The resumption of job growth and significant reductions in new construction will support improvement in Dallas/Fort Worth apartment fundamentals through the end of the year. During the first half of 2010, employment in the metroplex increased by 32,600 jobs, a welcome turnaround after the loss of 124,000 positions during the recession. While the financial, information and trade, transportation and utilities sectors shed a combined 6,000 jobs in the first half, the government, manufacturing, and education and health services sectors led job creation, adding 34,000 positions. As a result, the unemployment rate in Dallas/Fort Worth dropped roughly 10 basis points to 8.2 percent in the first half and remains well below the national average. Developers will deliver approximately 7,600 apartment units in 2010, down nearly 56 percent from 2009 and more closely aligned with new-supply trends in 2006 and 2007. Construction remains focused on the Dallas side of the Metroplex, with developers in Tarrant County completing 2,675 units during the past year. New supply in Fort Worth was isolated to the North Arlington, Northern Tarrant County and Northwest Fort Worth submarkets. After rising 360 basis points through the recession, apartment vacancy in Dallas/Fort Worth declined 80 basis points to 8.9 percent …
Texas Market Reports
Dallas/Fort Worth’s retail market continues to show the impact of the economic downturn, most notably in a lower occupancy rate. But the market at mid-year 2010 is showing signs of getting a little better. The market is helped by the improving economy. For example, April represented the third month in a row of positive job growth in D/FW, although overall unemployment remains more than 8 percent. As of mid-year, D/FW shows an occupancy rate of approximately 86.2 percent, compared to 86.4 percent at year-end 2009. The rate, which is very low, results in part from the many vacant boxes that were created in the past few years by the closures of Circuit City, Linens ‘n Things, Shoe Pavilion, Steve & Barry’s and Mervyn’s, plus underpforming grocer and department store locations. The rate remains fairly consistent thanks to a market where no major chains have gone out of business. Other than a handful of 2010 closings of underperforming Blockbuster stores (following a number of 2009 closings), we haven’t seen major chain pullbacks similar to when Linens ‘n Things failed in late 2008 and Circuit City and closed its last stores in early 2009, putting hundreds of thousands of feet back onto …
Despite a spike in supply last year and increasing competition from the affordable housing sector, San Antonio’s solid labor market and resilient economy will help to improve apartment fundamentals by the close of 2010. Following steep inventory additions in the first quarter, deliveries will slow significantly through the second half of the year. As renter demand begins to outpace supply growth, owners will trim incentives, reversing 10 quarters of revenue declines. The lower tiers will register the greatest revenue increases, supported by vacancy improvements toward the end of the year. Foreclosure activity has increased 19 percent over last year, and some top-tier renters will likely to make the transition into homeownership this year as these properties come to market. Class B and Class C operators will get a boost from the strengthened labor market as traditionally blue-collar employment sectors start to recover rapidly. In the construction sector, for instance, roughly 1,200 construction workers will be hired in the next few months to complete the Brooke Army Medical Center. During the last 12 months, developers have ramped up the pace of completions to 3,620 units, or a 2.5 percent inventory expansion, following the delivery of 2,490 units in the previous year. …
The Austin retail market is holding steady in the current economy due in no small part to positive media coverage. According to Sherry Sanchez of NAI Austin, numerous media organizations have placed the city near the top in many “best of” ranking lists. These honors have helped keep the retail market stable because job seekers from all over Texas have been coming to Austin, moved by reports of finding better jobs in the Capitol City. “There's a big huge flight of people moving to central Texas who don't even have jobs yet,” she says. “We have job opportunities all over the map for people from blue-collar workers to white-collar workers.” Companies in the city are also spurred on by stimulus money aimed at green energy projects. Finally, the stability of government jobs means a large number of Austinites are gainfully employed. But because no markets anywhere in the country are thriving, these factors mean that Austin is simply staying ahead of the glut. “We're not seeing attrition as rapidly as they are in a lot of parts of the country. Our service providers are hanging in there — some are expanding — and our restaurants are doing well,” Sanchez says. …
The abundance of completed units delivered to the market has had the biggest effect on the Dallas/Fort Worth multifamily sector. From September 2008 to September 2009, almost 15,000 units were completed in the Metroplex — nearly double the 7,600-unit annual average during the previous 5 years. Occupancy in the Dallas area dropped 0.2 percent to 89.8 percent during the third quarter of 2009, its lowest point since early 2005. However, occupancy for newer product held steady, while occupancy in older product tiers has suffered. The 1990s-era properties were the only product age category to achieve occupancy of more than 90 percent in the quarter, posting 92.4 percent occupancy. During the third quarter, 2000s-era product posted an 89.4 percent occupancy rate, and 1980s-era product posted an 89.8 percent occupancy rate. MPF Research forecasts that occupancy will drop 170 basis points to 88.1 percent in the next 12 months, given the huge stock of new deliveries expected to hit the market. New construction deliveries will also cause rents to drop further while rent concessions are expected to increase. One planned construction project is the redevelopment of the historic Continental Building downtown. The Dallas City Council approved $17 million in tax increment financing …
Historically, hotel rooms in San Antonio have either been in the central business district (CBD) or near the airport and “loop land.” In the 1980s and ’90s, there were two top golf resort properties built — Hyatt Hill Country Golf Resort near Sea World and Westin La Cantera Golf Resort near Six Flags Fiesta Texas — that attracted a new set of business. Additionally, the highway-located budget properties began posting strong numbers. In more recent years, hotel chains have recognized the need to cater to a mid-to-upscale market of tourists and small business road warriors who were unable to find hotel rooms during special events (such as The Final Four) for large conventions or during the busy summer months. Mid-upscale properties, including Marriott, Intercontinental Hotels, Hilton, Starwood, Sheraton, Hyatt, Doubletree, Drury, as well as boutique CBD/River Walk properties such as The Valencia, Watermark Hotel & Spa and Hotel Contessa, were developed and changed the entire complexion of the hospitality market in San Antonio. This year, there have been three major developments that are impacting the hospitality market in San Antonio: • The completion of a 1,000-room Hyatt Regency hotel/condo project adjacent to the Convention Center on the River Walk • …
The impact of today’s worldwide economic downturn and credit crunch is significant, but it is in no way the worst in history, especially for Houston. Houston was hit harder than other markets in the 1980s; in a way, this guaranteed that the city would be ahead of the rest of the nation in terms of avoiding a recession. Compared to the rest of the country, current demand for retail space in the area continues to be high, and the city has a relatively low vacancy rate of about 10 to 12 percent. Houston’s economy is still largely based on energy, but to a lesser extent than in years past. Houston’s growing population and strong economy continues to fuel a reasonably healthy retail market. A relatively low unemployment rate and a low cost of living are driving forces of the resilient market. In 2008, as most of the country was experiencing downsizing, Houston had a net gain of approximately 57,000 jobs in the region. Residents have continued to shop, but the habit of buying has changed — or it has at least slowed down a bit. Nonetheless, retailers consistently say Houston is one of the strongest performing markets in the country. …
Overall, the Austin office market is facing many of the challenges that other major metropolitan areas are confronting. However, the Austin market has relatively strong employment fundamentals and continues to attract office-using employers and skilled employees. The office market should rebound earlier and stronger than the national bounceback once positive absorption returns, with the South, Southeast and CBD submarkets leading the way. Austin currently boasts the strongest employment market of any major metropolitan area in the country, though significant weakening in the office sector is projected due to overbuilding. The amount of vacant space increased by more than 1 million square feet in 2008, an addition of 14 percent to existing inventory. These additions shifted the leverage in lease negotiations to tenants, resulting in lower rents and elevated concessions; this was particularly true in the Northwest and Round Rock/Georgetown/Cedar Park submarkets, which experienced the greatest increases in inventory. As a result, asking rents are forecast to fall to $24.66 per square foot, and effective rents are projected to end 2009 at $20.72 per square foot, annual declines of 6.2 percent and 7.1 percent, respectively. Office investment sales have slowed as financing constraints hamper the market. The median sales price, however, …
There are several trends that are shaping the Dallas industrial market right now. The uncertainty of financial markets and lack of liquidity is certainly hampering the market. Limited access to capital is withholding business expansion. We are also working with motivated landlords that are helping make successful tenant representation transactions, whether it is a restructure or a new deal. Equity is sitting back and waiting for values to continue to fall. I’m seeing short-term commitments on renewals; tenants are reluctant to make large commitments. There is minimum activity in the market as tenants are just making do with what they have. There is growing space availability as more bankruptcies create more inventory — and also opportunities. For example, tenants like Home Interiors and Fitz & Floyd have left the market, creating more available space. There are many 30,000-square-foot to 80,000-square-foot clients in the market but not as many big deals. We have made some deals on space and land that had previously not been available. Tenants are looking for facilities with extra storage areas and ability to secure the truck court. Facilities that have access to DFW airport and 30-foot clear height or greater are a big plus in this …
While the San Antonio office market has not been as directly impacted by the national economic slowdown as other markets, it is being impacted by excess deliveries and slower absorption overall. This has led to slightly lower effective rents and a rise in vacancy rates. Previously stable markets, in general, are holding level occupancies; however, there are several pockets where the vacancy rate exceeds 20 to 30 percent. This is primarily a result of newly constructed space that is not being absorbed, rather than tenants moving out of existing office space. Many would anticipate a larger reduction in rents with the current vacancy levels, but rents have not declined to the extent one would expect in a down market, as newer buildings continue to market their space at higher rents and existing stable building owners have declined to reduce rates to any significant degree. Two transactions in particular have impacted the San Antonio market in a very positive fashion. The sale of the 150,000-square-foot 300 Concord Plaza, Tesoro’s old headquarters, to Whataburger, which is relocating its home office to San Antonio from Corpus Christi, is worth noting. This transaction subdued concerns of the impact this vacancy would have had on …