At the end of 2023, industrial rent growth remains the clear winner among asset performances in the Dallas-Fort Worth region.

Industrial properties report rent growth of 7.7%, down from the peak of almost 12% last year.

The Dallas-Fort Worth industrial market, however, faces growing pains as developers have added 69 million square feet this year, the highest level on record. Half of the new space consists of larger logistics buildings 500,000 square feet or greater in major industrial nodes in south Dallas and Alliance. As a result, vacancies have expanded 320 basis points over the past year to 8.5%.

There are more options available than in years past, given the flood of new space available to tenants, placing downward pressure on rents. The share of available space on the market has climbed to 11%, equaling 136 million square feet, the highest level reported. Quarter-over-quarter market rents have grown 0.7% from the end of the third quarter to mid-December, the lowest rise since the end of 2012.

Even so, market participants still see aggressive rent growth on new leases and escalations on renewals for smaller bay properties. Rents are predicted to slip as supply outpaces demand through the near term but pick up as the market resets. CoStar forecasts industrial rent growth of 2.7% in 2024 before rising to 6.5% in 2025.

Rents have slipped further for other major asset classes led by multifamily properties, which are down 1.3% over the past year due to supply side pressure in development-heavy pockets of the market. Market rents for office properties are propped up by higher-quality buildings commanding a premium, while expensive tenant improvements and concessions erode growth. Office rent growth is 2% and is expected to fall 2.5% through the end of 2024. Retail properties report growth of 5% and are expected to normalize to 2.5% in the next year.

This article originally appeared on CoStar Insight. It has been republished here with permission.