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Thursday, December 4, 2014

Dallas Real Estate Market Benefits from Job Growth

By Greg Langston (Dallas)

Healthy job growth is helping drive investment in the Dallas real estate market, with the office market in particular experiencing nation-leading expansion. This growth is driven by a significant number of corporate relocations and expansions, increasing the value of existing space while promoting additional development. Demand is expected to remain high for the remainder of 2014, but current construction projects are expected to be complete in 2015, freeing up additional space and relieving the tight demand.

These trends, and others, are explored in greater detail in Avison Young’s Dallas Office Market Monitor for the Third Quarter of 2014. Read the full report here.

The Dallas-Fort Worth market is experiencing steady job growth, with 101,500 jobs being added over the 12 months ending in August 2013. In fact, every economic sector--excluding manufacturing and information--has experienced employment gains over the period. As you might expect, these factors have also led to robust growth in single-family and multi-family construction and, ultimately, the Dallas office market.

We can connect this job growth to the significant number of corporate relocations and expansions in the market, with corporations like FedEx and Toyota expanding their D-FW holdings. Although Downtown Dallas remains a top market, we’re seeing marked growth in the suburbs, most notably North Dallas. All in all, there are over 7.4 million square feet of office space currently under construction, 70% of which is already pre-leased.

All of these factors have combined to make the Dallas office market one of the nation’s top performers. The market absorbed over 1.8 million square feet of space during the third quarter, bringing year-to-date absorption numbers above 2013’s final tally with months to go. Although vacancy is down and gross asking rates are up, we expect to see some relief in terms of asking rates once major construction projects are completed in 2015.

In summary, the Dallas office market has continued its trend of steady growth through the third quarter of 2014. Thanks is no small part due to favorable business conditions in the region--and the job growth that comes as a result--we can look forward to the next year with some degree of optimism.

Read the full Dallas Office Market Monitor for the Third Quarter of 2014. or send us an email to learn more.

Tuesday, November 4, 2014

Oil Prices and the effect on Houston Real Estate

By Rand Stephens (Houston)

The recent drop in oil prices followed by Goldman Sachs’ recent bearish report that prices will continue to fall, raises the hair on the back of the neck for those of us in the Houston real estate business who lived through the 1980s oil crash.

For those who are too young to know what I’m referring to with regards to the oil crash in the 80’s, further research is warranted on this topic, if nothing else, but to gain an appreciation for an epic economic collapse that epitomized the phrase “what goes up, most come down”.

The 80’s economic collapse in Houston was an economic tsunami of sorts, with a similar economic affect to what happened to the national economy in the Great Recession beginning in 2008, but without a government bailout.  However, since 1994, after paying for its economic sins in the 80’s with a massive purging of everything in excess, including jobs, the Houston economy has done nothing but go up.

Even during the Great Recession, the Houston economy barely skipped a beat.  Of course, it is important to point out that oil prices were very stable during the Great Recession, which is the major reason the Houston economy didn’t falter.  Prior to the Great Recession, oil prices peaked at $145/barrel, fell to $35/barrel in April of 2009 and then quickly recovered to the $90-$100/barrel range, where they’ve been until now.

I think it is safe to say, that if the price of oil had stayed at $35/barrel in 2009 instead of quickly recovering to the $90-$100 range, the Houston economy would not have enjoyed the same robust growth that it has seen over the last 5 years.

However, since the bust in the 80’s, Houston has weaned itself from excess debt.  So, while negative job growth is a killer for any economy, Houston has proved to be very resilient because, in general, everything is much better capitalized.   

At the beginning of this year, I blogged my predictions for 2014.   One of my predictions was that Houston job growth would slow to around 60,000 jobs.  Well, the trailing 12-month job growth in Houston is 107,000.  Unless something happens drastically in the next two months, I’m going to be very wrong about this prediction.  But the top economists who follow Houston are also going to be very wrong, since they predicted a slowdown in Houston job growth as well.  So, I guess that puts me in good company!

The bottom-line is, no one knows what is going to happen with Houston job growth, or oil prices, including Goldman Sachs.  However, I do sleep better at night knowing these important things about Houston:
  • Houston is the energy capital of the world, and the industry’s intellectual and financial resources continue to move to Houston.
  • The City’s real estate fundamentals are strong and new projects are being well conceived and well capitalized (view the latest 3Q office report here).
  • Houston still has a low cost of living compared to other major markets, it is culturally diverse and is filled with hard working nice people.

What does all this mean for Houston real estate?  I think it bodes well.  No doubt if oil prices continue to drop it will have an effect on job growth, however, Houston is fundamentally sound and is well positioned to handle whatever comes its way.

Thursday, October 30, 2014

Giving back: A day spent volunteering at the Dallas Children’s Advocacy Center

By Kathryn Young (Dallas)

On October 9, 2014, Avison Young’s Dallas-based employees were reminded of the importance of giving back to the community.

As part of the firm’s first-ever Global Day of Giving, we proudly partnered with the Dallas Children’s Advocacy Center (DCAC), and spent the day assisting the charitable organization’s staff in the outstanding services they provide for child victims of tragic circumstances. Avison Young’s Global Day of Giving involved employees in all of the firm’s 60 offices in Canada, the U.S. and Europe. Each Avison Young office chose a local charity with which to volunteer. The Global Day of Giving will be held annually in October in all Avison Young markets and continually expand as the company opens new offices around the globe.

In Dallas, we chose the DCAC as our 2014 charity based on a recommendation from David Cooke, a Principal based in Avison Young’s Dallas office – and for good reason.

Nearly 3,000 children – a staggering number – walked through DCAC in 2014. These children are victims of extreme cases of domestic violence and/or sexual abuse. On average, the victim is a girl, aged nine or ten, who has been sexually abused by someone she knows and trusts. These children arrive by way of Child Protective Services, the Dallas Police Department, one of the 25 other police departments in Dallas County, or a hospital. Sometimes, they are brought straight from school, with no time to pack clothes or items that they would miss terribly, like a special teddy bear.

The DCAC provides these young victims with a warm, child-friendly environment to help buffer their emotional pain. Through loving donations, the children are given toys, stuffed animals, clothes, school supplies, and essential day-to-day items. There are several therapy rooms where children are provided with art, music, play, and even animal-assisted therapy.

One of these therapy rooms has a doll house version of a courtroom, with dolls playing the roles of lawyers, jurors and judge. In a better world, there would be no need for such a toy, but here, there is. While it is sad that such a toy should exist, it can do a great deal to help these innocent children, victims of unthinkable crimes who are too young to understand the court system. This toy is used to help them prepare for court, where they will have to face their perpetrator, a scary prospect for a child to imagine.

We noticed many beautiful quilts, stacked on shelves in the Clothes Closet, hanging on walls as decoration, or laid on sofas in waiting rooms. Erin Bannister, Director of Operations at DCAC, told us that they were all handmade by the Quilters Guild of Dallas. Erin said the guild had donated hundreds of quilts. These quilts gave a warm feeling of comfort, a very nice touch. Each quilt is a loving donation by the women of the Quilters Guild.

We worked in the Clothes Closet, directed by Becky Aguilar, Volunteer Coordinator at the DCAC, organizing donations and loading shelves with containers of children’s clothing, toiletries, diapers, and brand new toys. We were told that the teenage victims’ group needed more donations, and DCAC staff suggested art sets, sketchbooks and drawing supplies. We also worked in the visitation rooms, cleaning tables and chairs, and cleaned all of the children’s toys and placed them back in the dollhouses and toy trunks.

While it is tragic that such a place is necessary, we all felt that our day was well spent, and several of us mentioned that we would like to volunteer our services to the DCAC again.

Our thanks to the unselfish staff and volunteers at the Dallas Children’s Advocacy Center for what they do and for allowing us to be a part of the healing process – now, and in the future.

(Kathryn Young is a Client Services Coordinator based in Avison Young’s Dallas office.)

Monday, October 13, 2014

Industrial Development: A Key Contributor to the Commercial Real Estate Recovery

By: Rand Stephens

U.S. manufacturing is thriving again, returning the demand for industrial space to pre-recession levels. The U.S. industrial sector is leading the commercial real estate recovery with historically low vacancy rates and expanding speculative construction. Developers are far more disciplined than the prior cycle and the portion of speculative development has only recently become more in line with a healthy real estate market. Given current demand, it does not appear that rents will peak or experience a correction anytime soon even with new speculative deliveries. So, what is driving industrial real estate development?

Industrial production, which correlates highly with industrial demand, rose to a record level at the end of 2013 and continues to advance through 2014. As manufacturing sciences progress and consumers expect a quicker delivery of products, warehouses and distribution centers are adapting which translates to renovating existing structures as well as new construction.

In the Houston market, the expansion of oil and gas manufacturing and equipment storage facilities has always driven the city’s industrial market. Current events in the Middle East have created a renewed focus on domestic energy production as well as, potentially, the export of energy commodities thus cementing the demand for industrial space. Apart from energy exports, the market for industrial space near the Port of Houston is being further strengthened by the expansion of the Panama Canal in 2015. 

Houston’s overall industrial vacancy rate decreased in the third quarter, landing at 4.5 percent. The outlook for the remainder of 2014 continues to look good for industrial development, with strong year-over-year growth.

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