Texas Metros Lagging Peers, But Not Benched for 2004

Texas' Big Four metros are experiencing some gains, but growth is coming from industries rooted in the service sector, construction, public administration and not necessarily bound to large blocks of traditional office space. "Every month we go with a jobless recovery is another month we go from an office market recovery," says Robert Kramp, Grubb & Ellis' director of client services. And whether it's the office or industrial sector, there have been marginal gains due to in-place practices that keep Texas at the forefront because its pro-business attitude can most often turn a higher take-home pay for corporations.

Dallas will take longer to recover because it's been hit the hardest. "To understand Dallas today, you have to understand Dallas of the past," Kramp tells GlobeSt.com. The high office vacancy, 25.4% by the research team's calculations, is a struggle to survive, but causes more consternation outside the state limits than it does inside. "Dallas owners and landlords are accustomed to doing business at three to four times the national average. It's their perspective of doing business," he says of the can-do attitude that closes deals in the darkest of times in the 185-million-sf inventory. A rebound that started in the second half of 2003 will bring positive numbers this year for both sectors. "By 2005, the Dallas office leasing market will have begun to swing back toward landlords," he predicts.

Kramp ranks Houston as the most favorable office market from a tenants' perspective followed by Dallas, Austin and San Antonio in that order. Researchers put Houston's vacancy at 19.7%; Austin, 21.4%; and San Antonio, 20.4%.

The Texas/Oklahoma forecast showed all office markets bled red ink for absorption "mainly throughout the entire year although the rate at which users were dumping space slowed with some markets, such as Austin and Dallas/Fort Worth, finally stabilizing as the year drew to a close."

The industrial stack-up, with tenants also in the driver's seat, has Dallas first and trailed by Houston, San Antonio and Austin. The DFW's industrial market is primed with opportunity as a result of the lowest occupancy costs in 15 years...and will stay that way for at least another nine months, Kramp says. The team pegs vacancy at 10.3% in an inventory pushing 640 million sf, with another 4.5 million sf under construction. Houston's vacancy is 8.5%; San Antonio, 13.2%; and Austin, 15.2%.

Tantamount to the metros' influence, the state's maquiladora trade carries an economic clout of close to $250 billion for the US and Mexico. Last year was the roughest ride in four decades. Kramp says there are some gains being made, but it's now coming from small to mid-size users instead of big box assembly lines, many of which have been lost to China. In the last two years, more than 240,000 jobs were lost along the 1,254-mile border between Texas and Mexico. "It will be a challenging year ahead due to globalization," he says of the exporting of jobs to countries with cheaper overhead.