Abstract
DFW’s industrial market remains strong, driven by rapid population growth and solid demand. Vacancy declined to 8.7% as absorption outpaced deliveries, while rents rose across submarkets. Construction remains active but increasingly pre-leased, supporting landlord-favorable conditions despite varied pricing power.
Dallas Fort-Worth
ECONOMY
U.S. economic momentum strengthened in the second half of 2025, with GDP growth accelerating on the back of robust services spending, rising artificial intelligence (AI) related investment, and a rebound in durable goods consumption.
Looking ahead to 2026, expanded business investment tax incentives are expected to support increased domestic capital investment, while larger personal tax refunds should bolster consumer spending.
However, the extent of the resulting economic benefits will depend on corporate confidence in the economic, financial market, and policy environment, as well as consumers’ capacity and willingness to spend rather than save.
Dallas-Fort Worth’s (DFW) population growth is up 1.1%, adding more than 90,000 people in the past year, and 9.1%, adding more than 775,000 over the last five years.
National warehouse and storage employment continued its downward trend, decreasing by 28,000 positions compared with the same period last year.
The growth of AI development and investment in Texas has driven rising logistics demand statewide, supported by the state’s abundant and relatively low-cost power supply, pro-business environment, and availability of scalable land. As AI-related users expand, they require logistics space for the storage, manufacturing, and distribution of components critical to data center development and operations, while benefiting from Texas’s central location, robust transportation infrastructure, and speed-to-market advantages.
VACANCY
DFW’s vacancy rate continued to decline at the end of 2025, reaching 8.7%, a 20-basis point (bp) decrease from the prior quarter.
The current level has declined 160-bps from last year’s figure and remains 80 bps above the long-term average (LTA) of 7.9%.
We can expect vacancy rates to continue declining if demand keeps outpacing deliveries and if the construction pipeline experiences a slowdown in speculative starts. Notably, over a third of the current construction pipeline is already pre-leased.
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 570 bps.
SUBLEASE
Total sublease space available reached 13 million square feet (M SF), representing 1.2% of the overall inventory.
Sublease space for availabilities 200,000 SF and greater represent 48% of the total sublease space available between 15 spaces. The largest sublease on the market is JCPenney’s full building sublease in North Fort Worth for 1.1M SF.
The rise in sublease availability throughout the last two years has created advantages for tenants, offering more entry options at reduced rates and with greater lease-term flexibility.
RENT
Q4 2025 annual asking rent growth continues to remain positive bringing the market rent per square foot (/SF) to a record high of $9.18/SF, a 6.2% increase from this time last year.
Throughout 2025, rental rate growth was experienced throughout all DFW, with percentage of growth dependent on size and submarket.
South Dallas and East Dallas submarkets saw stagnant rates through the first half of the year but began to see increases in rates in the second half, due to rapid absorption and decrease in supply.
Rental rates for very large bulk buildings (900,000 SF+) are projected to rise sharply, driven by strong demand, limited supply, and a scarcity of easily developable land for future projects.
In lease deals, typical annual escalations range from 3.5%-4%, depending on size and submarket.
Overall, DFW continued to favor landlords, though pricing power varies by submarket and building size.
CONSTRUCTION
The construction pipeline grew 1.0M SF from the previous quarter, reaching 21.9M SF, with 38.4% pre-leased, which is the largest percentage the market has seen in many years and the largest amount on a SF basis the market has ever experienced.
Due to the strong demand for the bulk product, four developers started construction on 1.0M SF+ buildings in the 2nd half of 2025. We expect a couple more construction starts in this size range in the first quarter of 2026.
As vacancy continues to decrease, particularly in certain sizes and locations, we will likely see a continued increase in pre-leasing activity, which could also support a potential uptick in new construction as demand outpaces available supply.
We anticipate continued growth in shallow bay construction, projects under 200,000 SF, particularly within infill locations.
So far this year, 17.3M SF of new product has come online, including 4.9M SF delivered in the fourth quarter. North Fort Worth and South Fort Worth have led new deliveries, accounting for 40% of total product delivered in 2025. While South Dallas added a substantial amount of space over the past two years, construction activity in the submarket has since slowed considerably.
Data in this report was provided by KBC Advisors, St. Louis Federal Reserve, and CoStar.
Continue reading this report via the below PDF link.
