Cheers and the clamor of new construction are among the dominant sounds wafting above the downtown Austin skyline of late, as the city welcomes a new wave of hotel construction and construction plans. Not a moment too soon. For several years, the hospitality industry has fretted that Austin’s growth as a destination city is outpacing the development of hotel accommodations, particularly in and around downtown. Voila! Hospitality’s proverbial “rooms available” signs are flickering brighter. By early 2013, no fewer than five major hotels will be under construction, delivering more than 2,000 rooms to Austin’s central business district. From all indications, more hotel developments are in the offing for later next year. That’s welcome news for those who promote Austin’s viability as a destination city and who roll out the red carpet for everything from conventions and corporate meetings to spring break activities and mega-events. In mid-November, Austin will debut as host city, through 2021, of the Formula One U.S. Grand Prix, accommodating Formula One racing’s return to the U.S. following a five-year absence. This high-profile race could attract some 300,000 fans. The South by Southwest Film Conference and Festival, Rodeo Austin, and the Austin City Limits Music Festival are just …
Texas Market Reports
San Antonio’s multifamily market has historically been exempt from the fluctuations typical of other Texas cities. While San Antonio has had its share of new deliveries over the years, the multifamily stock has not increased in step with its Texas contemporaries. The traditional engines of the city– hospitality, health care and the military–provide a rock-solid foundation, but do not offer the types of high-paying wages that drive rent growth and new construction. New construction has also been inhibited by a lack of institutional capital flowing to San Antonio because it was perceived as a “low growth” market. Things, however, are changing. Job growth in industries such as energy, manufacturing, and the financial sector are drawing families to the region like never before, just as long-time San Antonio organizations such as USAA, the Medical Center and the University of Texas—San Antonio (UTSA) continue to expand. As a result of new jobs and a nationwide regression of home ownership rates to more historic levels, San Antonio’s multifamily market is seeing a rapid increase in demand. Developers, both local and national, have begun planning new developments… As of August 2012, San Antonio multifamily properties boast an overall occupancy rate of 92.9 percent. As …
More than a handful of times I have invoked the “If you build it, they will come …” line in discussions with office developers discussing the Southwest submarket of Austin, with the assurance that they can rely on statistics, trends and history. In fact, Austin is in a position to justify the delivery of new Class A office space in the Southwest submarket and there are some rock-solid reasons why. Located in the most geographically and environmentally challenging part of Austin, the Southwest submarket has grown from a mere 1.8 million square feet to more than 6.3 million square feet in the past 15 years. During that time, weathering two downturns, it has shown a resiliency for absorption, occupancy and rental rate strength that leaves the rest of the suburban market in the dust. Here are the factors that drive that resiliency: · Proximity to executive housing: Decision makers consistently find reasons to locate businesses close to their and other executives’ homes. The most attractive areas for executive homes is in the Southwest part of Austin’s MSA. This will be even more significant as traffic issues continue to cause longer commute times. · Adjacency to downtown: In particular, the south …
The off-campus student housing market in Austin is unique when compared to the majority of student markets around the country. From a macro perspective, the University of Texas at Austin (UT) is situated in one of the leading markets in the country in terms of population growth (42 percent from 2000-2011 Austin/Round Rock MSA), job growth (6.1 percent unemployment vs. 8.8 percent national average) business-friendly local and state economies and overall quality of life (“No. 1 best city to live in for the next 10 years” — Kiplinger’s Personal Finance, June 2011). UT has a current enrollment of more than 51,000 students and is the fifth largest institution in the country. UT regards itself as a leader in academics, athletics and as one of the leading research institutions in the U.S. For all the above reasons and more, UT continues to be a huge draw for students both in Texas and from out of state. Despite legislative enrollment limits of approximately 50,000 students, the student housing market in and around UT is one of the strongest student markets in the country today. West Campus (a roughly 10 by 10 block area due west of UT) reported market occupancy for the …
Currently, the Houston multifamily market is in the best shape that we’ve seen in a long time. For example, rents are increasing across the board, particularly in Class A properties. In addition, occupancy is at its highest point in years. We’re still trying to backfill supply into a market that has seen historically low deliveries over the last three years, and Houston is creating serious demand for new units. We use the rule of thumb that for every six or seven new jobs created, there is demand for one new apartment. Thus, Houston has added more than 90,000 jobs in the last 12 months, which tells us that we need to add 12-15,000 units annually just to keep up with current demand. So, all in all, Houston’s multifamily market is healthy right now. There are a variety of trends impacting the multifamily market in Houston. For example, tightening occupancy and low supply are driving concessions out of both urban and suburban markets. We will see increased supply in the next 18 months, but we will be lucky to build enough product to meet demand during that time. Development capital is available for quality infill sites, but investors are still being …
All indications are Fort Worth’s office market has turned the corner and is improving. The beginning of the year started out with activity and transaction levels that have not been experienced since early 2008. While activity has slowed down, we are still on pace for a good year. With limited new supply and increased activity, we are now seeing rates firm up, reduced free rent and positive net absorption. Currently, there are a few options outside of the Central Business District for large blocks of Class A space. One lease that helped tighten the market further was the Alcon lease for 87,000 square feet in the Wilcox Plaza. Vacancy rates for suburban Class A space stands at a record low of 3.88 percent. As a result, several developers are actively looking for sites to build new projects. Hillwood recently announced two new office buildings that will be built in the Alliance corridor totaling more than 160,000 square feet. Construction on the first of the two buildings should break ground in January 2013. In addition, by year end, we expect one or two additional projects to be announced in the Fort Worth suburban market. For tenants looking for space, downtown Fort …
Following a near record level of seniors housing transactions nationally in 2011, the Dallas/Fort Worth seniors housing market has continued to plow ahead through the Great Recession, supported by positive job growth from the aged child, strong demographics and a resilient housing market. This resilience has led DFW to become one of the most sought after seniors housing investment and development markets in the country for institutional quality investors looking to hedge risk in their portfolio. Like in most major metros, Dallas saw a significant pullback from renters through 2009 and 2010 in the independent living product, primarily caused by senior’s inability to sell their homes, combined with 2,550 units of new construction coming on line. This created significant softness in the suburban markets (Plano, Frisco and McKinney) during the downturn, but all have gained momentum as the economy and housing market has strengthened. From 2008 to 2010, the overall independent living occupancy dropped across the Metroplex from 86.1 percent to 83.0 percent, but has recovered to approximately 85.7 percent through the absorption of 803 units during the past four quarters. “We expect to continue to see positive absorption and rent growth in the DFW Metroplex over the next 12 …
Like other markets in the country, the Fort Worth office market began its decline in 2007, got worse in 2008 and 2009 and then visibly rebounded by the end of 2010. The ‘bottom’ of the market, by general consensus of local brokers, was in mid-2010. Without the booming energy business, conditions would have been much worse. Additional market drivers that helped support the local economy and office market during the recession were healthcare and government. The Central Business District Class A sector is comprised of 13 projects with 5.39 million square feet, while the Class B inventory includes 31 buildings with 3,726,829 square feet. Including Class C buildings, total office inventory is a little more than 10 million square feet and the current overall vacancy rate is 12.1 percent. The reported Class A rent averages $26.87 per square foot, plus electricity. The Class B reported average rent is $18.38 per square foot, plus electricity, according to the most recent CoStar Market Report. Other Fort Worth submarkets include Northside, Southside, Alliance, Wise County and Hood County. The downturn and recovery has looked like the classic hockey stick pattern — slow downturn and sharp upturn toward the previous high when things started …
For years El Paso was thought of as a sleepy little outpost in far West Texas on the Mexican border. Many people from the rest of the state knew little about the city, and thought it well suited to be part of New Mexico. The economy was always fairly stable especially in the commercial real estate sector. There was never boom nor bust, just steady growth fueled internally. Arguably the biggest things to happen in El Paso were the construction of Interstate 10 and the Sun Bowl. That was of course until recently with the opening of the Texas Tech School of Medicine, and explosive growth at Fort Bliss. The Army post is in the last phases of a $4.5 billion expansion. That does not include a $1.5 billion, 250-acre Army medical campus, and VA Hospital that recently broke ground. It is estimated that Ft Bliss’s population will expand by 40,000 troops and their families during the next few years. In spite of the economic downturn, El Paso’s future is as bright as ever. It has received many national accolades. Forbes Magazine recently ranked the city as having the 2nd best performing economy nationally in 2011. El Paso is the …
2011 was a good year for the Dallas office market with above average demand, minimal new construction and two quarters of rising overall asking rates. If you look at the Dallas office market since 2001, a typical year net absorption is usually about 800,000 square feet. In 2011, the Dallas market recorded more than 1.6 million square feet. New construction (excluding owner-occupied properties) averages 2.5 million square feet for that same time period, but a little more than 200,000 square feet was completed in 2011. Still, the overall total vacancy rate remains higher than normal at 22.5 percent. Keep in mind Dallas, with its abundance of land and pro-development climate, rarely dips below 20 percent vacancy. The average total vacancy since 2001 is 21.4 percent. Typically if it nears 20 percent, the construction cycle picks up again and more new product is brought to the market. That’s about where the market is headed at this point. Developers have not made any official announcements for new construction yet, but more than a few are prepared to break ground on potential projects in a few submarkets (Far North Dallas and the Dallas CBD being two of the more likely submarkets). Unless there …