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, …
Texas Market Reports
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 …
While the national economy and commercial real estate in general look to have a tough year ahead of them, Houston and multifamily real estate have a little more room for comfort, although not enough for complacency. Houston is projected by some to have the strongest job growth in the United States for 2009, and multifamily is the only commercial property class to maintain some semblance of normalcy. Houston benefits from the diversity of its economy. Houston has also greatly benefited by one sector in particular, oil and gas, which saw its greatest rally in history just as the financial sector saw its darkest days. Houston continues to maintain an unemployment rate almost 3 percent below the national average and is ranked 18 of 392 U.S. MSAs by Moody’s Economy.com for employment growth between now and 2013. Unlike other commercial real estate (CRE) asset classes, multifamily has been more successful fighting off the financial crisis that shut down the CMBS market and essentially froze CRE transactions across the country. Steve Duplantis, senior managing director of CBRE in Houston, is only aware of one investment grade retail transaction and one investment grade office transaction in the past year. So far this year …
The Dallas Fort Worth (D/FW) office market has gone through another successful quarter. First quarter 2009 ended with a positive net absorption of 1.2 million square feet and a vacancy rate of 16 percent. Fortunately, the first decline in D/FW job growth was not felt until January 2009. These two major trends have set D/FW up for the “last in first out” model of recovery. This is a much different trend than experienced during the last two major recessions, and this time D/FW is the right market to be in to ride out the recession. One of the major factors that has put D/FW in this positive light, as compared to the rest of the other major office markets across the country, is the preleasing of 241,500 square feet of the 965,387 square feet of new construction that came online in the first quarter. The D/FW office market as a whole has experienced positive net absorption for the last 6 years. The following are a few of the large deals that contributed to this. Torch Mark Corporation took 150,000 square feet at Stonebridge Ranch, AIG leased 138,010 square feet at South Tower, Texas Capital Bancshares. Inc signed on for 94,940 …
In general, the economy has created an atmosphere of cautiousness as companies rethink expansions and settle for the status quo. Many companies, such as those engaged in the auto industry, are experiencing a reduction in orders and are reducing their production, inventory and workforce to adjust to this trend. On the bright side, Foxconn’s industrial park south of Santa Teresa, New Mexico, will provide thousands of new jobs to the region. Suppliers and logistic companies that service Foxconn will locate on both sides of the border, affecting Santa Teresa as well as west El Paso, as the companies compete for a piece of the pie. Fort Bliss has substantially benefited from the BRAC realignment (See “A Strong Pulse” on the cover). With additional brigades being located at Fort Bliss, the further development of the base infrastructure, housing and tactical facilities are in full swing. With the influx of the more than 60,000 people (which include military personnel and their families), the El Paso region will require additional city/county governmental services, educational facilities, off-base housing and vendors to accommodate this growth in the community. The benefit to the El Paso community will be affected exponentially. Overall, the market is not in …
“Are we there yet?” seems to be the big question with the Dallas/Fort Worth office market. The most likely answer is no, there is still tough times ahead. The Dallas/Fort Worth (DFW) Metroplex refused to participate in the recession for most of 2007 and 2008, but the fourth quarter of 2008 started a down trend that has so far continued in the first quarter of 2009. Sales volume is down, rental rates are down and vacancies are up. National annual sales volumes for office properties peeked at nearly $208 billion in 2007 to be followed by a drop of 75 percent in 2008 according to Real Capital Analytics. Sales volume for office investments held up slightly better in the Dallas market decreasing only 65 percent in 2008 as the credit markets began tightening. The rental rates and vacancy percentages held up much better in the DFW Metroplex than did the national averages. According to CoStar DFW hit its high vacancy rate in mid 2003 around 18 percent. Since that time it has steadily dropped with 2007 and 2008 remaining fairly stable at slightly above 16 percent. In 2007 and 2008 the Metroplex added 11,278,582 square feet of new office space …
Greater downtown Waco is experiencing a renaissance of growth offering an exciting front door to visitors and residents. This district comprises between 5 and 7 square miles of land right along Interstate 35 in Central Texas. The Brazos River flows through the downtown area, linking Baylor University, Interstate 35, Cameron Park and Cameron Park Zoo. The Downtown Business District encompasses approximately 350 acres, featuring an emerging Central Business District and an array of redevelopment opportunities. Currently, there are approximately 18,000 residents in greater Downtown Waco and 16,000 jobs all within 1.25 miles of the heart of Downtown. There is resurgence in office development in the downtown Waco market. In 2008, an unprecedented 100,000 square feet of Class A office space was added to downtown. A vast majority of the space has been leased. More projects are under development for owner-occupied refurbishment, new construction and speculative lease space. In addition to these office developments, there are several new projects gaining momentum in downtown Waco totaling more than $200 million in new public and private investment. Phase I of Waco Town Square, which is nearing completion, will add 17 acres of mixed-use residential and retail space. This includes the 46-unit Austin Avenue …
Infill locations are highly desired in San Antonio’s multifamily market, as the last available tracts of land suitable for development are being picked off. Areas popular with developers are north central San Antonio, the South Texas Medical Center, and the area of the city just north of downtown, known as Alamo Heights/Fort Sam Houston. A recent trend is for multifamily developers to raze existing commercial buildings to make way for new projects, such as Chancellor Property’s site on Austin Highway, Regent Communities’ site across from the Pearl Brewery, or Bakke Development’s redevelopment of El Chaparral on Harry Wurzbach. With the high price of gas, renters have a stronger desire to live in close proximity to where they work and play. This is driving developers to create urban infill communities. The new development that will have the greatest impact on San Antonio is River North, the city’s initiative of an expansion of the River Walk just north of downtown. The city of San Antonio is creating a new urban lifestyle that will invigorate the urban core. The overall goal with this new development is to produce a downtown that is as attractive to locals as it is to tourists. The Stone …
High construction costs and slow absorption have limited the amount of speculative office construction in most of El Paso, with the exception of medical developments near the new hospitals and surgical centers. The current trends are for highly efficient, high-profile buildings with plentiful parking and state-of-the-art amenities. Energy efficiency is also a high priority, but the cost of construction has delayed many plans to upgrade to better office space. The predominant areas of new development are concentrated on the peripheries of El Paso to the northeast, east and far west sides. The availability of large tracts of land and the immediate proximity to the highest population centers and employers are what is driving this development. On the east side, Sierra Providence Health Network is completing a new 110-bed, general acute-care hospital that opened at 3280 Joe Battle Boulevard at the beginning of June. A planned expansion will accommodate 290 beds. Adjacent to the hospital, Trammell Crow Company is developing a medical office building. The company is one of the newest and most aggressive office-specific developers to locate in El Paso. In the downtown market, Borderplex Community Trust is extremely aggressive and is active in acquiring downtown properties for redevelopment. Mills …