Investors' Symposium Brings Some Good News

The cry from the dais focused on job creation, a must-have stimulus that's gaining some momentum but not nearly as quickly as the economists and labor pool would like. "The fed has done just about everything it can do," Harvey Rosenblum, senior vice president and research director for the Federal Reserve Bank of Dallas, told the 187 brokers and investors packing this week's event at the Hotel Inter-Continental in Addison. Rosenblum, not prone to predictions, said the front nationally could start producing 100,000 jobs per month in the coming months.

One of the strongest signs of late is the pricing power reported over the last five weeks by construction-related industries. "I don't know if this is going to be a tipping point from disinflation to rising inflation," Rosenblum said of the supply and demand balancing act arising from decreasing inventories, "but I'm getting more and more optimistic every month." As inventories decline, he says "double ordering" of goods is now creeping into the system after a long hiatus--a somewhat "scary sign."

Christopher J. Oberhaus, director of research services for Marcus & Millichap, can go out on the line to make predictions, and he did. Dallas/Fort Worth, he said, can "expect decent growth in 2004...The Dallas economy is on the mend and expect to return to trend lines in 2004." Nationwide, must-have jobs will come at a rate of 61,000 per month, just a fraction of the number that would normally be created at this point in the cycle to keep the rebound "sub-par by historical averages," he said.

Oberhaus predicted 55,000 new jobs this year will be created in the metroplex, mostly from defense, construction and telecommunications industries. It will be, he said, the first full year of job growth since 2000.

In a sector-by-sector perspective, Oberhaus said multifamily rents will stabilize in Dallas/Fort Worth although concessions won't burn off until 2005. "The worst is probably behind us in the apartment market," he reported, crediting builders with being "relatively disciplined at least by Dallas standards." As the market improves, he suggested the best upside will come from class A product, where vacancy overall is 20% or more. "There could be a 10% to 14% bump in the economic rents as the market improves," he added.

The office sector has gained some leverage. "Free rent is fading fast and the number of rent bumps are decreasing," Oberhaus said, predicting class A absorption will be back by midyear 2005.

Cap rates will hover at 10% for class A office building sales and 10.5% for class B and C product. Cap rates are down 25 basis points from the fall, but "don't waste time looking for RTC giveaways," Oberhaus told the investors.

And once again, retail will be the darling, the continued "safe haven" with prices sure to rise on the sales front by investors hungry for stable product. Favored properties will continue to grocery-anchored centers in the 40,000-sf category and single-tenant properties like Walgreens.