Q2 2025 Dallas-Fort Worth Industrial Market Report
Highlights
- The market’s vacancy rate stands at 9.2%, ranking among the highest across the 10 largest U.S. markets, second only to Phoenix, AZ.
- Uncertainty around trade policy has become the most significant factor affecting new leasing and acquisition activity, prompting many decision-makers to postpone transactions until greater clarity emerges.
- The pace of vacancy rate recovery in 2025 and beyond will largely hinge on demand for large-format industrial space. Properties of 500,000 square feet or more, heavily impacted by recent years of speculative development, now represent just under 30% of the market’s total vacant inventory.
Market Overview
Market participants largely anticipated stable leasing activity and a gradual decline from the peak 9.5% vacancy rate at the beginning of 2025. However, the f irst quarter defied expectations, witnessing a surge in tenant demand that drove gross absorption above 22 million square feet. This marked the second-strongest quarterly performance in the market’s history, trailing only the second quarter of 2021. The combination of this robust demand and a slowdown in new deliveries led to a roughly 50 basis point drop in vacancy within just three months.
Major industrial users, such as Ariat and Southwire, who signed leases exceeding one million square feet, were key contributors to the elevated absorption figures. Nonetheless, the market continues to grapple with tenants relinquishing space, a persistent issue reflected in eight consecutive quarters of move-outs exceeding 10 million square feet. This pattern has extended into the current quarter, which has already recorded more than 20 move-outs of 100,000 square feet or more.
Rents | Vacancy | Construction
The Dallas-Fort Worth development landscape shifts as construction starts and quarterly deliveries slowdown.
From the supply side, the market is beginning to exhibit signs of stabilization. Groundbreakings over the past year were among the lowest recorded in nearly a decade, and the first half of 2025 has continued along this subdued trajectory. This slowdown in new construction has been welcomed by many local owners and brokers, who view it as a valuable window for the market to absorb recently delivered inventory. Elevated vacancy levels have shifted negotiating leverage toward tenants, enabling them to secure more favorable lease terms and concessions—conditions that were nearly unheard of just one or two years ago.
Pricing remains most resilient in the market’s urban core, where properties have been more insulated from the influx of new supply and rising availabilities. Elevated rental rates are even more evident among small bay industrial and flex properties. With limited development activity in this segment, vacancies have remained relatively constrained. As supply pressures subside and vacant space is gradually absorbed, the market may be positioned for a resurgence in rent growth by early 2026, coinciding with an anticipated recovery in vacancy rates.
Vacancy Rate (%)
Construction Starts (SF)
YOY Market Asking Rent Growth (%)
Sales
The metro reported sales volume totaling $222 million in Q2 2025.
The industrial sector in Dallas-Fort Worth has seen a decline in sales volume, falling below pre-pandemic benchmarks, with only $1.5 billion in transactions over the past year. Inventory turnover—a key indicator of market activity in non-disclosure states like Texas—has dropped sharply, nearly halving over the past two years. As of early 2025, the trailing 12-month average for turnover sits at 1.5%, a figure notably below the market’s historical norm of around 2%. Despite recent trends, local investors remain optimistic about the short-term prospects for the market. Many anticipate that strengthening rent growth and declining vacancy rates will contribute to cap rate compression as 2025 progresses.
By the Numbers
- Vacancy Change (YOY): -0.3%
- Net Absorption SF: 23.5M
- Deliveries SF: 23.6M
- Rent Growth: 3.2%
- Sales Volume: $1.5B | Last 12 Months | Source: CoStar Group
