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The largest commercial real estate publication in the United States.
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January 11, 2012 |
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WHAT THE HECK TO EXPECT IN 2012 |
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| This year, DFW’s office market could post almost 3.8M SF of direct net absorption with roughly 800k SF of new construction (that’s not a typo) delivering, too, says PM Realty Group research guru/VP Ariel Guerrero. He and other experts gave us their 2012 predictions. |
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| Is that a UFO in the distance or just the bright outlook of the Metroplex? DFW’s office leasing market shows renewed health, with more than 2.7M SF of direct net absorption recorded in '11. The advance marked the highest annual absorption total since '08, indicating a distinct rebound as solid employment growth led companies to soak up more space, Ariel says. As a result, the market-wide occupancy level increased a full percentage point to 79.7%, its highest level in three years. The muted spec construction pipeline will accelerate the local office market's recovery as leasing activity resumes and excess inventory is absorbed at a steady clip this year. |
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| INVESTORS SHUN LA FOR TEXAS |
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| Dallas and Houston are among the top CRE hot spots (NY and DC are the others) generating investor interest, says Younan Properties chairman & CEO Zaya Younan, Dallas' largest office landlord. So long, LA—these days, foreign investors (including the Chinese and Europeans) only want to talk Texas because of its fast-growing, strong fundamentals. (They also love the heck out of some good barbeque.) Anybody who has an institutional-quality high-rise will be able to move and sell it this year because of investor interest in buying key assets. |
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| Zaya says there may be more Younan properties for sale this year to de-leverage. “We’ve been in Dallas for a long period and it is a great market for the future,” he says. In the coming years, Dallas' population is expected to increase 30%, which will equal 30% higher office demand than today. (It also means that it's going to get much harder to follow the rule of only chewing gum when you have enough for everyone.) The city's track record over the last couple of years shows the market has weathered the recession better than other areas, Zaya says. There were lots of funds in Dallas in 2011 and he thinks it will further pick up this year. |
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| DALLAS BUMPING ALONG BOTTOM |
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| Pillar Commercial founder Manny Ybarra anticipates positive, yet modest growth in 2012. There will be some attractive buying opportunities for patient investors, and while this recession has had an impact on virtually every property type, it is also creating some unique once-in-a-lifetime opportunities for strategic property owners with ample capital resources. The next recovery will be slow but start to take hold soon after the New Year. “I see a lot of bumping-along-the-bottom in the near term, but a stronger, de-levered economy in the long-term,” Manny says. “We have to live within our means and this recession is giving all of us the required discipline.” |
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| INSTITUTIONS WANT IN |
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| CRE, as an asset class for institutional investors, will continue to gain favor over time, especially as compared to the stock market and bond market, says CBRE vice chairman & managing director Jack Fraker. The chief investment officers for major pension plans need to lock into income-producing investments like real estate because they can’t afford to have all that volatility in the stock market, he says. Income is what it is all about from an actuarial perspective. |
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| DATA CENTERS DO DALLAS |
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| Dallas will continue to be a top-tier data center market, according to JLL associate director mission critical solutions Brian Oley (snapped last year with his son, Jude, his wife Jessica, and Brian’s boss, Roger Staubach). Enterprise data center users (of +2 MWs) will once again explore the nation to build their own data centers (versus colocation and wholesale leasing), a trend that hasn’t been seen in about four to five years. But, the colo/wholesale business will continue to thrive because those decisions won’t be made for another year or two, he tells us. Data centers will continue to be a sexy topic in CRE, leading more professionals to seek experience in the data center market. Personally, Brian plans to compete (and finish) his first Tough Mudders event on March 31. (We contacted Jude for comment, but he was not at liberty to discuss anything besides his new Lego village.) |
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| FORT WORTH CHUGS FORWARD |
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| Last year, Fort Worth saw 15 economic development deals (repping some 3.2M SF) that will yield about $1.2B in economic output for the City of Fort Worth and Tarrant County, says Fort Worth Chamber of Commerce economic development EVP David Berzina (here with Chuck Cooperstein and Nate Newton of the ESPN Coop and Nate radio show during Super Bowl week). Last year will be hard to repeat, as 2012 brings uncertainty between the volatile European markets and the November elections. (But one thing's for certain: the year will bring more Little League basketball and football coaching for David.) |
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| One of the deals inked in '11, but getting started this year: GE, which plans to bring two divisions to Fort Worth. A new locomotive manufacturing facility will open in Fort Worth, with GE investing up to $96M in the new plant while creating 700 new high-tech manufacturing jobs by 2016. The company bought a 500k SF building at 12850 Three Wide Dr and plans to eventually double that facility’s size. (It anticipates production will begin at the new facility this year). Nabbing a Fortune 10 company like GE is a big boost of confidence to the region, David tells us. |
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| INDUSTRIAL STRENGTHENS |
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| 2012 will bring the industrial market a stability it hasn’t seen since ’06, says JLL managing director for industrial, supply chain, logistics (and whiteboard drawing) Terry Darrow. The market will return to the fundamentals and the cap rates will follow. There will be demand, but less space, and people still waiting for positive signs. 2011 had plenty of absorption and came close to a record year, with an unusually high number of large deals (1M SF-plus) taking advantage of lower rental rates. That was a smart move as the market is at the bottom of the property clock, aptly demo’ed by Terry here. Now, we’re on the ascending side of the clock. With virtually no new industrial construction, 2012 will see more mid-sized deals of 85k to 200k SF, Terry tells us. He anticipates a slow Q1, with Q2 picking up as companies set their budgets. |
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| Come say hi to us at the Texas Hotel Investment Summit tomorrow morning. Space is still available; register here. Email tonie@bisnow.com. |
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