Texas Market Reports

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During the 2013 Legislative Session, the Texas Legislature established a state tax credit against franchise taxes equal to 25 percent of eligible costs and expenses incurred in rehabilitating certified historic structures. Combined with the 20 percent federal historic tax credit, owners and developers of historic properties in Texas have significant incentives to revitalize and rehabilitate rather than demolish qualifying historic structures. Texas is not well known for preserving historic buildings. While the federal historic tax credit was enacted in 1986, this incentive alone was not enough to prompt owners and developers to negotiate the process of completing a certified rehabilitation with the Texas Historic Commission and the National Park Service. Take for example Mike Sarimsakci’s 211 N. Ervay project located in Dallas. While the building is listed on the National Register of Historic Places and is an example of 1950’s and 1960’s architecture, prior to the enactment of the Texas credit, Sarimsakci did not consider utilizing tax credits because he could raise the capital privately. Further, many tenant brokers indicated that many of the office tenants he sought were searching for unique spaces that had character and a story to tell. The enactment of Texas’ state historic credit altered this …

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In the third quarter of 2014, the Oklahoma City multifamily market recorded 11 transactions totaling 1,537 units for a sales volume of $82.4 million. This is an average price per unit of $53,625. The third quarter experienced a significantly higher sales volume than the first quarter of 2014, increasing 305 percent. The total sales volume for 2014 overall has reached $182.7 million, which is 33 percent lower than the same time period in 2013, when the total sales volume was just over $272 million. However, the total units sold was down only 11 percent compared to last year, which indicates the quality of assets trading is lower than those properties trading  in 2013. For example, in the first three quarters of 2013, just over $215 million in Class A properties were sold, compared to just over $37 million in 2014. This is an 83 percent decrease in total volume of Class A properties and caused the total multifamily average price per unit to drop by 24 percent. This is not an indication of values declining. In fact, the opposite is true. Properties that are being fully marketed and that are providing access to as many buyers as possible are fetching …

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mclane-stadium-baylor-waco

Greater Waco’s economy is on a roll. Positioned halfway between Dallas and Austin, Waco is a prime destination for companies and individuals that want access to large metro areas without the hassles of traffic, expensive real estate and labor shortages. With newly completed facilities, such as Baylor University’s McLane Stadium and major downtown redevelopment projects, Waco is hitting the radar for new development opportunities. September 2014 marked 26 months of positive economic growth for the area, with 6.2 percent growth in the third quarter of 2014 alone. Major players, including Baylor, have played a tremendous role in elevating the status of Waco as a dominant player in the Central Texas region. Just as Texas has seen significant growth since 2008, so too has Waco. One major contributor to Waco’s economic success has been employment growth. Employers are creating new jobs in the area, with 1,500 more positions now in place, 108,200 compared to 106,700 in September 2013. Construction, manufacturing, healthcare, hospitality and logistics remain strong drivers for the economy. The result is a community with a 5 percent unemployment rate and residents with more disposable income. Retail Developers Step Up Spending was up 5.1 percent through the first nine months …

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Texarkana, riding a long-term economic boom with perfect positioning between Dallas and Little Rock, has enjoyed growth fueled by billions of dollars in external interstate projects, including I-30, I-369 and I-49, and hundreds of millions of dollars on the redevelopment of the city’s interstate infrastructure. An abundance of water has secured large-scale industrial developments including the recently opened John W. Turk Jr. Power Plant, Domtar and International Paper. Red River Army Depot (RRAD), the largest employer between Dallas and Little Rock, facilitates one of the largest wheeled and tracked military vehicle manufacturing centers in the world. RRAD coexists with TexAmericas Center, the largest industrial park in Texas, to offer an unmatched land resource of 12,000 acres along with abundant rail access. Texarkana’s strategic positioning, coupled with three interstates, ample rail and the proposed Red River Navigation Project, ensures long-term economic viability. H. Ross Perot, Texarkana’s native son, has endowed millions of dollars to the city’s education, the arts, scouting and the Salvation Army to name a few. Perot has been a major contributor to Texarkana College and Texas A&M University-Texarkana, helping facilitate the expansion of A&M’s four-year university programs to their new Bringle Lake campus, with a strong focus on …

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Positive economic indicators in the San Antonio metro area are bolstering commercial real estate operations. Companies are expanding or relocating to San Antonio, attracted by the diverse economy and skilled workforce. Over the past year, all major employment sectors contributed to job gains. San Antonio recovered all of the jobs lost during the recession some time ago and there is no sign of slowing down. One of the strongest economic contributors is the extraction of oil and natural gas in the Eagle Ford Shale south of San Antonio, which generates thousands of jobs and billions of dollars in output. Heightened production in shale is boosting construction. Recently, Republic Midstream announced a $400 million pipeline and terminal system at Eagle Ford Shale. Additionally, the expanding government sector is fueling job growth due in part to the region’s extensive military operations. As employment prospects grow and a comparatively low cost of living draws new residents to San Antonio, demand for rental housing is strengthening. With single-family home prices on the rise, the renter pool is growing as the gap between owning and renting widens. Effect on Multifamily Sector Capitalizing on these trends during 2014, multifamily developers will deliver one of the largest …

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The Houston retail market has changed dramatically in recent years, but 2014 has seen historically strong real estate fundamentals to date. It is a sign of considerable economic strength that per capita personal income reached a new peak in 2013, even while Houston experienced the largest change in population across U.S. metro areas, according to the latest estimates from the U.S. Census Bureau. Houston’s population increase of nearly 137,700 over the year ending in July 2013 outpaced all other metro areas, with New York in second place (111,749) and Dallas/Fort Worth in third (108,112). Additionally, with Houston employment growth among the strongest in country, it should come as no surprise that household incomes are rising and retail sales are strong. A Retail Landlord’s Market Retail occupancy in Houston reached nearly 93 percent during the first quarter of 2014. While retail availability is extremely limited across the city, it is particularly tight inside the Loop as well as in the northwest areas inside of Beltway 8. Class A product is in high demand across all submarkets, so much so that the highest profile centers currently have no availability. However, despite this high demand, retail construction activity is less than a quarter …

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Purpose-built student housing has always been a dynamic market segment with unique challenges and opportunities. As an asset class, student housing fared well during the recent downturn, but the micro-market nature of these developments precludes too many generalizations. What makes a university a strong market for new student housing is in large part due to the dynamics at work in that specific university community. In addition, student housing being developed today reveals a trend toward high-end finishes and lavish amenities. Hyper-local Market On a national scale, the student housing market is large and growing. As the recession drove more people back to college, developers began adding new beds to campus communities across the nation. The swelling ranks of college enrollment, even as the job market declined, is one reason student housing continued to provide strong returns in a weak economy. But within a university community, there is a finite market for off-campus housing. For example, if a university has 20,000 students, one-third may live on-campus and one-third may commute or live in conventional housing. The other third — 6,500 students — in the market for off-campus housing likely represents the total market. If there were already 5,000 beds available, the …

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Austin is maturing as a commercial real estate market. Over the past few years, the city has witnessed an increase in institutional and foreign capital attracted to Class A office assets in the metro area. Most of the new investors in Austin are capitalizing on continued rental rate growth in the office sector, but is this growth sustainable? Austin’s overall office occupancy rate and rental rates have traditionally been a series of steep peaks and valleys, but will future growth be dictated by these historical trends? Tech Bubble Bursts Leading up to the burst of “tech bubble” in 2001, office leasing in Austin was in full swing, with an occupancy rate of 93 percent. Dun & Bradstreet ranked Austin as the top city for high-tech startups in 1999, and Angelou Economic Advisors estimates that more than 200 new companies were added to Austin’s roster of technology firms in that year. Austin companies secured an estimated $740 million in venture financing in the first three quarters of 1999, more than triple the funding placed in all of 1998. The absorption witnessed leading up to this bubble was phenomenal, but the growth was inflated by the source of the rental payments. These …

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Is the Dallas/Fort Worth multifamily market headed back to the same level of intensity we experienced from 2005 to 2007? Most of the signs suggest that we are on track to not only meet this same amount of demand, but also outperform the market of the mid-2000s. So what are the drivers that are leading this investor demand? First, as a whole (not only Dallas/Fort Worth), Texas is flourishing right now. The state leads the nation in job growth, gaining nearly 300,000 new jobs in 2013, with one-third of those being considered high-paying jobs. Second, Texas leads the nation in population growth. These new residents benefit from the affordability of Texas versus that of other states. Here, we enjoy no income taxes and a lower price of living. In turn, this provides a better quality of life. Performance Needless to say, such growth and business-friendly conditions have a large impact on the multifamily sector of commercial real estate. Occupancies are the highest they’ve been in more than a decade. The current overall vacancy of 5.4 percent is a full 100 basis points below the level we saw 12 months ago, and effective rents have increased by 3.3 percent in the …

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Galveston is poised for economic growth and expansion on several fronts. With a proven track record for resiliency, the city has continued to see investments across the island touching all geographic and economic clusters. As illustrated in the 2013 Developer Profile magazine, a publication of the Galveston Economic Development Partnership (GEDP), more than $2 billion in investment is currently in process across the island. The area is seeing new investment in both public and private sector ventures. Retail, commercial, residential, industrial and institutional projects continue moving forward at an accelerated pace. Education & Healthcare As home to the University of Texas Medical Branch at Galveston (UTMB), Texas A&M University at Galveston (TAMUG), Galveston College, Texas A&M Engineering Extension Service (TEEX) Center for Marine Training and Safety, the Galveston Independent School District and several other private schools and charter schools, Galveston Island has a strong education sector. These institutions are each making investments, which points to an enhanced and superior environment for education and healthcare services. For example, UTMB is currently constructing the new Jennie Sealy Hospital, a $438 million facility with 310 patient rooms, 58 intensive care unit beds and 20 state-of-the-art operating rooms. The hospital is expected to open …

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