Monday, November 24, 2014
Looking ahead, real estate forecasters see more good times coming
With North Texas in the midst of the biggest real estate boom in decades, it would be easy for property market players to just live for the moment and enjoy these really good times.
Still the question I get asked most often these days is, “This time will it last?”
The history of real estate in these parts is written with stories of spectacular building and investment rushes followed by staggering crashes.
So no wonder with soaring activity in virtually every property type in the Dallas-Fort Worth area, even the most optimistic industry members are looking over their shoulders a bit.
Folks who’ve been following this stuff as long as I have remember the fabled real estate bonanza in the 1980s that broke all our banks and left the property market here in shambles. Digging out of that hole took almost 10 years.
The factors that fueled the ’80s boom were much different — crooked savings and loan money, tax-driven speculation and the ability to finance more than 100 percent of a project with almost no personal liability.
The current building and leasing boom that stretches from Dallas’ Uptown to the far suburbs is riding a wave of fundamentals including the country’s greatest population and job gains.
That’s why I think the real estate cycle we’re in now will last awhile, and will eventually end with a sigh rather than a scream.
Real estate analysts are betting there are going to be several more years to enjoy the current prosperity.
Jeanette Rice, a researcher with CBRE Group, expects another two to three years of good times in the Dallas-Fort Worth property market.
“Of course, we always have the supply issues in Texas,” Rice said. “But every time I start worrying about oversupply I look at demand, which is phenomenal.
“What’s being built in the office market is being leased up,” she said. “Even the retail sector — which was pretty hard hit during the recession — is seeing opportunities.”
CBRE’s 2015 forecast calls for leasing of industrial and apartment buildings to soften a bit during the next few years while the market appetite for retail and office remains robust.
The commercial real estate firm says that since 2010, 106 companies — the highest number for any Texas office market — expanded or relocated into space in the D-FW area.
Most of the leases were by companies in insurance (27 percent), financial services (15 percent) and technology (13 percent). Insurance is at the top of that list mainly because of State Farm’s new, 1.3 million-square-foot office complex being built in Richardson.
While Houston’s energy sector dominance and the high-tech emphasis in Austin have earned those cities high marks from investors and developers, Dallas’ diversified economy is catching everyone’s eye these days.
“We have this incredible job growth machine second to none,” said Kurt Day, regional director with MetLife Real Estate Investments. “We don’t have the risks of over-dependence on one sector.
“Houston has gotten a lot of interest and deserved it,” Day said. “But Dallas is poised to catch up.”
Because of North Texas’ broad economic base, D-FW will dominate with employment gains, predicts James Huckaby, managing director with Goldman Sachs.
“Dallas over time will garner more of the big corporate relocations,” Huckaby said at a recent meeting of local real estate execs.
And he agrees that the real estate market has some legs.
“If you are the believer that I am that interest rates aren’t going to move up, we are probably going to have a protracted cycle,” Huckaby said.
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