The Deal Sheet
Texas commercial real estate has one big problem: lack of supply. (Demand is lost without its soul mate.) That concern spreads across three markets to watch in the second half of 2014.
Henry S. Miller Cos appraisal/consulting group prez Mark O’Briant (who doesn’t always walk around with a red arrow pointing at him) tells us the real estate market has continued to strengthen with activity in all property types including a strong resurgence in single-family lot development. Additionally, service providers are creating strong competition for pad sites and redevelopment, he says.
Three markets to watch: corporate real estate, hospitality, and retail. He gives us a peek into HSM’s 45th Annual Trends, where he pulled some highlights for us. On the heels of the Toyota announcement, Miller corporate services prez Dan Arnold tells us DFW continues to attract corporate HQ and regional consolidations. In 2013, the office market absorbed about 5M SF, according to Xceligent. Leasing was strong, vacancies are down and rental rates up. An additional good sign for 2014 is that new construction is substantially pre-leased.
Hospitality is experiencing below-average supply coupled with above-average demand, the report says. Occupancy will fuel ADR growth to a projected 4.2% over last year and RevPAR should increase roughly 5.7%. In the retail world, Texas should continue to attract grocers and restaurant concepts for high-quality space in prime submarkets. (If commercial real estate is any indicator, we're all eating too much.) In the major markets such as DFW, the primary driver of anticipated rent growth will be lack of supply, as retail construction levels remain at historic lows.