Market Reports

Texas Self-Storage Markets Respond to Saturation

by Taylor Williams September 6, 2019

Developers of self-storage properties in major Texas cities are consciously putting the brakes on new construction as they wait for excess supply to be absorbed and for positive rent growth to return to the market. The market has been moving in this direction for some time. While property owners have generally maintained occupancy rates that meet pro forma thresholds for profitability, rent growth has been and will likely remain stunted. Supply growth has led to competitors cannibalizing each other’s market shares. In addition, ever-rising construction costs and a dwindling inventory of buildable sites are also governing the pace of new self-storage development. While certain pockets of developable sites still exist here and there, lenders and equity providers have also taken note of the saturated landscape and are tightening their purse strings for self-storage projects. “With respect to major markets, there’s no question that the pipeline is thinning out, and for projects that haven’t yet started construction, probably half of those proposed won’t come to fruition during this cycle,” says Bill Brownfield, owner of Brownfield & Associates, the Houston-based branch of industry-tracking firm Argus Self-Storage. “Markets are largely stabilized in terms of occupancy. But rent concessions and discounts have not only …

September 6, 2019

Market Reports Multifamily Texas Texas Market Reports

Up To the Challenge: Dallas Apartment Market Absorbs Record Levels of New Supply

by Taylor Williams September 2, 2019

In 2019, Dallas/Fort Worth (DFW) once again represents the nation’s top metro for job creation and net migration. These market conditions are occurring at an opportune time as more than 26,000 multifamily units have been completed throughout the market this year, marking a record wave of annual deliveries. This influx of new apartments will increase the metro’s rental inventory by 3.3 percent, yet robust demand for new supply allows net absorption to match delivery volume, lowering overall vacancy by 20 basis points. Prolonged Absorption Over the past three years ending in June, DFW’s apartment stock expanded by 10 percent, or 74,000 units, yet vacancy adjusted moderately during this period. Unit availability hovered in the high-4 to high-5 percent range, with demand supported by the creation of 400,000 jobs, robust in-migration and the widening gap between a monthly mortgage payment and average rent. The extended period of strong leasing velocity was highlighted by the second quarter of 2019, when a record 12,000 apartments were absorbed. Performance during this three-month stretch lowered vacancy by 90 basis points on a quarter-over-quarter basis. With employment growth slated to further improve during the second half of this year — the result of corporate relocations and …

September 2, 2019

Industrial Market Reports Texas Texas Market Reports

Diverse Mix of Industries Propels Dallas Industrial Market to New Heights

by Taylor Williams August 30, 2019

Until about six years ago, the Dallas-Fort Worth (DFW) industrial market was considered a second-tier market, lagging behind the likes of New York-New Jersey, Chicago and Los Angeles in terms of investor interest and demand. Today, the metroplex is not only holding its own with the traditional gateway markets, but in some cases surpassing them, thanks to growth from an exceptionally diverse group of tenants and industries. Natural population growth throughout North Texas has prompted stronger demand for industrial space across a range of user bases: e-commerce, global logistics, consumer products, building materials, pharmaceuticals, food, furniture, aviation. Some notable, six-figure leases that have been executed in the metroplex over the last 12 months and which reflect the diversity of tenant demand — as well as the geographic range of submarkets seeing strong activity — include the following: Smuckers (1.1 million square feet in south Dallas), furniture provider Steelcase (618,000 square feet in Carrollton), marketing firm Taylor Communications (232,000 square feet in south Dallas), ITW Food Equipment (184,000 square feet in Fort Worth), Alliance Glazing (137,000 square feet in Garland), Panoramic Doors (127,500 square feet in Fort Worth) and CEVA Logistics U.S. (100,000 square feet in Coppell). As these deals illustrate, …

August 30, 2019

Market Reports Office Texas Texas Market Reports

Dallas Office Market Grows Its Share of Tech Firms

by Taylor Williams August 27, 2019

While Austin is the Texas city that has become most synonymous with a tech-heavy office market over the last decade, the remarkable amount of overall job growth in the metroplex is allowing Dallas to slowly grab a larger piece of the tech pie. While some of the fastest-growing tech firms in the market right now — Google, Facebook, Indeed — have committed to larger office footprints in Austin, many of these firms still retain offices in Dallas due to its strong supply of qualified labor and relatively cheaper cost of doing business. However, in addition to having offices in Dallas, these firms have contributed to commercial real estate growth in the metroplex through build-to-suit data center developments and large colocation leases with established data center operators in the market. Facebook’s $1 billion data center development in Fort Worth is among the largest in the country, and construction recently began on Google’s $600 million data center campus in the southern suburb of Midlothian. IBM SoftLayer, Rackspace, and LinkedIn are other examples of technology firms taking large data center leases in the Dallas metroplex, North America’s third-largest data center market, according to 2019 figures from DataCenter Hawk. Outside of the context of …

August 27, 2019

Market Reports Retail Texas Texas Market Reports

Investor Demand Accelerates for Dallas Metro Retail Assets

by Taylor Williams August 23, 2019

The Dallas-Fort Worth (DFW) economy is booming with tremendous population, income and job growth trajectories that directly benefit the local retail sector. Shopping center investors have taken notice, as evidenced by the total transaction volume for retail properties during the last 12 months reaching its highest level in more than 10 years. Compelling Fundamentals Investors continue to buy retail properties in Dallas as a result of DFW’s healthy and diversified economy. Population growth and in-migration patterns are significant factors with more people moving to DFW last year than any other metro area in the nation (246 people arriving daily), according to recent data from the U.S. Census Bureau. This surge has pushed DFW’s population to more than 7.5 million residents. Additionally, employment growth has exploded, with DFW leading the nation in job creation last year by adding 116,400 jobs. The Dallas metro unemployment rate has recently dropped to 3 percent, which is the lowest rate in 20 years, and this has further contributed to powerful employment dynamics that continue to fuel consumer retail spending. DFW was also recently ranked as the No. 5 market in the nation for technology jobs, which typically are higher-paying and will add strength to an …

August 23, 2019

Market Reports Office Texas Texas Market Reports

As Users Flock to Quality Space, Houston Office Owners Focus on “Ecosystems”

by Taylor Williams July 26, 2019

If industry professionals, particularly developers and landlords, don’t make educated attempts to understand the mindsets of their tenants, they have little hope of advancing the dialogue and ultimately furthering their understanding of tenant decision-making. Take the Houston office market, for example, and its inventory of approximately 330 million square feet, according to CoStar Group. This market has experienced rising vacancy and declining rents throughout the four-year oil slump, but continues to see strong tenant demand in the Class A space. To this end, CoStar reports that there are still nearly 3 million square feet of new office projects under construction throughout metro Houston, the vast majority of which is Class A product. The high proportion of Class A deliveries is partially attributable to rising land and construction costs that mandate heftier rent projections. But still, there’s no question that Houston’s growth in certain employment sectors — healthcare, technology, financial services — ensures that many of the jobs being created in the city need to be paired with high-quality office space. Understanding and explaining the actions of the thousands of companies that commit to millions of square feet of office space is a case-by-case endeavor. But as markets of this size …

July 26, 2019

Industrial Market Reports Texas Texas Market Reports

With Oil Recovering, Houston Industrial Market Turns to Distribution

by Taylor Williams July 23, 2019

For many years, companies seeking to establish major distribution operations for the southwestern United States flocked to one market: Dallas-Fort Worth (DFW). Any deal that required a warehouse or logistics space of several hundred thousand square feet or more headed to the metroplex, and Houston received what was left — deals falling anywhere from 20,000 to 100,000 square feet. That began to change in 2010, when oil was consistently trading at close to $100 per barrel. Subsequent innovations in hydraulic fracturing that lowered the threshold at which offshore drilling companies could turn a profit, combined with escalated tensions among Middle Eastern producers, kept prices for American crude at high levels until December 2014. At the time of this writing, oil futures traded at about $58 per barrel, suggesting that any hopes of a recovery by mid-2019 had been premature. But between 2010 and 2014, when the party was in full swing, Houston experienced tremendous job growth that attracted tens of thousands of new residents to the city. More housing was built, and significant amounts of industrial absorption began to stem from the need to store and distribute consumer goods, from food to furniture to household appliances. Today, Houston’s population is …

July 23, 2019

Market Reports Multifamily Texas Texas Market Reports

Houston Multifamily Occupancy, Rent Growth Return to Normal After Setbacks

by Taylor Williams July 19, 2019

Houston’s multifamily market has endured battles from all fronts in recent years: the oil slump, hurricanes, flooding, overbuilding in select submarkets, sluggish rent growth of late and lavish concessions to new renters that have been mainstays during this period. But the market now appears to be moving in the right direction with a sense of normalcy. From late 2014, when the oil downturn began, through the price bottoming in early 2016, Houston’s energy economy consistently made headlines across the nation’s publications. Each article claimed that at lower oil prices, the city’s over-reliance on energy would shut off job creation and growth. Yet this period also provided an opportunity to illuminate the incredible diversity within the greater Houston economy. Up until the oil downturn, the city’s diversity had been theoretical and unproven; now, along with the city’s resilience, it is indelible. Expanded activity at Port Houston, particularly in terms of manufacturing, in addition to plastics and petrochemicals, has propelled Houston’s job growth. The same applies to the market’s emerging role as a logistics hub and the expansion of the Texas Medical Center and regional healthcare providers, as well as strong growth in financial services and construction sectors. All told, the metro …

July 19, 2019

Market Reports Mixed-Use Retail Texas Texas Market Reports

Mixed-Use Settings Permeate Houston Retail Market, Drive New Development

by Taylor Williams July 16, 2019

With higher costs of land and construction, increased demand for walkable environments and more acceptance of structured parking, mixed-use is finally becoming the norm rather than the exception as the backdrop for new retail development in metro Houston. Developers of all types recognize that quality retail enhances the value of all surrounding real estate. Apartment and office developers are utilizing retail areas as additional amenities to differentiate themselves from their competition. Selecting the appropriate retailers for highly visible spaces in these developments is extremely important, as those users become strongly representative of the overall project. Project Examples Regent Square, a 24-acre development from GID, spans four blocks, with Allen Parkway, West Dallas and Dunlavy defining the perimeter of the project. GID is currently building apartments on one of these blocks to include 50,000 square feet of retail on the first floor and three large freestanding restaurant pads. JLL has been hired to handle leasing of the project. MetroNational has gained control of the 200,000-square-foot former Sears building at Memorial City Mall and 13,620-square-foot adjoining garage. Trademark has been hired to assist in the redevelopment of the property. Zadok Jewelers announced a new mixed-use development on 1.6 acres at 1801 Post …

July 16, 2019

Market Reports Texas Texas Market Reports

Commercial Lease Assignments: A Tale of Two Leases and A Landlord’s Right to Recapture

by Taylor Williams July 9, 2019

Commercial leases typically contain standard protections for landlords that may be potential pitfalls for tenants seeking to assign or transfer interests in a lease. A lease recapture provision permits a landlord to terminate a lease and “recapture” the leased premises when the tenant requests landlord’s consent to assign, sublease or transfer the lease. These recapture rights, which are frequently overlooked, can actually have shocking results for tenants. In order to assign a lease, the landlord’s consent is required. The Texas Property Code provides that leases, unlike certain other commercial contracts, are not assignable without a landlord’s prior written consent. Many leases enlarge the obligation to get consent by expressly preventing the tenant from selling or changing ownership interests in the tenant without landlord’s consent. These provisions can frustrate tenants in their efforts to expand, increase capital, perform corporate restructuring or to sell equity or assets of their companies. In some cases, the language is so broad that it could be construed to prevent certain collateral assignments that are ancillary to tenant financing. Negotiating Strategies Savvy commercial tenants carefully negotiate assignment and transfer language to include flexibility for future changes in the company. Brokers will often request that landlords consent to …

July 9, 2019

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