The nation's largest pipeline of industrial space is surging in Texas, helping to drive a record amount of incoming new U.S. supply of warehouses, logistics centers and related property, according to the latest industry estimate.

Dallas-Fort Worth, one of the top U.S. industrial markets, has the most space of that kind under construction with about 82 million square feet underway helping to fuel the 656.9 million square feet of industrial space in some form of construction, both record amounts, according to brokerage Colliers. About 20% of that pipeline in the Dallas-Fort Worth area is pre-leased to tenants with the remainder being under construction on a speculative basis.

This wave of new industrial space means vacancy rates could temporarily rise in some markets across the country even as demand remains strong from manufacturers and distributors, said Amanda Ortiz, national director of industrial research for Toronto-based brokerage Colliers International. The new estimates are in line with CoStar analytical data from earlier this year on the surging amounts of construction of warehouses and other logistics space and serve as confirmation of that demand.

"Dallas-Fort Worth really stands out in terms of new construction," Ortiz told CoStar News. "The market continues to see unprecedented levels of construction activity. At the end of the third quarter, it was around 76 million square feet of industrial space that was active in the pipeline, but as of today, it's more like 82 million square feet, which is just crazy. The market hasn't seen this before and it's by far a record for any industrial market."

The average pipeline for all 76 markets tracked by Colliers International is 9 million square feet, a fraction of Dallas-Fort Worth, showing the region's impending supply of industrial space makes it an outlier and leader.

The next highest-ranking market for industrial space in the construction pipeline is Atlanta, with just more than 50 million square feet of industrial space underway, she said, another record for that market. Both Phoenix and the Inland Empire also have impressive industrial pipeline supplies of more than 40 million square feet each, Ortiz added.

"Demand has outpaced supply for a really long time," Ortiz said. "Demand has started to soften a little bit. In 2023, we will see a shift with more supply than demand depending on what happens in this economy. We could also see projects put on pause with developers looking to see where things end up."

The Dallas-Fort Worth metroplex was leading the nation with 66 million square feet of space underway, according to a CoStar analysis in June. In addition, the market at that time had experienced the most new builds over the past 12 months, with 31.4 million square feet.

Ortiz said she expects to continue to see demand from third-party logistics providers and retailers banking on e-commerce, but with online retailing giant Amazon saying in the past year it's pulling back on investing in new facilities, the tenant demand will also evolve.

One of the largest industrial leases this year in Dallas-Fort Worth was for a 1.2 million-square-foot speculative distribution facility in Fort Worth that is still under construction. Target leased the space, spurring the developer Hillwood to begin a few additional speculative industrial buildings to keep a fresh pipeline of new space for would-be tenants.

The two speculative industrial projects total 1.7 million square feet and will help meet the changing timelines of tenants who need the space fast, an executive at Hillwood, a Dallas-based development firm founded by Ross Perot Jr., told CoStar News in August.

The demand for industrial space is expected to moderate in the next 12 months, Ortiz said, roiled by some impacts tied to economic and consumer uncertainty. That could bring a temporary rise in vacancy rates as this swell of new industrial space hit markets like Dallas-Fort Worth, she said, which has a vacancy rate of 5.4%, which is just above the national average of 3.7%.

"With Dallas-Fort Worth's pipeline being mostly speculative, it shows developers really have confidence to ultimately lease their space and hopefully have it occupied shortly after delivery," Ortiz said, adding the developers are also likely eyeing population figures with the region's population rising to nearly 8 million residents with projections of Dallas-Fort Worth being home to as many as 15 million residents by 2050.

"With projections of population in Dallas-Fort Worth being nearly double what it is today, more space is needed for warehousing and distribution," she added.

Despite material delays and labor shortages, industrial projects are continuing to break ground at a record pace in the United States, Ortiz said. The nation's construction pipeline remains "incredibly full," with new supply rising nearly 25% year-over-year in the third quarter of 2022, she said.

The southern part of the country accounts for nearly 40% of the new supply of industrial space in the United States. To date, developers have completed 331.7 million square feet of new industrial space.