Six 2015 Predictions
DFW’s real estate experts agree—our diversified economy means the Metroplex will fare better than the rest of the country. But, there’s a wariness about the impact of oil prices. We rounded up some of the industry’s biggest names to give us their expert opinions on what lies ahead in 2015.
Colliers EVP Jack Minter (with a white-tailed ptarmigan) thinks the Dallas office market will continue its run. Dallas has a balanced economy and has new companies like Toyota and many others moving here and calling the Metroplex home, he tells us. That influx of companies will continue this year. And the drastically dropping oil prices over the last several months will help the retail and housing sectors, he says. However, the lower oil prices do create a black cloud because the energy sector and the companies that service it will be in a wait-and-see mode until it is clear what the price of oil will be on a going-forward basis.
Trademark Property Co founder Terry Montesi (here with his wife and former President and First Lady Jimmy and Rosalynn Carter at a Habitat for Humanity build) tells us that while the overall US economy in 2015 will remain in slow growth mode, we’ll fare better in DFW. The Texas economy is strong because of the diversification of our business infrastructure: technology, agriculture, automotive, real estate, energy, just to name a few, he says. As a result, DFW should hold up to a drop in oil prices better than some other markets in Texas and could be net positive because of the drop in living expenses to the consumer. Specific to retail: 2015 will continue to see a focus on redevelopment, as opposed to new development, he tells us. Trademark is working on several major redevelopments in DFW: Victory Park, Uptown Village at Cedar Hill, The Shops at Highland Village and Westbend.
DTZ vice chairman Randy Cooper says oil prices will be a huge barometer of the Texas economy. Dallas is not immune; the oil and gas industry is close to 20% of the overall economy statewide. This impacts our banks, funding for schools, roads and every segment of our lives in Texas, he tells us. “We need the tax revenue to keep up with the growth and the services. If the revenue is cut in half, Texas will feel it,” he says. The obvious answer for the state to reconcile a huge drop in oil and gas tax revenue is taxes, he says.
Structure Commercial president Eric Deuillet warns that Californians (among others) are flocking to Texas. With steady interest rates and more state incentives will come more HQs, like Toyota. Construction will continue on much-needed projects, but Eric hopes developers and lenders have learned a lesson from past cycles to avoid overbuilding. Despite all the new residents coming, retail will continue to grow online. That means the service industry, medical and restaurants will be the dominant fillers of space. He anticipates restaurants and retailers, along with a resurrected Downtown, Deep Ellum and Design District will continue to make Dallas more of a trendsetter than the trend follower it used to be.
The Weitzman Group director of leasing/VP Blake Shipp (just to the left of the TWG table with clients at the New York ICSC event) says retailers will create a more specialized store experience specific to their brands in flagship locations across the US, which is crucial since brick-and-mortar locations now have to compete with Internet sales. This can be done by incorporating collaborative meeting spaces within stores or celebrating local baristas and juice bars within retail spaces, for instance, he says. He also expects to see more creative uses of space that give the customer a reason to stay longer and shop more (a customer cannot experience shopping behind a computer or smartphone). With a majority of national retailers scaling back on new store growth, he expects to see a continued resurgence of local restaurants and retailers.
Cresa Dallas managing principal Susan Arledge (here, after getting her 2012 Stemmons Service Award) cautions us that “he (or she) who predicts by the crystal ball, must learn to eat broken glass.” Susan went even beyond 2015 as she tells us the greatest impact on our real estate industry, from both the leasing and new development and construction perspective, will be the growth of the Millennial population. In seven years, 75 million Baby Boomers will be older than 55. As they bail out of the workforce, there just won’t be enough qualified entrants from the Millennial/baby-bust generation to replace them. That creates a zero-sum game and a war for talent, which usually means that if you need qualified employees to survive or grow, you will have to steal them from your competition, she says. That completely shifts the power in the hiring relationship from employer to employee, which means employers have to focus on locating their companies in places where employees want to live and work. To remain competitive, companies will have to find ways to redesign their space to reduce occupancy costs because they will have to pay more for real estate in the higher profile/more desirable locations like Uptown and Oak Lawn.