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When 2018 started, people were asking when the Dallas-Fort Worth economy would slow down. Not only has it not happened yet, but DFW commercial real estate had a particularly strong year.
That looked different in different parts of the Metroplex and in different property types. The following are 10 trends that dominated local CRE in 2018, as reported through the year by Bisnow.
Dallas Is No Ordinary Texas Boomtown
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CRE experts at our annual Dallas State of the Market said Dallas is more than just a Texas boomtown with easy access to the rest of the country — though it is that. More fundamentally, Dallas is going to be one of the leading cities of North America in the 21st century.
Metro DFW, because of its job growth and business-friendly environment, is on track to be the country's third-largest metro in population in the not-too-distant future, probably within a decade. As businesses and residents flee high-cost coastal markets, they are going to come here.
Uptown Has Investors All Agog
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Who wants to invest in Dallas' Uptown submarket? National and international deep-pocketed investors. Land availability for new builds in Uptown is scarce and the market is brutally competitive, which is just right for institutional investors.
And those investors are paying the big bucks: 2000 McKinney Tower commanded one of the highest prices for an office building ever in Dallas at over $500/SF.
Dallas Hit Hard By Affordable Housing Shortage
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Though Dallas has a booming economy and a robust real estate market, the city falls short when it comes to affordable housing. Like many markets in other parts of the country, there simply isn't enough affordable housing and there are few mechanisms for creating more.
For every 100 renters in metro DFW, there are only 19 low-income housing units available locally, the same as in metro Houston and only marginally better than in Los Angeles.
More Hotels Than Ever, But Dallas Isn't Overbuilt Yet
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Even after nearly a decade of hotel room growth in Dallas, demand hasn't been satisfied. But because of rising costs, developers are turning toward niche hotels on smaller sites and redevelopments of older properties to make new hospitality space.
Dallas Retail Defies The Odds
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Dallas-Fort Worth’s retail market at midyear 2018 had an occupancy rate of 92.5%. Not only is that one of its highest rates over the past three decades, it comes despite several major store closings this year and in the face of e-commerce growth. Space is being backfilled by new and often experiential retailers.
At least one local favorite is doing well nationally: Strongly anchored in its home base of Dallas-Fort Worth, home decor retailer At Home Group is expanding the brand nationally to 600 stores, including opening about 15 new stores in 2018.
More Hyperscale Coming To Dallas Data Center Market
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Northern Virginia and the Bay Area might get the plaudits when it comes to the heft of their data center markets, but the Metroplex is no slacker in that property type. More hyperscale users are on the way to Dallas-Fort Worth, attracted by strong fundamentals, room to build, the low cost of electricity and a business-friendly government.
Senior Housing Only Seems Overbuilt
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As senior housing markets go, Dallas-Fort Worth (and Texas for that matter) is a low-barrier-to-entry proposition. That gives developers pause about building here, but it shouldn't, according to the speakers at Bisnow's Dallas Senior Living event.
Of course, some submarkets are overbuilt or soon will be. That just means that developers have to go that extra mile to figure out where demand is going to race ahead of supply. There is a lot of opportunity in North Texas.
The 121 Corridor Has Extra Oomph
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A generation ago, McKinney and the surrounding area were merely outlying towns. Now they are growth suburbs, according to the speakers at Bisnow's 121 Corridor event. Some of the nation’s and region’s biggest and most well-respected developers are active in the 121 Corridor, with The Howard Hughes Co., Hines and KDC among them.
Fort Worth Has Momentum, Too
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In some ways, Fort Worth is as hot or hotter than Dallas in real estate growth. For instance, Fort Worth-Arlington's multifamily rent growth has surpassed Dallas for the past five years. Also, just south of Downtown Fort Worth, historic buildings are attracting locally based restaurants, retail, bars, offices and residences. True, Fort Worth legacy company XTO Energy, the biggest employer in the CBD, left — but other companies are busy absorbing space Downtown.
We Didn't Win Amazon HQ2. Big Deal
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It may be too early to tell exactly how the region should work to improve its chances for future big corporate expansions, but it will definitely learn from the Amazon experience, according to site selection experts. Besides, while it would have been nice, DFW hardly needed the jobs boost — the area has created more than 750,000 new jobs since the end of the recession.
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