DALLAS EXPECTED TO BE A TOP U.S. OFFICE GROWTH MARKET THROUGH 2019
An unprecedented building boom is underway across the globe, and North Texas is playing a significant role. A new report from Cushman & Wakefield predicts that more than 700 million square feet of office space will deliver globally between 2017 and 2019. Dallas is projected to rank No. 1 in office completions in the Americas, at 20.5 million square feet.
Dallas has gotten into trouble in the past for overbuilding. That doesn’t seem likely for this cycle, however, as the region is expected to create 92,700 office jobs during the same period. This puts it at No. 2 in the U.S., slightly behind New York City, which is nearly twice the size of Dallas.
“Job growth is expected to continue keeping pace with construction,” says Curtis Hornaday, Dallas Market Research Director for Cushman & Wakefield. “Typically, space planners allocate about 200 square feet per employee, which adds up to more than 18.5 million square feet.”
Cushman & Wakefield is currently tracking 59 companies looking for office space in the region, for a total of more than 5.6 million square feet.
The firm’s study revealed that Dallas ranked No. 6 in the world for rent growth during 2014-2016, at 9.9 percent. It’s expected to slow and stabilize to 1.9 percent between 2017 and 2019. Overall, Dallas is expected to maintain a “neutral” status over the next several years, striking a healthy balance between tenant-favorable and landlord-favorable conditions.
In the United States, newly built space has accounted for 65 percent of all office absorption since 2012. Developers are hoping that trend continues. They are “certainly placing some big bets on new product, but the bulk of it is concentrated in the major global cities, which is precisely where the greatest appetite is for these shiny new buildings,” says Kevin Thorpe, Cushman&Wakefield’s Global Chief Economist.
OFFICE FORECAST: THE DALLAS URBAN CORE
What’s happening with office space in the Dallas urban core? New research by JLL suggests plenty.
JLL says that Class A and B office leasing activity in the urban core typically has averaged roughly 4 million square feet a year over the past decade. During the tech boom of the late 1990s, however, leasing activity nearly doubled that pace, JLL says.
The recent pace has come in closer to 5 million square feet a year, as tenants look for space in new buildings or optimize floor plans to meet their individual needs, JLL says.
The commercial real estate community is abuzz about future leasing possibilities, with nearly 2.5 million square feet of office space under construction or soon to break ground in the Dallas urban center.
Tenants with leases expiring between 2020 and 2023 account for nearly 6 million square feet of space in the urban core.
Leasing velocity should stay robust for the years ahead, as some may choose to leave the urban core, while others may choose new buildings or renew/restack their current
CHART-TOPPING ECONOMIC GROWTH PROJECTED FOR TWO NORTH TEXAS COUNTIES
Two North Texas counties are projected to be among the nation’s fastest-growing economies over the next five years.
According to a forecast by Oxford Economics, Denton, and Collin counties in North Texas and Montgomery County in South Texas are expected to top the nation’s county economies.
Oxford said that over the next five years, the fastest-growing cities in the United States will be in “sprawling, suburban metro areas,” which it described as places such as Austin.
Driving the assessment is that Americans are leaving high-cost, densely populated cities in search of cheaper areas with strong job growth, Oxford said.
According to the forecast, Denton and Collin counties ranked third and 10th, respectively, in net migration and immigration from 2009 through 2013.
During that period, Denton County gained 23,000 residents, and Collin County gained 8,800 people.
DALLAS REGION BOASTS THE MOST LEED-CERTIFIED RESIDENTIAL CONSTRUCTION IN TEXAS
When it comes to Leadership in Energy and Environmental Design-certified (LEED) projects, North Texas is a bright spot in the state.
Dallas, Fort Worth, and Arlington have more than half of the 6,945 LEED-certified residential construction projects in Texas, according to an analysis by the apartment locator website ABODO.
“Texas is one of our best markets for LEED building. The residential sector in Texas has the second most LEED-certified single and multifamily residences in the country,” U.S. Green Building Council Project manager Nick Brousse told Anna Clark for her GreenBiz column.
The LEED rating system was created by the USGBC to evaluate a building’s environmental performance and to move the market toward sustainable design.
Thom Powell, architect and director of sustainable design at the Dallas-based design firm GFF, told Clark the road to green growth has not been an easy one because building owners tend to focus solely on construction costs and have a tendency to pass along operation costs to the end user.
“When I joined the USGBC North Texas Board of Directors in 2009, our collective goal was market transformation,” Powell said.
Since then, the green building movement has been doubling globally every three years and currently, there are about 1.3 million residential square feet of green construction in the U.S. alone, according to ABODO’s analysis. That’s enough to cover about 89 percent of Staten Island or roughly 23,000 football fields.
By 2018, LEED-certified construction is expected to contribute nearly $30 million to the nation’s gross domestic product — a number that is likely to grow as the USGBC certifies more than 2.2 million new square feet of LEED space daily.
SENIOR HOUSING SECTOR CONTINUES TO THRIVE
The steady stream of new supply in the senior housing market has been a hot topic of conversation in the construction industry, and survey results from the fourth annual NREI/NIC Senior Housing Market Study shows enthusiasm for that sector remains strong.
It’s a real estate sector that has shown steady activity in Dallas-Fort Worth, one of the leading locations for senior housing in the nation.
Construction of senior housing across the nation continues to set a steady pace, with its share of existing inventory maintaining a robust pace of 5.8 percent in the second quarter, according to a report in National Real Estate Investor.
Demographics and an increased focus on updating outdated product are two major drivers in the industry.
“As active as the market is with the product that we have today, we are looking at the tip of the iceberg in terms of boomers hitting retirement age,” Scott Stewart, a managing partner at Capitol Seniors Housing, a private equity-backed real estate acquisition, development and investment management firm Washington, D.C., tells National Real Estate Investor. “The fast-paced growth of that population in that sector is going to make today’s discussion of overbuilding obsolete, because there just aren’t enough places for everybody today.”
In the nation’s biggest metro areas over the past year through June, NREI reports there has been roughly 35,000 units added to the stock of senior housing inventory.
And, about 30 percent of that growth happened in seven metro areas: Dallas, Chicago, Minneapolis, Atlanta, Houston, Miami and Boston.
NREI reports that Dallas and Minneapolis accounted for 12 percent of all new seniors housing inventory in the past 12 months.
DALLAS REGION LEADS NATION IN SELF-STORAGE DEVELOPMENT
If you need a place to store things under lock and key, Dallas-Fort Worth is the top place in the nation to find a storage space, according to a new report released by the self-storage brokerage Argus Self Storage.
DFW leads the nation in the amount of self-storage space under development — more than 9 million square feet. That’s a 16 percent increase over the existing supply, according to the report.
Here are few more numbers to show just how big DFW is: 164 projects under some stage of development this year — 49 planned, 82 under construction or awaiting certificate of occupancy, and 33 sites in the lease-up stage, Argus reported. We’re one of the most oversupplied storage markets in the nation, according to the report.
The report looked at development in 35 metropolitan areas, and DFW led second-place Miami (70 projects) by a large margin. Miami, however, is considered undersupplied.
REPORT: E-COMMERCE FACILITIES ARE CLOSE TO CONSUMERS
Real estate firm CBRE has taken a look at the proximity of e-commerce facilities around the population centers in the U.S. and has found they are positioned between 6 and 9 miles from the center point of the population areas they serve.
That holds true in the sprawling Dallas-Fort Worth area, where people imagine wide-open spaces. Facilities in DFW are, on average, 6.9 miles from consumers, CBRE said. That ranks us among the top six out of the 15 largest metro areas in the nation.
Distribution facilities are a foundation for rapid-delivery service that didn’t exist on this scale as recently as a few years ago, CBRE said in its new report.
CBRE analyzed the location of last-mile distribution facilities opened in the past two years in the 15 biggest U.S. population centers.
CBRE found that denser cities tended to have shorter average distances, such as the 6-mile average in San Francisco and the 6.3-mile average in Philadelphia.
But cities that are more spread out have more distant averages, such as 7.5 miles in Houston, 8.5 miles in Phoenix and 9 miles in Southern California’s Inland Empire, CBRE said.
“As consumers grow accustomed to purchasing almost everything online, they are also expecting delivery times to remain the same regardless if they have ordered a small electronic or a large home furnishing. As a result, it is driving the need for more final-mile facilities,” says Ryan Keiser, senior vice president with CBRE in Dallas. “The type of product being shipped (e.g. an iPhone vs. a sofa) and how it is being shipped is a key factor in the types of final-mile facilities that are being established in close proximity to both primary and secondary population centers.”
The close proximity of the last-mile facilities to huge populations of customers makes the growing expectation of shoppers for nearly instantaneous delivery of their orders closer to a reality.
“These close-in fulfillment centers have proliferated within the past two years, underscoring the need for retailers to have large batches of inventory within 10 miles of most of their customers so they can fulfill orders as rapidly as possible,” David Egan, CBRE global head of industrial and logistics research says in the study. “This is an entirely new link in most supply chains that delivers on the promise of fast, super-high-performance delivery.”
Last-mile distribution centers are the final point of distribution for goods before they arrive on customers’ doorsteps. CBRE focused on newly opened distribution centers of less than 200,000 square feet in the nation’s top 15 markets.