Thursday, October 01, 2015
CBRE: How low oil prices impact DFW commercial real estate
DALLAS (CBRE) – A new report from CBRE says the impact of sliding and volatile oil prices on Dallas-Fort Worth commercial real estate has been minimal, as commercial real estate fundamentals in the market have shown pervasive strength.
“Given the diverse industry base of DFW and the energy sector’s 1.1 percent share of metro employment, any economic impact from low oil prices is expected to be marginal on a local level,” said CBRE's Michael Caffey. "We’re seeing minimal effects on commercial real estate occupancy as our region looks to other industries like finance, insurance, wholesale trade and transportation for growth. Above-average population growth should continue to sustain momentum in the housing market, which will also benefit overall growth and help secure the region’s continued status as an expanding market."
Office: Energy-related companies within DFW are predominantly located in the Fort Worth CBD, where approximately 10 percent of the office base is occupied by oil and gas tenants.
Although second-quarter occupancy was down by 100 to 380 basis points (bps) from a year earlier in other energy markets (Calgary, Houston and Pittsburgh), occupancy was up by 75 bps in DFW.
Industrial: While vacancy has begun to level off in the area, it is a result of increasing speculative construction, rather than a product of oil- and gas-related instability.
Multifamily: Aggressive expansion of the job base will continue to fuel renter demand as DFW is projected to add 13.6 percent to the job base through 2019, according to Moody’s Analytics.
Capital markets: So far in 2015, sales volume in the Dallas and Fort Worth CBDs have declined from 2014, which was notably higher than previous years. Last December, the rolling 12-month sales volume surpassed $800 million, a level not reached since second quarter 2008. Since second quarter 2014, the cores of both cities have shifted from institutional to private buyers.
Retail: Lower gas prices have meant more disposable income for consumers. This is expected to have an impact on retail sales, particularly for big-ticket items.
Hotel: Overall, the fall in oil prices has had no effect on the DFW hospitality market. Annual increases in revenue per available room are expected to reach 9 percent in Dallas and 6.5 percent in Fort Worth for 2015, exceeding the long-term averages (since 1988) of 3.4 percent and 3.9 percent, respectively, according to PKF Research, a CBRE company.
Real Estate Center