Markets Down, Not Out, Hendricks Says

DALLAS-A third-quarter report by multifamily advisory firm Hendricks & Partners concludes the Dallas/Ft. Worth office and multifamily real estate industries have been hit hard but are not down for the count. The study finds the region has suffered its worst third quarter in several years.

The general vacancy rate is now 5.4%, a 1.8-point increase from the same quarter in 2000.

Other numbers are even more staggering. The net absorption in the multifamily market for the last quarter was down to 1,400 units, compared to 11,270 units at the same time last year. That factor, along with new construction, is the cause of the nearly 2-point jump in overall vacancies. Henrdicks’ report also finds there are currently approximately 50 million sf of available pre-existing space in the area, as well as 8 million sf of space under construction. On the average, the office vacancy number is nearing 20% in the metro area.

Despite the apparently grim distinctions between this year’s third quarter and that of 2000, Hendricks officials say Dallas/Ft.Worth will be able to make a speedy recovery without a great deal of suffering. One reason for that is “Dallas is such a diversified economy and our job market has been so robust over the past few years,” Hendricks & Partners’ Michael Lewis tells GlobeSt.com from his Dallas office.

Lewis notes the area is in better condition than area cities such as Houston because it is not an oil-based market — the Dallas/Ft. Worth area’s economy base varies from textiles to electronics to potato chips. As for the drastic change in absorption, Lewis explains “the gears for developers have slowed down ahead of this recession, so we’re in pretty good shape to absorb what needs to be absorbed.”

Looking ahead, Hendricks & Partners speculates that building on the outskirts of the region will prove economically prudent for developers. A potentially successful venture, Lewis suggests, would be “a B-class project in a mature area…where you can avoid direct competition from ill-conceived projects (in-town).” He adds most of the new employment is on the outskirts.