Surprise: Tarrant County Enters Downturn

Keynote speaker Matt Valley, editor-in-chief of National Real Estate Investor said the good news is that unemployment in Tarrant County is at 5.5%. The not-so-good news is that job creation will determine real estate trends and "there isn't a lot of job security these days," he acknowledged.

Daniel P. Wright, director with Integra Realty Resources' local office gave a list of predictions across the board that included increased cap rates, decreased rental rates and investors losing equity. This, in turn, will lead to distressed property sales. "In other words, a lot of California investors will return their property back to Texas," Wright commented.

The retail side offered up some especially dour news. "As we head into 2009, we'll see retailers continue to close non-profitable locations, while some close altogether," remarks James M. Makens, president, the Makens Co. in Bedford, TX. "Full-price stores will feel it, while discount and membership stores will continue to do relatively well."

Other speakers pointed out that the real estate business is cyclical. After some wonderful high points from the mid-2000s, we're now on the down side. "The market, like the seasons, ebb and flow," Locally based Village Homes LP partner Rob Sell commented. "We're in the winter of the market, and have been for awhile."

Jones Lang LaSalle Inc.'s George D. Duncan Jr., in the meantime, commented that the office side will likely experience negative absorption, the first time Fort Worth and Tarrant County have experienced something like this in years. "There'll be office buildings that trade hands, but not necessarily because the owners want that to happen," added Duncan, who is with the company's Fort Worth office.

However, even amid the rather gloomy predictions, the speakers were somewhat optimistic. The fundamentals of job growth, particularly from the Barnett Shale, should help aid a quick turnaround when the economy starts to revive. Furthermore, Michael K. Berry, president with Dallas-based Hillwood Properties said the industrial side would likely outperform the other markets in terms of leasing, namely because of what's on the ground today.

"I do believe we have a chance to make a few big national, or at least regional, consolidation deals," he commented. "We'll out-perform the other markets because of the fundamentals."

Wright acknowledged things wouldn't be nearly as bad as they were in the RTC days of the early 1990s. Sell remarked that with great interest rates, it could be a banner year for buyers. "Most developers are probably willing to make deals right now," he comments.

Makens agrees that 2009 will be a great year for investment deals. He goes one step further, saying that rail-focused infrastructure could likely see the emergence of more emphasis on transit-oriented development, which will likely attract retail.

The experts also agreed this down cycle was past due. "2009 will be a challenging year, and it will be a slow process to get out of it," Valley remarked. "But we needed for the bubble to burst. We needed some correction in the economy."

Adds Duncan: "It could be stormy weather. Not that we won't get through it. And not everyone will be affected."