As a lender in construction and permanent financing of new multifamily properties, Mason Joseph Co. is constantly assessing and reassessing future supply and demand estimates for rental properties. Tarrant County has several high-profile apartment properties under construction, causing some in the lending industry to ask if the market is on the verge of being oversupplied. Our answer to that question is a firm “no.” Since 2010, a year in which Tarrant County boasted a ratio of 1.07 housing units per household, the market has suffered diminished production of all housing types. As of 2017, ESRI estimates that the units-to-household ratio is closer to 1.09. While that difference appears small, it means about 14,000 fewer housing units were built in Tarrant County from 2010 to 2017 than would be expected. A review of housing permits issued for the following two periods supports that data. From 2001 to 2010, the volume of housing units permitted exceeded the number of new households by an average of 821 units per year. From 2011 to 2017, the equation flipped and Tarrant County added 354 more households than housing units annually, implying the county has now been undersupplied by about 1,200 units per year for the …
With occupancies, rental rates and volumes of new construction on the rise, the Fort Worth retail market continues to draw a great number of investors and available debt lenders to the area in search of deals. Stabilized strip centers in high-traffic areas are in high demand, often trading at first-year returns in the high-6 percent to low-7 percent range. The Dallas-Fort Worth (DFW) metroplex’s thriving economy and growing population has prompted greater retail spending, which, in combination with the shifting retail landscape, is generating strong demand for space. During the first quarter, area employers added 24,300 positions. Many of these jobs were created at businesses that are situated within master-planned, mixed-use developments that combine office, retail and rental units, which has helped foster greater retail spending. As of the first quarter, average retail spending per household in Fort Worth reached $4,439 per month — 17.3 percent higher than the U.S. average. Looking forward, it seems likely that these trends will continue as the DFW population is projected to expand by 728,000 people over the next five years. This should help sustain healthy demand and positive momentum for retail real estate. Along with the positive economic outlook, the reconfiguration and diversification …
The recent announcement that XTO Energy Inc., a division of energy giant ExxonMobil, will be moving 1,600 jobs to Houston was not the best news for Fort Worth. The move, which will occur in waves between 2018 and 2020, will reduce downtown’s private workforce by 3 percent over the next few years and lead to several of the company’s CBD properties hitting the market for sale. Broader economic implications notwithstanding, many tenants, landlords and city officials are wondering what impact XTO’s move will have, not only on the office market, but also on the downtown area’s commercial real estate market. However, any worries that the move would drastically upset the downtown market’s equilibrium appear to be misplaced. Most office sectors, especially the CBD’s Class A market and the suburban market that includes the West 7th and West/Southwest Fort Worth areas — should see minimal impact. It is even possible that most of the Class B market in the CBD will remain unaffected, as demand for re-development or from existing office users may consume much of XTO’s spaces. To understand how this move could affect downtown Fort Worth, it helps to look at the bigger picture. The current CBD office inventory …
Healthcare facilities have become a mainstream investment asset class for private and institutional investors over the last decade. Healthcare assets with strong credit tenancy and on-campus locations are now fetching record pricing. Pressure from consumers, federal and state legislation and fiscal responsibility are driving changes in the delivery of healthcare services. Significant consolidation is occurring in the form of acquisitions and affiliations. The most visible and tangible change to the consumer has been the proliferation of urgent care facilities. Other drivers of healthcare facility construction include hospital operators pushing for their brands and facilities to be more convenient to the consumer. Increased focus on preventative care and consumers’ desire for quick and convenient access to services near work or home plays a role as well. These trends are relevant and visible in the 2017 El Paso healthcare market. Population Growth Leads Historically, El Paso ranks among the nation’s fastest-growing metropolitan areas, averaging decade-over-decade growth of 21 percent from 1960 to 2010. The MSA, composed of El Paso County and the more recently added Hudspeth County, is projected to hit nearly 883,000 residents by 2019. In 2014, when El Paso data was combined with data from sister city Ciudad Juárez and …
The border economy of the United States and Mexico is complex and deeply intertwined, to say the least. As such, the sister cities of El Paso and Juarez should be viewed as one economy. The region ended 2016 on a high note. According to the Federal Reserve Bank of Dallas, El Paso’s total nonfarm employment rose 1.7 percent during the year, besting the state average of 1.6 percent. The city added more than 5,000 jobs, with strong gains in service-providing sectors offsetting losses in the manufacturing sector. Leisure and hospitality led the way, according to the Fed, adding more than 1,700 jobs. At the same time, employment in Juarez’s manufacturing sector was up 5.4 percent from the previous year for a projected total of 263,000 new jobs. The downtown El Paso office market currently totals about 3.2 million square feet across 65 buildings. It breaks down into about 1.1 million square feet of Class A space, 1.2 million square feet of Class B space and 900,000 square feet of Class C space. For years, vacancy in the city’s Central Business District hovered around 20 percent, with virtually no new construction. But lately, conditions have dramatically improved. According to CoStar Group, …
With an inventory of about 63 million square feet, El Paso’s industrial market has played a pivotal role in the business of commercial real estate for the past 10 years. During that stretch, portfolio trades have come to dominate industrial transactions in this market. For example, Dallas-based Stonelake Capital Partners recently added to its holdings by buying four buildings from 5 Star Real Estate in Vista Del Sol East totaling about 567,000 square feet. Stonelake had entered the market several years prior after buying 11 buildings totaling roughly 1 million square feet in Butterfield Trail Industrial Park from two separate entities, Louis Kennedy and Lincoln Properties. Other defining examples of trades include the activity of IndCore, a Blackstone company that began buying Industrial real estate in El Paso in 2010. The company purchased 1.2 million square feet of assets from Prologis; 1 million square feet of space from Northwestern Mutual Credit and 1.2 million square feet of product from UBS. In addition, Allstate foreclosed approximately 500,000 square feet of the KASCO portfolio in 2011, which was re-sold to Covington Capital in 2015. CIII Capital Partners absorbed eight buildings totaling 900,000 square feet from Titan Industrial in 2012. Soon after, CIII …
Long-time El Paso residents frequently hear people talking about the good things happening in our city. To be sure, El Paso is an enigma and a contradiction — a big small town with its own identity. Cultural, economic, social and ethnic differences are comfortably accommodated in a “mi casa es tu casa” openness. Contrary to our “wild west” reputation, El Paso ranks as one of America’s safest cities by size. The closest major city to El Paso is Ciudad Juarez, a city of 1.5 million people just across the Rio Grande River in the Mexican state of Chihuahua. The economies of the two cities are inextricably linked and create a major trade area on the southern U.S. border with Mexico. Roughly 30 percent of El Paso’s retail sales come from Mexican shoppers who also access educational institutions, medical services and professional services on the U.S. side. American and multinational manufacturers employ more than 200,000 people in Juarez and rely on El Paso’s transportation and trade infrastructure. The expansion of both trade and interdiction at the border has generated thousands of new federal agency jobs paying wages above the city’s median incomes. Apartment development and ownership in El Paso are dominated …
The terms “experiential retail” and “mixed-use development” are both thrown around heavily in the context of 21st century commercial real estate. As buzzwords for the changing landscape of retail real estate and encapsulations of the preferences of millennials, the terms are as popular in their usage as they are arbitrary in their application. Is an apartment building with a ground-floor restaurant or coffee shop really considered mixed-use? Is it actually legitimate to think of buying shoes or jewelry as an experience? The answer varies depending on who’s asked. But the fact remains that dividing lines between certain property classes are beginning to blur. Increasingly, office and multifamily projects are designed to include food, drink and entertainment options, which have become the only real common denominators among mixed-use projects. Given that those three facets of retail involve spending on one-time, consumable products and services, they have become the face of experiential shopping and spending. Integrating retail development into mixed-use projects, as opposed to standalone shopping centers or pad sites, comes with its own unique challenges: parking, noise restrictions and sourcing contractors that specialize in build-outs for multiple property types, to name a few. But developers realize that no matter how much …
For the past several quarters, the headlines of most CRE publications in Texas and beyond have proclaimed the end of retail as we know it. By now, we’ve all heard the stories and seen the writing on the wall: e-commerce will kill the shopping mall; large anchors that landlords have counted on for decades are shuttering and Amazon will be the end of the retail storefront. It’s a familiar tale as of late. But amid the doom and gloom of store closings, Houston seems to be staying on top of the trends, as its retail market remains healthy and appears to be moving ahead. In fact, despite losing over 70,000 oil-related jobs since 2015, Houston’s retail market remains one of the strongest in the country, posting an average occupancy rate of 95 percent. In addition, employment growth in the retail sector grew 5.1 percent in 2016 amidst the oil bust. Despite these strong retail indicators in Houston, the aforementioned market changes do have an effect on the retail environment. And while retailers themselves need to make the biggest adjustments, developers and landlords are not without their own challenges. Like the rest of the country, Houston retailers must figure out ways …
Speaking to a panel of real estate professionals in the 1980s on the dangers of overbuilding during a period of economic expansion, Dallas real estate magnate Trammell Crow offered lenders in the crowd a simple proposition: “If you stop lending, I’ll stop developing.” Thirty-one years later, the nature of that relationship has manifested in the Texas self-storage market. After minimal delivery of self-storage properties in 2012 and 2013, development began to surge in 2014. The Texas Self Storage Association (TSSA) estimates that there are now roughly 6,500 facilities statewide, and local sources concur that unit growth from 2014 to the present has been somewhere in the neighborhood of 350 new facilities per year. This development boom has occurred in the face of rising land prices, high property taxes and a constricting pool of skilled labor that has driven up construction costs. Overall economic growth is contributing to the concern as well. Lenders are still lending, thus developers are still developing, betting that the pent-up demand for self-storage properties in Texas still has some gas left in the tank. The bullish perspective on self-storage appears to go beyond the Lone Star State. Tennessee-based hotel data and research firm STR, which has …