- Google decided to exit a 1.05 MSF lease at Northlake 35 Logistics Park in North Texas after spending millions on the buildout of a data center it never occupied.
- According to KBC Advisors, the property, located at 3400 Catherine Court in Northlake, Texas, is now ready for new tenants, and strong leasing activity has been reported.
- Despite this exit, most newly built industrial space in the Dallas-Fort Worth region remains vacant, with more than 30% of newly delivered facilities still available for lease.
- Google continues to invest heavily in Texas, particularly in the data center and cloud infrastructure sector, with plans to spend over $1B in the state this year alone.
In a surprising move, Google (GOOGL) is backing out of a 1.05 MSF industrial lease in the Dallas-Fort Worth area, a space it had intended to use for storing data center materials, per CoStar.
The Mountain View-based tech giant spent millions of dollars on building out the space at 3400 Catherine Court in Northlake, Texas, but never occupied it. The space, now ready for lease, is part of the larger Northlake 35 Logistics Park, a former dairy farm turned into four industrial hubs.
Texas Investments
Despite exiting this particular property, Google’s presence in Texas is felt by all. The company has been investing heavily in its Lone Star data center infrastructure, including campuses in Midlothian and Red Oak, both in the Dallas-Fort Worth region.
In fact, Google planned to invest $1B in Texas last year to meet the growing demand for its data and cloud services. The company has also been focused on renewable energy partnerships in the state to ensure it meets its carbon-free energy goals by 2030.
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Industrial Inertia
Google’s decision to exit this space highlights a broader trend in the Dallas-Fort Worth industrial market. Despite the demand for industrial properties, the region has seen a large number of new projects delivered in recent years, many of which are still struggling to find tenants.
According to Cody Gibbs, CoStar’s market analytics director, over 30% of the 31.2 MSF of industrial space delivered since 2022 remains unleased.
The vacancy rate has been worsened by the fact that a large portion of newly delivered spaces—such as the one Google has vacated—are over 1 MSF, a size that limits the pool of potential tenants. Gibbs noted that seven properties of similar size are currently available for lease in the region.
DFW in Focus
While Google continues to ramp up its investments in the Texas data center market, the exit from this industrial lease reminds us of the challenges still facing CRE, particularly in the highly competitive logistics sector.
For potential tenants looking for large-scale industrial spaces, Google’s former space at Northlake 35 Logistics Park could be an attractive option, since it’s move-in ready and boasts strong leasing interest.
For the broader market, finding tenants for newly delivered industrial spaces, especially those over 1 MSF, remains challenging. Developers may need to reconsider the size and nature of future developments to better align with market demand.
