What Amazon's growing distribution footprint means for North Texas

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This article was originally published by the Dallas Business Journal.

While many companies are temporarily pumping the brakes on expansion due to COVID-19, Amazon is aggressively eyeing more space throughout the country, including in North Texas. 

 As of this week, Amazon occupied 11.4 million square feet of warehouse and distribution space in North Texas across 20 facilities, according to CoStar. The company is also expected to take an additional 2.3 million square feet by the end of the year, CoStar says.

Some of this new space will include a 1 million-square-foot warehouse near Dallas-Fort Worth International Airport, which is expected to open later this year. Located at 2601 S. Airfield Drive, the company confirmed the new facility in February, saying it would create 1,000 jobs. In March, a company spokesperson said Amazon was looking to hire 100,000 people across the country, including some 3,300 in North Texas. It is not known how many employees the company already has locally, but it is believed to be in the thousands.

Other potential warehouse locations have been reported on recently, but have not been confirmed by Amazon. When reached on Wednesday, a company spokesperson said Amazon (Nasdaq: AMZN) does not comment on rumors or speculation. They also did not confirm the company's total footprint locally.

Below are the largest distribution centers Amazon either already occupies or has confirmed in North Texas, according to CoStar and the Dallas Central and Tarrant appraisal districts:

  1. 1301 Chalk Hill Road, Dallas - 2.3 million square feet
  2. 940 W. Bethel Road, Coppell - 1.08 million square feet
  3. 2701 W. Bethel Road, Coppell - 1.05 million square feet
  4. 15201 Heritage Parkway, Fort Worth - 1.04 million square feet
  5. 2601 S. Airfield Drive, Irving - 1 million square feet

 

 

Amazon's local footprint makes it easily the region's largest warehouse tenant, according to Cresa. The company operates warehouses and distribution centers in nearly all submarkets, with multiple locations in north Fort Worth, Coppell, Irving and Dallas, according to CoStar. The only major submarket that Amazon does not appear to have a presence in currently is south Fort Worth.

While experts don't believe Amazon's industrial presence creates a ripple effect when it comes to new companies and jobs moving nearby, some say it can be an endorsement for the submarket they choose.

"When Amazon goes to a certain location, it’s like a seal of approval for that particular area," said Allen Gump, executive vice president at Colliers International.

 

Is Amazon helping drive speculative development?

Amazon's presence in North Texas has not only helped create thousands of jobs, but is potentially driving some of the larger spec development the region has seen lately, experts say.

"It sure feels that way. This year, I can't recall anyone who has leased 1 million square feet of spec space other than Amazon," said Gump.

At the end of the second quarter, North Texas had about 23.5 million square feet of new industrial space under construction, according to Cushman & Wakefield, with 89 percent being spec space. North Texas continues to lead the nation in industrial construction while enjoying its 18th consecutive quarter with more than 20 million square feet under construction, according to JLL.

This abundance of new and available space is not only allowing Amazon to find its perfect real estate locally, but is helping other companies, too.

"I was working with a 150,000-square-foot client and we had done deals in New Jersey and Sacramento. In both of those areas, we had three options and they weren't necessarily quality options. In DFW, there were 28 options," said Alex Coe, principal of Cresa's Dallas office. "It just shows the maturity of this market and the availability of new construction.

Of this new space, a fair amount of it is on the larger side. In June, the Business Journal identified 12 projects around DFW that were either 1 million-square-foot warehouses or had the capability of holding a 1 million-square-foot warehouse. There are numerous other sites that were not included in the article, and since June, more industrial parks have been announced that will have room for a 1 million-square-foot user, perhaps hoping that Amazon could be interested.

 

The future for big deals and spec verses build-to-suit

Besides Amazon's numerous leases, a number of other companies have taken large warehouses in North Texas over the past few years, helping drive large spec development. While the sizes and number of deals has fallen slightly in 2020, experts say there should continue to be interest from companies seeking a large footprint in DFW. The question becomes whether or not these companies will choose to occupy new spec space or choose to do a build-to-suit.

"We’ve done multiple deals in the last two years over 500,000 square feet. We had a 1 million-square-foot deal that took an existing building, we had a 1.05 million-square-foot build-to-suit and a 700,000-square-foot build-to-suit in Fort Worth," Gump said. "The question becomes on these larger deals, is your spec building close enough to what a big user wants? Will they choose to take it or will they do a build-to-suit? The good news for developers is, some companies just don’t have time for a build-to-suit."

While Gump knows of a few build-to-suit projects Amazon has done in smaller markets, he is unaware of any that the company has done locally.

"They haven’t had to because we’ve had a plethora of 1 million-square-foot buildings," he said.

With or without Amazon's aggressive expansion in North Texas, Gump says he believe more deals are on the way from other national firms and logistics companies.

"My sense is that these larger deals are continuing to move forward. There hasn't been a lot of pullback from those national firms, just some stalling on smaller deals. Look at UPS. They just recorded record earnings. Logistics operations and companies that are moving product seem to be pretty resilient with all that's been going on," said Gump.