When we look back at the last couple of years in the Dallas/Fort Worth industrial real estate sector, it is absolutely certain that it’s been great to be a tenant. Landlords have been fighting for new deals and trying to keep the ones they have. But is next year going to be better or worse than this year? In the past year, there have been glimmers that the real estate market and the economy might be on the rebound. With a complete lack of any notable new speculative industrial construction in the past 3 years in DFW, we’ve all been working to fill up the existing vacant inventory. In the past 4 quarters, we’ve seen positive absorption of approximately 10 million square feet. We’ve moved the needle in DFW from 11.5 percent vacancy, to 10.5 percent in one year’s time. While that’s significant compared to where we’ve been, it’s approximately half of where we were in 2007 when we saw more than 20 million square feet of industrial absorption in 2007 in DFW alone. While it seems that the market is positioning itself for some sustained growth, the flex sector of the industrial market still seems to be flagging. Vacancy …
TX
The Dallas-Fort Worth office market is currently in a recovery phase helped along by the limited supply of new speculative construction projects and an increasing demand for space. The region has experienced slow, steady employment growth across diverse industry segments, which translated to positive net absorption for 2011. Asking rental rates are beginning to bottom out and concessions have reached their peak. Regardless of the sense of uncertainty for businesses on a national level, local tenants are making longer term decisions to take advantage of the current leasing environment. From the tenant’s perspective, two recurring trends are to optimize space efficiency and to create a positive environment aimed at recruiting and retaining employees. The need to meet these goals has prompted a number of relocations within the market. Office spaces that provide a multitude of area amenities within walking distance are likely to be in higher demand in 2012. Other tenants are looking for more efficient office space configurations and consequently properties with higher parking ratios will be increasingly important as tenants occupy denser, more efficient spaces. Access to public transportation also continues to become more important for corporations making long-term decisions. In 2011, the market saw the return of …
The downtown San Antonio office sector is shining brightest when compared to the second quarter. Vacancy has declined from 29 percent to 24 percent and absorption is in the black. “The downtown San Antonio office market experienced a big win in the third quarter,” says Kim Gatley, senior VP and director of research for NAI REOC San Antonio. Some of the major transactions for the CBD include HVHC Inc. leasing 112,652 square feet and Argo Group US Inc. leasing 77,000 square feet at the IBC Centre I & II complex. Transactions like these have lead to 265,034 square feet of positive absorption this quarter. But it's at the expense of the suburban market, which is struggling with 99,504 square feet of negative absorption this quarter. Year-to-date, San Antonio's non-CBD properties have posted 62,580 square feet of negative absorption. Citywide, there is 165,530 square feet of positive absorption in the third quarter, but the year-to-date total sits at 129,871 square feet of negative net absorption. Vacancy, however, remained relatively stable at 19.9 percent. Rental rates citywide have risen 2.1 percent from last quarter to sit at $21.11 per square foot. Bright areas for San Antonio: • Domicilio Conocido purchased Pacific Plaza …
While the San Antonio area has not been immune to the effects of the economic slowdown, the city’s location, business-friendly atmosphere, strong labor force and low cost of living continue to create a thriving environment for warehousing, logistics and manufacturing companies. One of those companies, Caterpillar Inc., recently completed the construction on the 260,000-square-foot first phase of its manufacturing facility in Schertz that will supply components to the company’s assembly plant in nearby Seguin. Also in Schertz, Sysco Corporation is close to completing a 635,000-square-foot distribution facility in an effort to consolidate and expand its operations in Central Texas. These and other new additions continue to make local headlines, but what really had the industrial market buzzing during most of the first half of 2011 was the activity generated by the Eagle Ford Shale oil and gas play. As with many south and central Texas markets, industrial activity in San Antonio’s MSA has been positively affected by the Eagle Ford Shale, a 24-county oil and gas play stretching from the Texas-Mexico border to well east of San Antonio. With its central location along the northern edge of the Eagle Ford Shale, San Antonio has attracted the attention of major energy …
The market for soft and hard goods remains somewhat weak due to uncertainty in the economy and labor market (although the Houston job market is generally stronger than the rest of the country). However, in the last several months, many big boxes that went dark due to bankruptcies and/or downsizing have been absorbed, either in the totality or because of the lack of 50,000-square-foot tenants in the market. Landlords have had to get creative and divide larger spaces to accommodate smaller tenants. Generally, the most active tenants in this arena have been health clubs, discount stores, dollar stores and non-traditional retailers. Landlords, eager to fill dark spaces, are making very aggressive deals (low base rents, extra tenant allowances, more free rent, etc.). On the other hand, fast casual (FC), quick-serve restaurants (QSRs) and casual dining remains robust. As such, many companies are aggressively seeking locations in Houston. It has been increasingly difficult to find locations that can accommodate FC, QSR’s (especially users with a drive-thru) and casual dining needs because quality locations have become scarce and parking requirements can’t be adequately met. Alternatively, fine dining has been spotty with good thru-puts but lower average checks. Many restaurateurs have been reluctant …
Industrial real estate activity is up in the El Paso/Juarez, Mexico metro area, indicating that the recession-driven slump, which had been intensified by reported violence on the border, has not deterred companies from making long-term commitments to the region. The increase in industrial leasing and sales, as well as improved employment statistics and increasing commercial truck crossing data are all positive signs for the future of the local industrial economy. The industrial market in El Paso and Juarez totals 115 million square feet split between two countries and is an intersection of international manufacturing firms, global supply chains and the local economy. During the past 3 years both the global recession and security situation in Mexico have reverberated across the industrial market. However, industrial leasing and sale activity is up on both sides of the border, with Juarez leading the way at 658,000 square feet of net absorption during the first 6 months of the year, and El Paso recording 264,000 square feet. However, El Paso was the first city to start the rebound in 2010 with almost 600,000 square feet of net industrial absorption in the second half of the year. Both markets have seen industrial vacancy levels recede …
Austin remains a popular destination for institutional and private multifamily investors. In the first half of 2010, there was a scarcity premium as buyer demand far exceeded the number of properties offered for sale. It was common to give 50-plus property tours and receive roughly 40 offers for a fully marketed Class A apartment community. The enormous amount of investment capital raised in 2008 and 2009 struggled to find a home in early 2010. As apartment fundamentals improved, interest rates decreased and cap rates compressed, more product came to market in the third quarter of 2010. Subsequently, the number of investor tours and offers has been cut in half. Offers today are coming from well-capitalized low leverage private investors, pension fund advisors, private funds and public REITs. Urban Class A cap rates have dropped from 6.5 percent in late 2009 to an average of 4.75 percent today. Suburban Class A cap rates are trading around 5.25 percent. The 1980s to 1990s vintage, B class product, is trading in a range from 5.75 to 6.75 percent based on quality and location. The highest conventional apartment sales prices have occurred in and around the Central Business District (CBD) where mid-rise Class A …
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 …
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. …