DFW 2020: Long CRE Cycle Continues, Election Time Slowdown Expected And The Rise Of Midtown And 635 Corridor
The Dallas-Fort Worth commercial real estate market thrived on capital liquidity and a strong local economy in 2019. Now, 2020 is expected to bring even more commercial growth in DFW, with interest rates remaining low and demand for North Texas real estate going strong.
A group of top developers and real estate executives told Bisnow that 2020 will bring a 10th inning to the long-winded real estate cycle that started close to a decade ago. However, there will likely be some drag mid-year as the volatile politics of election season rear their head after July.
“I think the first half of the year, you are going to see a bull market related to real estate,” Beck Ventures CEO and President Scott Beck said. “You’ve seen some of the banks pull back slightly, and I think that’s healthy … some areas have had a tremendous amount of overbuilding, especially in the apartment residential space in urban core areas.”
But Beck and other developers speaking at Bisnow's DFW 2020 Forecast event Dec. 17 expect history will repeat itself with some dampening of activity in the second half of the year.
“It’s an election year, so I think what you will find is a lot of people are more eager to place capital in the first half of the year,” Fort Capital CEO Chris Powers said. “I think there will be a lot of speculation about a coming slowdown in the second half of the year.”
The slowdown could be driven by developers and investors waiting to see whether our nation's leadership will change and what that might mean for policies.
“Typically, with an election, there is uncertainty, and uncertainty usually drives developer perception about the marketplace,” Beck said.
But excluding that possible dip, DFW executives are confident in market fundamentals across asset classes.
“With there being so much capital out there and the interest rates at the lowest [level] they’ve ever been, I still say 2020, and even 2021, will be a booming year for multifamily, senior living and retail if it’s innovative,” Goodwin said.
The industrial market in DFW also is expected to remain strong as demand for last-mile delivery locations and e-commerce make distribution-focused assets in urban environments a top priority, Dalfen President and Chief Investment Officer Sean Dalfen said.
“Whether there are tailwinds in the market or headwinds in the market, I think there is going to be increased demand in the near and long term for industrial,” Dalfen said, citing e-commerce delivery demand as a catalyst for industrial’s long-term strength in DFW and nationwide.
Even those who foresee some slowdown in 2020 predict a more controlled drop-off in activity rather than a rapid decline.
“I think next year we may see some submarkets lose a little bit of ground, but it won’t be dramatic,” Lang Partners Vice President of Development Cindy Harris said. “[Multifamily] occupancies are still in the 95% range, so if they drop a little bit, I don’t expect it to be problematic, but I do think we will see a little bit [of a drop off] because a lot of supply will come over the next year or so.”
I-635: The New Center Of The Metroplex?
In 2020, more North Texans will continue to choose homes in far-flung suburbs to the east, north and west of Downtown Dallas, CRE experts say.
As this expansion happens, Beck is confident his firm’s Dallas Midtown development atop the old Valley View Mall will create the new center of the Metroplex near I-635.
“The location of the Midtown project … is in the center of the population of the Metroplex, which is precisely why we are focused on large urban, infill office buildings,” Beck said.
From Beck’s point of view, as more residents move to the outer reaches of the Metroplex over the next two decades, the redeveloped Dallas Midtown project will offer luxury office in what will become the most centralized office market for all DFW communities.
“As we move further out over the next 10 to 15 years, we will end up with this rubber band effect, basically pulling consumers and office users back toward the center of the population density,” he said.