Market Reports

Building Size Matters in Amarillo Industrial Market

by Taylor Williams July 13, 2018

Amarillo’s industrial market is truly a tale of two sectors, as some form of that expression goes, and the key number is 50,000 square feet. The occupancy rate for industrial properties in the sub-50,000-square-foot range in Amarillo remains very high, with few properties of this size sitting on the market for extended amounts of time. With such high occupancy rates, several new developments have recently sprung up. Those with both large footprints and divisible floor plans to meet the needs of smaller tenants tend to be most successful in terms of leasing velocity. In addition, developers of this product type are seeing its success and gravitating to Amarillo with spec projects. This sector of the industrial market should remain profitable for developers unless construction costs increase at a greater pace than rents can justify. The lull lies in existing properties that measure more than 50,000 square feet. In a smaller market like Amarillo, properties of this size sitting empty can be an ominous sign, and a few in particular have really come to symbolize concerns about sales of assets of this magnitude. Such properties include a 140,208-square-foot manufacturing facility previously occupied by chemicals manufacturer Techspray; a 115,000-square-foot facility formerly occupied …

July 13, 2018

Market Reports Office Texas Texas Market Reports

Fort Worth Office Market Embodies Live-Work-Play Mentality

by Taylor Williams July 6, 2018

Over the last 15 years, the office market of Fort Worth, as well as that of the metroplex as a whole, has experienced steady growth in both development and absorption of new product. DFW’s office vacancy rate currently sits at 15 percent, according to CoStar Group, indicating the ceiling for new growth has not yet been hit. The traditional drivers of job and population growth have fueled new construction and strong leasing velocity for office properties in Dallas. But in Fort Worth, particularly the downtown area, the growth is more visibly tied to the live-work-play trend embodied by millennials and other young members of the workforce. The health of Fort Worth’s multifamily, restaurant and hotel markets are all contributing to the growth of the office sector. Office developers consider a number of factors when constructing new space. But much like any project, location is key. As Fort Worth’s need for more housing, dining and hotels has grown, the walkability factor in the office sector has only increased in importance. As such, it’s not only the employees that are drawn to properties that are located within walking distance to residential buildings and entertainment destinations. Developers are also coveting these sites. Entertainment …

July 6, 2018

Market Reports Multifamily Texas Texas Market Reports

Soaring Home Prices Drive Multifamily Absorption, Sales in Fort Worth

by Taylor Williams June 29, 2018

The Dallas-Fort Worth (DFW) metroplex will lead the nation in absolute job creation for a third consecutive year in 2018. Strong employment gains have produced healthy household formation trends as new residents migrate to the market and young adults continue to move out on their own. As a result, many new residents are filtering into apartments as homeownership in the metro falls out of reach. Pricing Concerns Since the end of 2012, median home prices in DFW have increased nearly 60 percent to more than a quarter of a million dollars, with median prices in some core neighborhoods reaching well above half a million dollars. At the same time, the projected minimum qualifying income rose marginally in comparison. The gap in growth between these two metrics makes single-family homeownership unattainable for a number of residents. And although the homeownership rate has ticked up over the past couple of years, it remained below the national average in the first quarter of 2018. These trends bode well for the apartment sector, ensuring overall absorption will be healthy at a time when developers are adding a record number of units to inventory. Households, whether renting or owning, are searching for affordable living options …

June 29, 2018

Industrial Market Reports Texas Texas Market Reports

Fort Worth Industrial Market Gaining Ground on Big Brother Dallas

by Taylor Williams June 22, 2018

Any commuter who takes Interstate 35 on a regular basis can tell that the Fort Worth industrial market is continuously growing. But the question is, how much longer will the growth last? Numerous signs point to the metro’s industrial market having considerably more runway for new development, as well as key factors in place to maintain strong positive absorption of existing industrial space. These factors include continuous and regular population growth, a low cost of living, strong labor force and an exceptional availability of developable land. Historically, Fort Worth’s industrial growth has always lagged that of Dallas. But times are changing. Just four years ago, there were very few national developers taking space and setting up operations in Fort Worth, but now major firms can’t seem to get here fast enough. To be sure, the state’s soft regulatory environment and tax-friendly structure have always helped lure businesses to Fort Worth as much as they have to Dallas, which usually gets the big-name relocations. But the speed at which Fort Worth is catching up to its big brother is real, and the industrial market may embody it better than any other sector. One construction-based statistic captures this trend above others: There …

June 22, 2018

Market Reports Retail Texas Texas Market Reports

University Submarket Emerging as Retail Hotspot in Fort Worth

by Taylor Williams June 15, 2018

For the last several years, Fort Worth’s retail market has posted a vacancy rate of 5 to 6 percent, suggesting that absorption is strong yet new construction is still permissible. However, there is a difference between Fort Worth’s vacancy rate and that of comparably sized markets wherein 95 percent of the retail space is occupied. In Fort Worth, occupancy is evenly distributed from submarket to submarket. Because of this balance, the metro’s most thriving retail neighborhood — the university corridor — and the driving forces behind its growth often go overlooked. Perhaps because it has only one campus that is located within a large city and even larger metropolex, Texas Christian University (TCU) doesn’t always get the credit it deserves for driving retail growth in Fort Worth. Rarely in recent history, however, has the connection between the two been more visible. According to the school’s website, its total enrollment was approximately 10,400 students during the academic year ending in May 2017. Three years earlier, that figure stood at roughly 9,700. That difference of 700 or so students may not seem like much at first. But it bears reminding that these are young adults attending a private university. This means that …

June 15, 2018

Market Reports Retail Texas Texas Market Reports

Retailers That Cater to Single-Family Homes Find Success in Rio Grande Valley

by Taylor Williams June 8, 2018

As the number of jobs and people in the Rio Grande Valley (RGV) grows, the region’s retail market holds steady. Historically, vacancy in this market tends to hover between 5 and 7 percent. So the current retail vacancy rate in the McAllen-Edinburg-Mission MSA, which according to CoStar Group is 4.5 percent, represents a couple different trends. First, the vacancy figure illustrates positive absorption of newly constructed retail space. In 2016 and 2017, the market added about 770,000 and 675,000 square feet, respectively, its highest supply additions in nearly a decade. Second, the diminished vacancy rate suggests that new retailers are entering the McAllen MSA, which can be a gauge for the rest of the RGV. In actuality, much of the new space is being leased to retailers that already have a presence in the valley. One might think the RGV is too small a market to support healthy same-store operations, but this is not the case. Best Buy, Walmart and Ulta Beauty can attest to this. A Dominant Sector There is a common thread that unites these newcomers, and it involves single-family development. According to the latest HUD data available, single-family home sales increased 3 percent year-over-year in 2017. More …

June 8, 2018

Industrial Market Reports Texas Texas Market Reports

Heightened Border Activity Drives Down Industrial Vacancy in Rio Grande Valley

by Taylor Williams June 1, 2018

The industrial market of the Rio Grande Valley (RGV) is off to a blistering start in 2018, thanks to a combination of increased commercial activity around the U.S.-Mexico border and renewed political and military interest in the region. We use the tri-city area of McAllen-Edinburg-Mission, now the fifth-largest MSA in Texas, as a yardstick for our regional analysis. According to CBRE, industrial vacancy in this market registered an all-time low of 3 percent during the first quarter. In addition, the market posted positive net absorption of approximately 79,000 square feet during the first quarter, a year-over-year increase of 24,000 square feet. Average asking rents for industrial space are also up 40 cents from the first quarter of 2017. Demand for industrial space in the RGV has always been a factor of the region’s proximity to Mexico. The Mexican border city of Reynosa absorbed more than 2 million square feet of industrial space in 2017. More than 1 million square feet of industrial product is under construction in Reynosa, and the pipeline includes everything from heavy manufacturing plants to rail-served distribution centers. This aspect of the RGV’s location has always played a pivotal role in generating demand for warehousing — for …

June 1, 2018

Market Reports Office Texas Texas Market Reports

Fate of NAFTA, Foreign Trade to Shape Rio Grande Valley Office Market in 2018

by Taylor Williams May 25, 2018

The economy of the Rio Grande Valley (RGV) has always been closely linked to foreign trade. The region’s numerous port markets and its proximity to Mexico — in particular, the robust industrial market of the Mexican border city of Reynosa — have always ensured that international commerce plays a key role in the economic success of the RGV. Manufacturing and distribution have always been major drivers of growth in the RGV. We often analyze the performances of these sectors when gauging the health of the region’s office market, as the performance of the office market tends to trail the performance of the industrial sector, usually by a period of 12 to 18 months. The office market of the RGV consists mostly of small, Class B properties developed in the 1980s and 1990s. There are no true skyscrapers or trophy assets in this region, as office users in the RGV simply don’t demand the level of amenities and quality of space as their counterparts in major markets. Small and steady as the office market may be, it is not immune to the influence of larger political movements. Everyone with a vested interest in RGV commercial real estate is keeping a close …

May 25, 2018

Market Reports Multifamily Texas Texas Market Reports

Rio Grande Valley Multifamily Market Playing Catch-Up on Class A Product

by Taylor Williams May 18, 2018

Commercial real estate sectors in secondary and tertiary markets often suffer from a lack of current, comprehensive data and metrics. Until a few years ago, the multifamily market of the Rio Grande Valley (RGV) was no exception. Much of the region’s multifamily product consists of “clusters” of fourplexes. In many cases, different investors own different units within these properties, which generally do not have management and leasing offices with hard data. Consequently, for years multifamily developers and brokers in Hidalgo and Cameron counties operated without reliable information on their market, generally ceding to the ideas that it was overbuilt. Turns out they were incorrect. Year-over-year rent growth in this market tends to be flat. Fluctuations are short-lived and back-and-forth in nature. But beginning in 2015 and carrying over into 2016, multifamily players in the RGV began to realize that their market was not overbuilt and that in fact, demand for better product was rising. Volatile Vacancy To better grasp the ebbs and flows of this market, we revert to 2008 and pre-recession data. To simplify our analysis, we use the McAllen-Edinburg-Mission MSA as a proxy for the region. In 2008, multifamily vacancy stood at approximately 6 percent. By 2011, when …

May 18, 2018

Market Reports Office Texas Texas Market Reports

Texas Office Markets: Who’s Hot, Who’s Not

by Taylor Williams May 11, 2018

From Dallas-Fort Worth’s (DFW) explosive rate of corporate relocations and expansions to Houston’s reliance on oil prices to Austin’s strong supply of tech talent, there’s very little common ground among the office sectors of Texas’ biggest cities. And whereas the pace of sales, development and absorption for certain property types — industrial, multifamily, self-storage — are strong across DFW, Houston, Austin and San Antonio, it’s the office sectors of these metros that truly capture their differences. The office markets of the Lone Star State’s four major metros each have a different story to tell — a narrative that speaks to their core demand drivers, as well as their projected performances for the rest of the year. In this piece, we take a closer look at the crucial factors underlying each of the Big Four’s office markets. DFW: Slowing But Stable The DFW office market isn’t as hot as its multifamily or industrial sectors, which are seeing record volumes of new construction and absorption, respectively. But the metro’s ability to create 100,000-plus jobs per year ensures that its strong office fundamentals can be maintained. The metro posted year-over-year rent growth of 2.2 percent, according to CoStar Group, right on par with …

May 11, 2018

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