Texas, and in particular the Dallas-Fort Worth area, presents a number of opportunities for real estate investment. As my colleague Randy Williams noted in his snapshot of the Austin commercial real estate market, Texas has weathered the recession well.
Figures from the Bureau of Labor Statistics bear this out: The unemployment rate in Texas stood at 7.4 percent in June, much lower than the 8.2 percent unemployment rate nationally. In July, total nonfarm employment grew by 2.9 million jobs, a 2.1 percent increase year-over-year.
More workers are flocking to Texas because the state has no income tax, and the economy, and state and local governments remain strong. This is bringing not only workers but companies to Texas to avoid the taxes levied by other states.
In turn, these positive economic numbers have buoyed the commercial real estate market across several sectors. Here?s a look at the trends shaping each of those markets.
Multifamily
The apartment market has been improving because some of the workers moving into the area are reluctant to buy into the housing market, so there has been a large increase in the occupancy of existing apartments. Vacancy rates are at their lowest level since 2001 and average rents have risen 3.4 percent. Construction is also on the rise. Developers broke ground in May on 3003 Carlisle, a six-story, 192-unit luxury Mediterranean-style apartment building; construction began in April on a 17-story, 308-unit Taylor apartment tower; and construction has resumed on Lake Highlands Town Center, a project that had been paused due to the recession. The boomerang generation ? those young people who moved out of their parents? houses only to move back in once the economy got bad ? has contributed to this growth as they start to boomerang back out.
Housing
Housing activity has started to pick up as some potential home buyers believe that the market has hit bottom or is very close. With rents increasing on the apartment side, some are seizing the opportunity of lower housing prices and low interest rates to buy a home. The feasibility of buying has become much more realistic, and for some renters, purchasing a home is more cost-effective. As a result, prices are starting to recover. The National Association of Realtors found that Dallas-Fort Worth home prices were up 7.6 percent year-over-year in the second quarter.
Retail
The retail industry was hit hard by the recession, but the sector is recovering. Adjusted advance figures for retail sales in July show a 3.7 percent uptick year-over-year. Consumers are more willing to spend, which has created a demand for more inventory. One sector of retail property that is still struggling is big box stores, which are competing with online retailers. The Dallas market, however, hasn?t struggled to fill the space left behind by shuttered stores: 150 big box stores in the Dallas-Fort Worth area have been refilled by new tenants or knocked down for other development since 2008.
Office
Occupancy in Fort Worth is hovering at 88.7 percent according to our Q2 2012 Viewpoint report and construction began on three new office buildings in Fort Worth?s central business district in May. Dallas vacancies are running higher due to changes in office space requirements. Some companies are moving up from Class B to Class A properties, but others are doing the opposite, moving down in quality and utilizing less space with the same number of employees. Though this trend has some worried, the office market in general is marching in a positive direction. In 2011, companies leased more office space than they moved out of in the Dallas-Fort Worth area for the first time since the recession hit. Continuing employment growth in 2012 should keep up the positive momentum as companies need to expand their space.
Though Dallas-Fort Worth has had some issues because of the general economy, the unemployment rate is lower than the rest of the nation, and quite a few people have immigrated to Texas from various other states to find job opportunities. All in all, Texas? ability to create jobs and attract new workers will help the economy continue to grow and support the commercial real estate market.
Source: http://blog.irr.com/2012/08/27/job-growth-fueling-dallas-commercial-real-estate/
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