X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

FORT WORTH-High-profile news-breaking wins in Tarrant County and the city have put them in enviable positions as they continue to steal some thunder from their rival to the east, Dallas. At the height of the forecast season, the consensus is the western side of the metroplex clearly is a front-runner in investors’ eyes.

“Over time, Dallas is becoming less important to the metroplex and places like Tarrant County and Denton are more characterizing of the metroplex,” Robert M. White Jr., president of New York City-based Real Capital Analytics Inc., told a record-breaking crowd of more than 670 from all walks of the industry at yesterday’s 18th annual forecast held in the Fort Worth Convention Center in the CBD. And, no one disputed his claim.

It’s not always easy to sort the stats for the two cities because the out-of-state perception is it’s one big MSA. “You shouldn’t be so sensitive about being grouped in with Dallas,” White said, “because more sold in Dallas in 2006 than in all of France or Canada.” But, he did dig deep enough to explain to the crowd what makes Fort Worth and its surrounding Tarrant County cities shine so strong in the capital markets game.

Dallas/Fort Worth accounted for $11.5 billion of the $20 billion sold last year in Texas. Of that, Fort Worth rang up $2.5 billion, putting it in fourth place statewide. Dallas led the lineup with Houston and Austin in second and third places, respectively. San Antonio was last.

Real Capital Analytics’ research shows Texas last year replaced Florida in market positioning, coming in third to California and New York. On the sales front, Dallas/Fort Worth placed seventh in the nation’s $320 billion of commercial real estate sales in deals of $5 million or more. But underlying it all, investors’ spotlights are pointed at Dallas/Fort Worth because its 7.7% cap rate is second highest out of 25 metros and the $123 per sf office price is the lowest in the pack.

“My clients would kill to have a 7.5% return in a CBD market with a low vacancy,” White said. Fort Worth’s low office vacancy and current cap rates “signal fine opportunities,” he stressed.

White said Fort Worth stands to prosper again this year. “Your leveraged return can be well into the double digits,” he said, “and that is an incredible rarity in the markets.”

Texas, in general, has reaped rewards as out-of-state investors of all types see opportunity instead of sticker shock on pricing. “For the first time last year, Californians bought more commercial property in Texas than Texans did,” White said. “And, New York’s not far behind. They have a lot of money and that’s only going to continue.” Californians forked out more than $4.95 billion to Texans’ $4.8 billion for the $20-billion sales year. New Yorkers spent more than $2.92 billion.

From the local perspective, dealmakers of all product type reported rock-solid results from 2006 and promises of more gains in 2007. Construction prices, for now, aren’t stalling development. But, the federal government’s minimum wage hike and Texas lawmakers’ legislative approach to undocumented workers could change the scenery, but it’s too early to predict the impact. On the other hand, the Dallas Cowboys’ new home in Arlington and the periphery development could easily minimize the fallout.

In the residential arena, Rob Sell, partner and co-founder of Village Homes LP in Fort Worth, had a word of caution for infill developers: supply will outpace demand this year. “We’ll just have to work through that.”

In the industrial sector, Robert J. Scully, senior vice president and co-managing director of CB Richard Ellis’ Fort Worth team, reported there are 18.29 million sf of deals in the market right now. And with that comes construction, much of it as spec. Tarrant County accounts for nearly half of the 9.6 million sf that’s under construction in the metroplex. AllianceTexas alone has jumpstarted a 1.7-million-sf spec program to get five buildings ready to go to maintain its deal flow. “It’s the most aggressive spec program in its history,” Scully said. “Hillwood is clearly targeting the sweet spot in the market.”

Scully predicted word will come soon about a 1.6-million-sf build-to-suit in Alliance and a one-million-sf one at Carter Industrial Park. And if his calls are on target, the 527-acre Intel site in Alliance will be bought for an entertainment development.

James M. Makens, president of the Makens Co. in Fort Worth, laid out at least two dozen retail developments from one end of Tarrant County to the other. The Bentonville, AR-based Wal-Mart Stores Inc. and Minneapolis-headquartered Target Corp. are fueling a high percentage of the pipeline. His crystal ball shows an IKEA landing in Arlington Highlands either at year’s end or early 2008 and Grapevine Mills Mall transitioning from an outlet location to a full-price center.

On the office front, George D. Duncan Jr., senior vice president for the Staubach Co.’s Fort Worth office, predicted another large CBD building will be sold this year. Last year, it was Burnett Plaza in a $172-million deal. If he’s calling right, there will be more mid- and high-rise office projects surface as the year plays out.

Duncan said rents are rising, with $25 per sf to $28 per sf becoming the norm, creating some renewal shock for tenants who’ve been paying under $20 per sf. “The good news is they’ve more choices this year than a year ago,” he said, referencing several under-construction buildings and a 200,000-sf sublease block. “It’s a very healthy market. In one sense, it’s unhealthy,” he says, “because there’s not enough inventory.” He pegged overall vacancy at 7%.

In a recent report, Fort Worth-based Crescent Real Estate Equities says the city’s six class A buildings, totaling 3.8 million sf, are 98.2% physically occupied and 98.6% economically occupied.

“2006 has been a great year for Tarrant County,” said Ben D. Loughry, managing partner for Integra Realty Resources DFW LLP. “Nearly all of our markets are in expansion or recovery.”

The good news, though, has a cloud hanging overhead. Texas lawmakers have 43 more days in which to file bills for the 80th legislative session, which opened Jan. 9. Some bills are already in place and on a “watch list” for the Greater Fort Worth Real Estate Council, said Susan A. Halsey, partner in Jackson Walker LLP and council president.

The bills to watch are HB 133, which would require full sales price disclosure; HB 476, which would cap on appraisals for commercial properties; HB 325, setting penalties for hiring undocumented workers; House Joint Resolution 11, defining eminent domain; and House Joint Resolution 30, also aimed at eminent domain properties.

Disclosure of sales prices has divided the state before and promises to do so again. Hailing from a state where disclosure has long been practiced, White did have a word of professional advice: “Transparency benefits any market. To get a bigger piece of the global market, I think transparency will help you.”

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

GlobeSt. NET LEASE Spring 2021Event

This conference brings together the industry's most influential & knowledgeable real estate executives from the net lease sector.

Get More Information
 

GlobeSt. NET LEASE Spring 2021Event

This conference brings together the industry's most influential & knowledgeable real estate executives from the net lease sector.

Get More Information
 

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.