Stanley Black & Decker, the world's largest tool maker, agreed to open a major distribution facility in North Texas, bringing another marquee nameplate to a region that is overtaking larger population centers to become one of the biggest logistics hubs in the United States.
The 1.2 million-square-foot facility, called Alliance Northport 3, is part of the 260-acre Alliance Northport development in the Town of Northlake, a small ranch community about 15 miles north of Dallas-Fort Worth International Airport along Interstate 35W -- a major north-south corridor in Texas -- and State Highway 114. The distribution hub is scheduled to open next month; construction began last year as part of an ongoing speculative building program by Fort Worth-based development firm Hillwood. Show Full Story
"As we aim to meet the growing demands of our customers in the central and southern regions of the U.S., Northlake, Texas, is the ideal location to support our current operational needs, while also providing future growth opportunities," said Greg Smulski, Stanley Black & Decker's vice president of real estate, in a statement.
Stanley Black & Decker, based in New Britain, Connecticut, plans to employ more than 300 employees at the distribution center, designed to route power tools from 30 U.S. manufacturing plants to customers in the central and southern United States.
The Dallas area's industrial market has been growing rapidly, in part, because of speculative construction in the region. In all, the Dallas area has 913 million square feet of industrial inventory, following Chicago at No. 1, with 1.2 billion square feet, and Los Angeles at No. 3, with 930 million. Meanwhile, in terms of construction pipeline, Dallas-Fort Worth outpaces every other U.S. city with 28.1 million square feet of industrial space under construction. The Inland Empire follows, with a pipeline of 25.3 million and Chicago, with 20.5 million, according to the latest CoStar data .
Based on the latest CoStar data, Dallas-Fort Worth is projected to overtake Los Angeles as the No. 2 ranked industrial city in the United States based on inventory this year.
Throughout the United States, there's been a rise of new speculative construction. Last year, developers had 152 million square feet of speculative industrial space underway, while building another 126 million build-to-suit projects for specific tenants. Only three years earlier, developers had 73 million square feet of speculative industrial space, with the majority of construction earmarked for build-to-suit clientele.
For Hillwood, the developer behind the 26,000-acre AllianceTexas master-planned, mixed-use development surround Fort Worth Alliance Airport, it has been important to have at least 1 million square feet of speculative space to help deliver instant real estate in this growing e-commerce, on-demand world, said Tony Creme, a senior vice president at Hillwood, who worked on the Stanley Black & Decker project.
"When the company was initially looking at the market, they were only looking at existing building, but they were able to see dirt moving and that made a huge difference," Creme told CoStar News. "We were not originally on the list and luck to get in front of them."
The enviable location between the crossroads of two major freeways, coupled with Hillwood being a long-term developer, owner and manager of the property, helped solidify the deal, he added. The development firm has another 1.3 million square feet of spec space planned, including an adjacent 500,000-square-foot facility, called Alliance Northport 1. Hillwood's pipeline also includes a 783,000-square-foot facility, called Alliance Center North 3. Both projects have yet to launch.
Creme said the company has embraced building spec space because retailers often seek to move in quickly as they ramp up their own ecommerce operations.
"Tenants expect these facilities to be delivered immediately," he said. "To meet that market demand, we have to have the product ready to go for them."
The facility location, coupled with Hillwood's development, ownership and management, helped sway Stanley Black & Decker, Creme said. Hillwood's AllianceTexas is also home to the recently announced Amazon Air regional air cargo hub in Fort Worth.
Not all tenants require a building as quickly. Deal makers in North Texas say there has been a rash of recent build-to-suit activity. Last year, Cushman & Wakefield clocked 22 deals totaling more than 500,000 square feet of industrial space. Nine of those deals were build-to-suit deals, which is an anomaly in the Dallas market, said Kurt Griffin, an executive managing director in Cushman & Wakefield's Dallas office.
"Last year was unique when it came to build-to-suits coming to the market," said Griffin, who was not involved in the Stanley Black & Decker deal. "Some of the things driving it are higher parking ratios for e-commerce facilities, more trailer parking or unique requirements, such as food-grade facilities or specific needs for a fulfillment operation."
Griffin said one of the things constraining developers in North Texas was the shortage of development sites with the right zoning or infrastructure to support industrial facilities, such as e-commerce and warehouse buildings. That is pushing the market to its perimeters ranging from AllianceTexas to South Dallas and even Forney, a suburb about 21 miles east of downtown Dallas, in which Goodyear recently signed a lease for a 1.2 million-square-foot facility.
Even though construction costs are projected to rise and development sites are getting harder to find, Griffin said he expects Dallas-Fort Worth to continue to have robust demand. His team at Cushman & Wakefield is tracking more than 25 million square feet of active industrial tenant requirements.
"Dallas-Fort Worth is still the most affordable major distribution market in the country," he added. "Compared to the cost of doing business in the West Coast or Chicago, Dallas is still the low-cost provider. I think Dallas is going to be competitive nationally for a long time."
To put the cost difference in perspective, Griffin said, developers in the Inland Empire are charging tenants about $70 per square foot for a piece of land to develop a building, while Dallas tenants are paying $3 to $6 per square foot.
Meanwhile, Creme said the Fort Worth-based developer plans to keep its construction pipeline full, especially as buildings continue to lease during construction.
"We have a lot of great industrial land left and we are working through it," Creme said. "In Tarrant County, we are seeing a lot of spec because there's a lot more land, but there's less and less land by the day."