability, pro-business environment, and access to developable land have made it a leading destination for AI-related investment. DFW is especially positioned to benefit due to its central location, robust transportation network, and reliable power infrastructure. As AI users scale operations, demand continues to extend beyond data centers into logistics facilities needed for the storage, assembly, and distribution of critical equipment and components.
VACANCY
DFW’s industrial vacancy rate continued its downward trend in Q2 2026, reaching 8.1%. The rate decreased 20 basis points (bps) quarter-over-quarter (QOQ) and declined 110 bps year-over-year (YOY). Vacancy remains near the market’s long-term average of 8.0%, sitting just 10 bps above historical levels and reflecting continued market stabilization.
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, with vacancy improving 800 bps since Q1 2024 after an influx of speculative deliveries impacted the submarket. Slower construction activity since then has helped support a healthier supply-demand balance.
SUBLEASE
Total available space available reached 13.2 million square feet (M SF), representing 1.2% of the overall inventory.
Sublease activity has increased slightly, with current availability 1.7M SF higher than the previous quarter.
Sublease space of 200,000 SF and larger accounts for nearly 50% of total sublease inventory across 15 available spaces. The largest on the market is JCPenney’s full building sublease in North Fort Worth, totaling 1.1M SF.
Sublease space remains an attractive option for tenants seeking flexibility in the DFW market, providing a range of available options and more adaptable lease terms.
RENT
Q2 2026 annual asking rent growth continues to remain positive bringing the market rent per square foot (/SF) to a record high of $9.22/SF, a 5.0% increase over this time last year.
Rental rates across DFW continue to increase, although the pace of growth varies by submarket and size range. Annual escalations on lease transactions generally range from 3.5%–4.0%.
The very large bulk segment (900,000 SF+) is expected to see continued rent growth as limited supply, strong tenant demand, and fewer readily developable land sites constrain future deliveries.
As availability continues to decline and demand remains strong, it is becoming more and more favorable to landlords. Pricing power depends on the submarket and size range.
DEMAND
Strong absorption continued in Q2 2026, with nearly 8.3M SF of positive net absorption. First half 2026 absorption has already nearly matched the total absorption recorded throughout 2025, which totaled 20.7M SF.
The North Fort Worth/Alliance submarkets recorded the highest level of absorption in Q2 2026, totaling 2.5M SF. Year-to-date (YTD) absorption in these submarkets remains the strongest in the market at 5.2M SF.
Leasing activity continues to outperform 2025 levels, with the first half of 2026 reaching 42.2M SF, more than 20% higher than the first half of 2025.
Activity remains strong across most size ranges, with the 100,000–200,000 SF range experiencing the slowest velocity due to a larger amount of available space. However, activity within this size range has improved over the past 30–60 days.
Activity from 3PLs, AI and data center suppliers, energy users, and consumer goods companies remains strong.
AI and data center supplier demand have remained a key driver of absorption in the DFW market over the past two years. Based on active deals currently in the pipeline, this demand is expected to continue into 2026.
Deal velocity in the very large bulk range (900,000 SF+) continues to remain strong. There is significant activity across existing and under construction buildings within this size range, with approximately 15 tenants currently in the market.
CONSTRUCTION
Construction activity in the second quarter decreased slightly to 19.5M SF under construction (UC), with 26% of the pipeline either pre-leased or build-to-suit (BTS).
During the first half of 2026, DFW delivered 13.8M SF, with nearly 50% of deliveries pre-leased, resulting in only 7.2M SF of speculative space added to available inventory.
Due to continued demand for bulk product, there are currently five 1.0M SF+ buildings UC, including three BTS and two speculative projects. We anticipate additional speculative starts later this year, with deliveries expected in 2027. For comparison, DFW had 19 buildings totaling 1.0M SF+ UC in Q4 2022.
As vacancy continues to decline, particularly within certain size ranges and submarkets, we expect continued growth in BTS and pre-leasing activity. Demand for initial phase of BTS projects has already begun increasing, especially within the very large bulk range.
Data in this report was provided by KBC Advisors, St. Louis Federal Reserve, and CoStar.
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