The concern isn't that North Texas, Dallas specifically, has reached a critical point, but there is an undercurrent that it might due to the widespread and fast-paced momentum. In fact, industry professionals agree that vacancy and absorption--in some submarkets--validate the need to build. "There are fears of overbuilding because there's so much activity. That's the key," Rick Medinis, executive vice president for NAI Robert Lynn in Dallas, told GlobeSt.com.

In Medinis' specialty of industrial, the finger is pointed at the northern bounds of the Dallas/Fort Worth International Airport submarket, where six million sf is coming out of the ground or on developers' dockets. In the office sector, an estimated two million sf of class AA space in four, perhaps five high rises, are ticketed just for Uptown and the Arts District.

Similar construction accounts dominated the retail sector, with Container Store vice president Valerie Richardson telling the crowded room of professionals that she's regularly pocketing "gross rates on turnkey deals" due to developers' penchant and the competition for specialty retail anchors in lifestyle and mixed-use centers. Likewise, multifamily developers are poised to follow suit, with rents and occupancy both on the upswing. In and around Greenville Avenue, 2,500 apartments are ticketed to be razed so the land can be redeveloped. Another 1,000 units are on the demolition docket to the northwest along Skillman Street. Even the City of Arlington is urging owners of roughly 5,000 units to look at putting redevelopment deals into play via teardowns.

The deep pockets of the debt and equity markets are bankrolling plays with reduced preleasing requirements for proposed projects and low cap rates on existing space for a heavily weighted population of California exchange buyers in a free-for-all scenario to place capital. How deep is the need for investment circles? Mark Gibson, executive managing director for Holliday Fenoglio Fowler LP, said the industry needs only to look at the Peter Cooper Village deal, which got its capital backing in just 20 days.

Regardless of the RealShare session, liquidity and overbuilding were in the spotlight. "A lot of these buildings are being purchased on the come," Jean Farris, leasing director for Hall Financial Group, said during an office market session. "Those buildings have no choice but to push rents. The question is will rents catch up to construction costs. Everyone who is buying building and everyone who is building a building are thinking it will happen. But, developers are going to have to take a lower return until the rents are there."

The consensus of the day is that the pendulum is swinging to a landlords' market after several years with tenants in control. "For two or three years, I think it's going to be a pretty good market for landlords," said Jeff Ellerman, executive vice president of the Staubach Co.

Regardless of who's in control, Dallas is pushing full throttle on all fronts. "Look for Texas to grow faster than the US economy for some time," said keynote speaker, John Duca, senior economist for the Federal Reserve Bank of Dallas. There are some hot-button issues that the Feds are closely watching like new residential mortgage products and energy prices, both of which have trickledown impacts on the commercial marketplace.

Yet, a panel of investors said not even Texas' controversial margin tax is going to keep them from scooping up deeds in the Lone Star State. They're convinced the law will change or the impact mitigated when the legislature reconvenes in January. "It's definitely not an expense we've 'pro forma-ed' into the buildings we've bought," said Larry Blankenship, asset manager for Los Angles-based Younan Properties Inc. "Will it affect our investment strategy in Texas, probably not."

The reality is rents are rising, buildings are filling and the buy-in is cheaper in Dallas/Fort Worth than either coast. As coastal investors buy into the region, the market's veterans are banking on Dallas' historical appetite for new and expensive. And yes, there is the age-old concern about what will happen to existing class B and class A buildings--or even a trophy like the Crescent given the new Uptown competition. But, Dallas has wrestled before with the dilemma and won.

"It's Dallas. We will overbuild it again," said Chuck Anderson, partner in local firm, Bandera Ventures. "We have too many people who do what they do really well."

This year's RealShare Conference, held at the Westin Galleria, featured a panel of local "legends" that put the industry into perspective for the younger generations. Among the panel's many pearls of wisdom came this one from Vance Miller, chairman of Henry S. Miller Commercial: "Business goes where it is invited and stays where it is appreciated." The RealShare Conference Series is produced by Real Estate Media, publisher of GlobeSt.com and Real Estate Forum.

Instant Insights /

RealShare EXCLUSIVE: Market Momentum Fuels Fears of Overbuilding

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