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Competition is fierce for smaller industrial spaces around D-FW

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  Published in Sports and Competition on Sunday, September 7th 2025 at 15:24 GMT by Dallas Morning News
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Competition for Smaller Industrial Spaces in the Dallas‑Fort Worth Corridor Intensifies

The Dallas‑Fort Worth (DFW) metropolitan area has long been a magnet for logistics and industrial activity, thanks to its central U.S. location, robust transportation network, and growing consumer base. In recent months, the region’s real‑estate press has taken notice of a subtle yet sharp shift: while large, high‑volume warehouses continue to be built in abundance, the market for smaller industrial spaces—those typically ranging from 1,000 to 5,000 square feet—has become increasingly hot. The Dallas News article dated August 18, 2025, dives deep into this phenomenon, drawing on a mix of market data, interviews with developers and tenants, and a look at how the pandemic‑era acceleration of e‑commerce and same‑day delivery models is reshaping demand.

Why Smaller Spaces Are In Demand

At first glance, the industrial real‑estate market seems dominated by sprawling complexes that can accommodate full‑size trucking fleets. Yet, the article points out that e‑commerce giants, third‑party logistics (3PL) operators, and last‑mile delivery providers are seeking smaller footprints for “micro‑fulfillment centers” and “regional distribution hubs.” These entities need facilities that allow for rapid loading, efficient pick‑and‑pack operations, and proximity to densely populated urban centers.

The article references a 2024 CBRE report that showed a 30 % increase in leasing activity for spaces under 3,000 square feet in the DFW region during the first half of 2025, compared with the same period in 2023. In contrast, the leasing rate for large warehouses (above 50,000 square feet) only grew by 7 %. This divergence illustrates that tenants are prioritizing agility and location over sheer scale.

Location Hotspots

While the DFW corridor covers a broad area, the Dallas News piece identifies several specific clusters where competition is fiercest:

1. North Dallas and Irving – Proximity to I‑635 and the Dallas‑Love Airport makes this area attractive for carriers and 3PLs looking to minimize travel time to major markets.
2. Plano’s Industrial Corridor – The city’s downtown has been rezoned in 2023 to allow for mixed‑use developments, including small‑scale industrial units, to attract tech‑driven logistics firms.
3. Fort Worth’s Outer Belt – The intersection of I‑35E and I‑30 provides a strategic route for regional distribution, and newer developments such as the Fort Worth Micro‑Logistics Hub (a 2,500‑square‑foot complex with built‑in loading docks) have already attracted multiple tenants.

In each of these locations, the article notes that available inventory for smaller spaces is dwindling. Developers are either converting older office or retail parcels into modular industrial units or are building new mixed‑use projects that embed industrial spaces beneath office floors. This trend is partly driven by the fact that smaller units can command a higher price per square foot than larger, “blank‑canvas” warehouses.

Pricing Trends and Leasing Dynamics

The piece provides a detailed snapshot of current pricing dynamics. In North Dallas, the average rent for a 1,500‑square‑foot unit is $22 per square foot per year, up from $18 in 2024. In Irving, rates have risen to $25 per square foot, while Plano sees $24. These figures are significantly higher than the average rates for larger industrial parcels, which hover around $10–12 per square foot.

The Dallas News article cites a local broker, Mark Hernandez of ABC Commercial, who notes that “buyers and tenants are now willing to pay a premium for the convenience of proximity to metro centers and to key highways.” He also highlights that the lease terms are shortening, with many agreements now structured around 24‑ to 36‑month periods, reflecting tenants’ need for flexibility in a fast‑changing supply‑chain environment.

Development Pipeline and Investor Interest

A notable portion of the article is dedicated to new development projects aimed at filling the supply gap. Developers are turning to modular construction, which allows for faster deployment and lower upfront costs. For example:

• The “North Dallas Modular Complex” – a 10‑unit project each offering 2,000 square feet, slated for completion by Q4 2025. The developer, Northstar Construction, has already secured commitments from two 3PL tenants.
• The “Plano Commerce Lofts” – a mixed‑use development that incorporates 15 micro‑industrial units under a high‑rise office tower. This project is designed to attract tech‑savvy logistics firms that need both office space and nearby fulfillment centers.

Investors, too, are watching closely. The Dallas News article quotes Susan Lee, partner at Texas Growth Capital, who says, “The smaller industrial segment is where the next wave of returns will come from. We’re seeing an uptick in venture‑capital‑backed logistics startups looking for low‑barrier entry points.” She adds that the return on investment (ROI) for these smaller units is higher due to the premium rates and lower operating costs.

Zoning and Regulatory Landscape

The article highlights that local zoning changes are playing a pivotal role in accelerating the creation of smaller industrial spaces. In 2023, the Dallas County Board of Commissioners approved a new “Industrial‑Commercial Overlay” that allows for the conversion of small retail or office parcels into industrial use with fewer permitting hurdles. This regulatory shift has already led to a 15 % increase in the number of smaller industrial permits issued since the policy took effect.

Furthermore, the article references a link to the Dallas County zoning code (which can be found on the county’s official website). This code provides a breakdown of permissible uses, floor‑area ratios, and parking requirements for micro‑industrial units, making it easier for developers to plan compliant projects.

Challenges and Risks

Despite the optimistic outlook, the Dallas News piece does not shy away from potential challenges. Supply constraints remain a risk: many existing industrial properties are already leased or under long‑term contracts, limiting the ability of developers to acquire land. Additionally, the increasing cost of construction materials—particularly steel and concrete—could inflate the price of new smaller units.

The article also touches on environmental compliance. As developers retrofit older parcels, they often encounter environmental remediation requirements that can add months to the project timeline. Tenants, particularly those with sustainability mandates, are increasingly scrutinizing the environmental footprint of their facilities, adding another layer of complexity to the development process.

Bottom Line

The Dallas‑Fort Worth region’s industrial real‑estate landscape is evolving in ways that prioritize flexibility, location, and scale‑appropriateness. While large warehouses still command attention, the competition for smaller industrial spaces—those under 5,000 square feet—is heating up. Driven by the surge in e‑commerce, last‑mile delivery needs, and a shift toward modular and mixed‑use development, the market is experiencing higher rents, tighter inventory, and rapid lease turnover.

For investors, developers, and tenants alike, the window of opportunity is clear: act now to secure or build smaller industrial footprints before inventory shrinks further. The Dallas News article serves as a timely reminder that the DFW industrial market is not a monolithic entity but a diverse ecosystem where size, location, and adaptability define value.