Texas Market Reports

While rumors of a looming recession dot the mainstream media landscape and pervade conversations at bars and water coolers, Dallas-Fort Worth (DFW) and Austin are humming along with the kind of healthy job growth that reduces that talk to little more than a whisper.  Growth in office-using sectors like tech, finance, engineering and business services in both the state’s capital and largest metropolis continues to fuel demand for space, push rents to new levels and drive price  appreciation on office assets. According to CoStar Group, the Dallas area has added about 90,000 new jobs over the last 12 months, and currently boasts a 3.4 percent unemployment rate, which is lower than both the state and national averages. And based on the most current data from the Austin Chamber of Commerce, payrolls in the state capital grew by about 23,000 between June 2018 and June 2019, while unemployment currently sits below 3 percent. While strong population growth is enough to jumpstart development and absorption in the multifamily, industrial and retail sectors, it’s pure job growth that drives the office space. So it’s not a bad time to be an owner of core properties in desirable submarkets in both cities. But these …

As we enter the fourth quarter, Houston’s office market remains sluggish due primarily to uncertainty in the energy industry. With the price of West Texas Intermediate crude fluctuating between $45 and $60 per barrel, the market has seen minimal oil company expansions.  With the pricing outlook remaining on a bleak to flat trajectory, little growth in office occupancy is expected in the next 18 to 24 months. The cycle favors tenants, now and for the foreseeable future. Should energy pricing return to higher levels, there will undoubtedly be higher occupancy through positive absorption, making the next six months an ideal time to lock in rental rates and construction/build-out costs for the next five to seven years. Through the third quarter of 2019, Houston has seen 217,000 square feet of overall net absorption, including sublease space returning to the direct market. The bright  spots are new Class A downtown properties like Bank of America Tower, 609 Main and Texas Tower, whose current and future tenants have demonstrated their willingness to pay the higher base rates and operating expenses associated with new development. Companies are using office space more efficiently due to technological advances and transformations in mobility and are demanding more …

Office buildings that have been newly constructed or recently rehabilitated are fielding the greatest demand from large companies, which are banking on the idea that lifestyle-enriching amenities and a vibrant surrounding neighborhood create advantages in attracting and retaining talent. According to the Bureau of Labor Statistics, during the 12-month period ending in July, the four major office markets of Texas added more than 200,000 new jobs combined. The state’s unemployment rate was 3.4 percent at the time of this writing, 30 basis points below the national average. The job market clearly favors applicants, and the competition between major office-using companies to secure the best applicants is fierce. Of course, some job seekers still base their employment decisions based on traditional factors like salary and commute time. But all other factors being held equal, employees with multiple job offers are placing greater emphasis on what kind of working environment they can get with one employer versus another. “It’s all about what amenities a building can offer to its tenants,” says Jackie Marshall, first vice president in CBRE’s Dallas office. “Many tenants are willing to pay more to be in buildings that help them recruit and retain talent, and amenities that make …