Earlier this month, Stream Realty Partners held a Dallas State-of-the-Market event at the Nasher Sculpture Center. We hosted nearly 200 business leaders who gathered for insight into the current state of the North Texas commercial real estate market.
Dr. W. Michael Cox, our guest speaker and director of the O’Neil Center for Global Markets and Freedom at SMU’s Cox School of Business, opened the event with a keynote address on the growing economy, and all that Texas has to offer to its corporate citizens. He also provided insight into where the strong demand for commercial real estate is originating. Texas’ healthy economy is attracting residents from other states and DFW is adding roughly 1 million people every six years. Dr. Cox estimated that at this current growth rate, DFW will be the 3rd largest metropolitan statistical area in the nation by 2020.
More jobs equate to a better economy, and Dallas, along with Texas as a whole, remains attractive because of its economic freedom, ability to adapt, and globalization. These factors make the Texas economy one to watch while the national economy continues to rebound from the recession. You can find more of Dr. Cox’s research in his full report, “Looking for the New New World,” here.
Along with overall insight from Dr. Cox, two of Stream’s top executives, Sarah Erickson and Blake Kendrick, presented an overview of prevalent trends in two sectors of Dallas commercial real estate: office and industrial.
Erickson said the Dallas office market is looking very promising heading into 2013. The hot submarkets to watch right now are Uptown/Turtle Creek, Quorum/Bent Tree, and Upper Tollway/West Plano.
She also addressed the balance of supply and demand for office product in Dallas. Economy.com predicts Dallas will see a net gain of 90,000 office-space-using jobs over the next five years, yet Dallas is experiencing the largest span without any new spec development. Developers are expected to build 3.3 million square feet of office space between 2012 and 2014—the second-lowest in any three-year period.
Historically, Texas has been overbuilt, but the fundamentals are in balance in this cycle. Demand is up and supply is down, which means big opportunities for landlords.
Kendrick said demand is up in Dallas on the industrial side, too. He’s currently tracking approximately 18 million square feet of demand in the market, versus 10.5 million square feet in 2011. All industrial submarkets are seeing activity, and big box activity continues to be strong. Build-to-suits remain active; through the 3rd quarter of 2012, Dallas has absorbed 6.7 million square feet of industrial space.
In terms of overall industrial trends, Kendrick expects to see:
• Continued rent growth in top submarkets for renewals, expansions and new leases
• 8.9-percent vacancy rate by year-end
• Continued increases in existing tenant expansions
• Large build-to-suit activity announcements, including pre-leasing of developments in the DFW Airport area
• Major land acquisition activity within certain submarkets, a sign that new capital is entering the market.
Our event concluded with a moderated panel of commercial real estate investors who expressed optimism in the Dallas market. Participants included Jim Wilson from Goddard Investment Group, Travis Pritchett from Harbert Management Corp.; Dayton Conklin from Clarion Partners, and Jim McGill from Prologis.
Thanks to everyone to made the event a success!
Chris Jackson is managing partner of Stream Realty Partners, overseeing the Dallas office. Contact him at firstname.lastname@example.org.