dfw commercial real estate market year in review · dfw commercial real estate market year in...
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DFW COMMERCIALREAL ESTATE MARKETYEAR IN REVIEW
1.29.2020
Presented to:
2020 ECONOMIC DEVELOPMENT PARTNERSHIP LUNCHEON
Rowlett Economic Development 1.29.2020 2
Agenda
Construction
The Big (D) Picture
Multi-Family
Office
Sales
Industrial
Economy
Retail
Rowlett Economic Development 1.29.2020 3
MEDIAN HOUSEHOLD INCOME TOTAL HOUSEHOLDS
TOTAL JOBS CITY PARKS
MEDIAN AGE ACRES OF TOTAL PARK LAND AREA
DFW Market Facts
120,700Jobs added in the last year
29.7 MinutesAverage commute time
7,539,711Total population
3.0%Unemployment in Dallas.
#1Places for business and career
-Forbes
DFW has 43 Fortune 1,000 companies located in the metro.
Highly educated workforce The area is host to 15 major universities and 7 community college districts, combining to total over 366,000 enrollees. Multiple universities have achieved or are working towards “tier one” research institution status.
Increase in employment over the last year
3.2%
10,676,844 Will live in the DFWarea by 2030 $63,812
3,870,400
34.7 21,200
410+
2.88 M
The Big (D) Picture Q4 2019
Rowlett Economic Development 1.29.2020 4
The Big (D) Picture Q4 2019
OFFICEINVENTORY
330 MSF
VACANCY14.6%
12 MO. NET ABSORPTION5.7 MSF
UNDER CONSTRUCTION7.2 MSF
INVENTORY434 MSF
VACANCY4.5%
12 MO. NET ABSORPTION2.5 MSF
UNDER CONSTRUCTION5.5 MSF
INVENTORY835 MSF
VACANCY5.4%
12 MO. NET ABSORPTION22.5 MSF
UNDER CONSTRUCTION29.3 MSF
INVENTORY848K Units
VACANCY7.4%
12 MO. NET ABSORPTION24K Units
UNDER CONSTRUCTION39K Units
RETAILINDUSTRIAL MULTI-FAMILY
*Owner Occupied Included
Rowlett Economic Development 1.29.2020 5
The Year in Review Office
1.9 MSF net absorption for Q4 2019
Rent growth cooled for Class B product, turning
negative for the quarter. Class A rent
growth slowed as well but was still positive.
7.2 MSF under construction
7.3 MSF of deliveriesfor the year.
Uber had the biggest lease with its Epic 2
deal, and when combined with its
Epic 1 lease, signed off for over 600,000 SF.
5.7 MSF net absorption for 2019 $4.1B in sales.
Over half of the year’s absorption was single
tenant/build to suit activity.
Rowlett Economic Development 1.29.2020 6
The Year in Review Office
10%
32%
27%
18%
13%
Full Serv
icePlus E
NNNNegotiab
leOther
Partnership. Performance.
2019 Market Overview: Dallas-Fort Worth
Class AClass B
Total Market
$30.42 15.5% 5,850,056 1,840,265 1,187,698 6,608,185 6,373,966 2.7%$21.70 14.5% 87,427 190,278 712,194 667,743 792,567 -0.6%$26.06 15.0% 5,937,483 2,030,543 1,889,892 7,275,928 7,166,533 1.3%
168,086,159 144,849,951312,936,110
659 1,9022,571
Avg Gross Rate Vacancy 12 Mo. Absorb Q4 AbsorbCoworking Space YTD Deliveries Under Constr YOY Rent GrowthRBA SFBuildings
“Dallas-Fort Worth continues to poistion itself as one of the premier Tier I markets in the country.”- Greg Langston, Principal & Managing Director
Q4 2019
2019 High Profile Deliveries
Inventory Tenancy: Single vs Multi
12 Mo. Absorption: Single vs Multi
Market Cap Rate
6.7%
12 Month Sales Volume
$4.18 BRecent Major Sale Activity
Quick Facts
Market Talking Points
Largest Signed Leases for the Year
Avison Young | 1920 McKinney Ave, Suite 1100 | Dallas, TX 75201 | 214.559.3900 © 2020 Avison Young—Dallas, LLC. All rights reserved. E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young.
• Construction pipelines picked up in 2019 after cooling for the previous two years. New product continues to drive absorption in the metro, with products built in the 70’s, 80’s & 90’s all posting negative 12-month absorption. This flight-to-quality trend will likely continue across the market, creating a sort of hybrid bubble where the metro is not over-built, but a glut of unpopular older product sits vacant.
• Net Absorption for the metro has been driven by single tenant build-to-suits in recent years, thus helping keep vacancy rates consistent even as millions of square feet of new product delivered.
• Steady job growth helped DFW recently cross the milestone of having 1 million office using jobs. Total non-farm employment for the metro now sits at nearly 3.5 million jobs.
• WeWork’s fall from grace cast some uncertainty onto the coworking landscape, but look to smaller local players and companies with better cash setups continue to drive growth in the flexible leasing sector.
Gross Direct Rent Changes Most Common Rent Structures
American Airlines Corporate Campus
Pioneer Natural Resources
Charles Schwab Westlake Campus
The Epic Nokia HQ Offices at The Realm
Harwood No.10
4200 American Blvd1,700,000 SF
HEB/Mid-Cities/ArlingtonSingle Tenant
777 Hidden Ridge Dr1,125,366 SFLas Colinas
Single Tenant
3101 Schwab Way580,000 SF
Westlake/Grapevine/SouthlakeSingle Tenant
2550 Pacific Ave294,820 SF
Deep Ellum/White Rock94.0% Leased
$35.00-$37.00/NNN
3201 Olympus Blvd250,000 SFLas Colinas
Single Tenant
4400 Sam Rayburn Tollway235,921 SF
Upper Tollway/West Plano37.7% Leased$30.00/NNN
2850 N Harwood St231,098 SF
HEB/Mid-Cities67.8% Leased
$38.00-$40.00/NNN
Pioneer Natural Resources HQ
One AT&T Plaza
1900 Pearl
Premier Place
One Twenty Five
1 2/19
9/19
4/19
11/19
11/19
$584M
~$250M
$181M
$143M
$99M
$519/SF
~$259/SF
$724/SF
$313/SF
$226/SF
KDC
Dundon Capital, Woods Cap Mgmt
Lincoln Property/Goldman Sachs
CBRE Global Investors Ltd
KBS Strategic Opportunity REIT
Riyad Capital, PRP
Hana Financial Group
STRS Ohio
GlenStar Properties
Keppel-KBS US REIT
DATE OWNER/SELLER BUYER PRICE PSF
23% 77%
51% 49%
Lockheed Martin 431,579 SF
5401 N Beach StEast Northeast Ft Worth
Start Date: April 1, ‘20
Tenet Healthcare 372,931 SF
International Plaza IQuorum/Bent Tree
Start Date: Feb 1, ‘20
Uber Technologies634,245 SF
The Epic 1 & 2Deep Ellum/White Rock
Start Date: Jan 1 ‘20, Aug. 1 ‘22
7,539,711 Total Population
4th Largest Metro in US
120,700Jobs added Nov. ‘18-Nov. ‘19
3.2% YOY Growth
3.1%Unemployment
.4% Lower than US average
Sources: US Census Bureau, and Bureau of Labor Statistics
Source: Real Capital Analytics
10%
32%
27%
18%
13%
Full Service Plus E NNN Negotiable Other
10%
32%
27%
18%
13%
Full Service Plus E NNN Negotiable Other
32%
27%
18%
13%
10%
$21
$22
$23
$24
$25
$26
$27
$28
$29
$30
$31
1/1/19 2/1/19 3/1/19 4/1/19 5/1/19 6/1/19 7/1/19 8/1/19 9/1/19 10/1/19 11/1/19 12/1/19
DFW Total Class A Class B
0
2
4
6
8
10
12
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Mill
ions
of S
F
Yearly Construction Starts
Net Absorption, Net Deliveries & Vacancy
12.5%
13.0%
13.5%
14.0%
14.5%
15.0%
15.5%
0
0.5
1
1.5
2
2.5
3
3.5
2016 Q3
2016 Q4
2017 Q1
2017 Q2
2017 Q3
2017 Q4
2018 Q1
2018 Q2
2018 Q3
2018 Q4
2019 Q1
2019 Q2
2019 Q3
2019 Q4
Mill
ions
of S
F
Net Absorption SF Total Deliveries SF Vacant Available Percent % Total
Rowlett Economic Development 1.29.2020 7
The Year in Review Office
10%
32%
27%
18%
13%
Full Serv
icePlus E
NNNNegotiab
leOther
Partnership. Performance.
2019 Market Overview: Dallas-Fort Worth
Class AClass B
Total Market
$30.42 15.5% 5,850,056 1,840,265 1,187,698 6,608,185 6,373,966 2.7%$21.70 14.5% 87,427 190,278 712,194 667,743 792,567 -0.6%$26.06 15.0% 5,937,483 2,030,543 1,889,892 7,275,928 7,166,533 1.3%
168,086,159 144,849,951312,936,110
659 1,9022,571
Avg Gross Rate Vacancy 12 Mo. Absorb Q4 AbsorbCoworking Space YTD Deliveries Under Constr YOY Rent GrowthRBA SFBuildings
“Dallas-Fort Worth continues to poistion itself as one of the premier Tier I markets in the country.”- Greg Langston, Principal & Managing Director
Q4 2019
2019 High Profile Deliveries
Inventory Tenancy: Single vs Multi
12 Mo. Absorption: Single vs Multi
Market Cap Rate
6.7%
12 Month Sales Volume
$4.18 BRecent Major Sale Activity
Quick Facts
Market Talking Points
Largest Signed Leases for the Year
Avison Young | 1920 McKinney Ave, Suite 1100 | Dallas, TX 75201 | 214.559.3900 © 2020 Avison Young—Dallas, LLC. All rights reserved. E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young.
• Construction pipelines picked up in 2019 after cooling for the previous two years. New product continues to drive absorption in the metro, with products built in the 70’s, 80’s & 90’s all posting negative 12-month absorption. This flight-to-quality trend will likely continue across the market, creating a sort of hybrid bubble where the metro is not over-built, but a glut of unpopular older product sits vacant.
• Net Absorption for the metro has been driven by single tenant build-to-suits in recent years, thus helping keep vacancy rates consistent even as millions of square feet of new product delivered.
• Steady job growth helped DFW recently cross the milestone of having 1 million office using jobs. Total non-farm employment for the metro now sits at nearly 3.5 million jobs.
• WeWork’s fall from grace cast some uncertainty onto the coworking landscape, but look to smaller local players and companies with better cash setups continue to drive growth in the flexible leasing sector.
Gross Direct Rent Changes Most Common Rent Structures
American Airlines Corporate Campus
Pioneer Natural Resources
Charles Schwab Westlake Campus
The Epic Nokia HQ Offices at The Realm
Harwood No.10
4200 American Blvd1,700,000 SF
HEB/Mid-Cities/ArlingtonSingle Tenant
777 Hidden Ridge Dr1,125,366 SFLas Colinas
Single Tenant
3101 Schwab Way580,000 SF
Westlake/Grapevine/SouthlakeSingle Tenant
2550 Pacific Ave294,820 SF
Deep Ellum/White Rock94.0% Leased
$35.00-$37.00/NNN
3201 Olympus Blvd250,000 SFLas Colinas
Single Tenant
4400 Sam Rayburn Tollway235,921 SF
Upper Tollway/West Plano37.7% Leased$30.00/NNN
2850 N Harwood St231,098 SF
HEB/Mid-Cities67.8% Leased
$38.00-$40.00/NNN
Pioneer Natural Resources HQ
One AT&T Plaza
1900 Pearl
Premier Place
One Twenty Five
1 2/19
9/19
4/19
11/19
11/19
$584M
~$250M
$181M
$143M
$99M
$519/SF
~$259/SF
$724/SF
$313/SF
$226/SF
KDC
Dundon Capital, Woods Cap Mgmt
Lincoln Property/Goldman Sachs
CBRE Global Investors Ltd
KBS Strategic Opportunity REIT
Riyad Capital, PRP
Hana Financial Group
STRS Ohio
GlenStar Properties
Keppel-KBS US REIT
DATE OWNER/SELLER BUYER PRICE PSF
23% 77%
51% 49%
Lockheed Martin 431,579 SF
5401 N Beach StEast Northeast Ft Worth
Start Date: April 1, ‘20
Tenet Healthcare 372,931 SF
International Plaza IQuorum/Bent Tree
Start Date: Feb 1, ‘20
Uber Technologies634,245 SF
The Epic 1 & 2Deep Ellum/White Rock
Start Date: Jan 1 ‘20, Aug. 1 ‘22
7,539,711 Total Population
4th Largest Metro in US
120,700Jobs added Nov. ‘18-Nov. ‘19
3.2% YOY Growth
3.1%Unemployment
.4% Lower than US average
Sources: US Census Bureau, and Bureau of Labor Statistics
Source: Real Capital Analytics
10%
32%
27%
18%
13%
Full Service Plus E NNN Negotiable Other
10%
32%
27%
18%
13%
Full Service Plus E NNN Negotiable Other
32%
27%
18%
13%
10%
$21
$22
$23
$24
$25
$26
$27
$28
$29
$30
$31
1/1/19 2/1/19 3/1/19 4/1/19 5/1/19 6/1/19 7/1/19 8/1/19 9/1/19 10/1/19 11/1/19 12/1/19
DFW Total Class A Class B
0
2
4
6
8
10
12
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Mill
ions
of S
F
Yearly Construction Starts
Net Absorption, Net Deliveries & Vacancy
12.5%
13.0%
13.5%
14.0%
14.5%
15.0%
15.5%
0
0.5
1
1.5
2
2.5
3
3.5
2016 Q3
2016 Q4
2017 Q1
2017 Q2
2017 Q3
2017 Q4
2018 Q1
2018 Q2
2018 Q3
2018 Q4
2019 Q1
2019 Q2
2019 Q3
2019 Q4
Mill
ions
of S
F
Net Absorption SF Total Deliveries SF Vacant Available Percent % Total
(2.0%)(1.0%)0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%
2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4
Class A Class B Total
Annualized Rent Growth
12.5%
13.0%
13.5%
14.0%
14.5%
15.0%
15.5%
295
300
305
310
315
320
325
330
335
2016 Q3
2016 Q4
2017 Q1
2017 Q2
2017 Q3
2017 Q4
2018 Q1
2018 Q2
2018 Q3
2018 Q4
2019 Q1
2019 Q2
2019 Q3
2019 Q4
Milli
ons o
f SF
Inventory SF Vacant Available Percent % Total
Inventory & Vacancy
Rowlett Economic Development 1.29.2020 8
The Year in Review Office
TRENDS
Coworking & Flexible Lease Office Space
continued to grow, evenwith WeWork’s issues
Flight to quality Rise of the suburbs Amenities arms race
(2)
0
2
4
6
8
10
2010'S 2000'S 1990'S 1980'S 1970'S
Mill
ions
of S
F
2019 Net Absorption by Decade Built
Rowlett Economic Development 1.29.2020 9
CO-WORKINGThere is currently 3.5 MSF
of space dedicated to coworking and flexible
lease providers.
26%Regus & Spaces
18%WeWork
8%Boxer
6%Common Desk
LARGEST PROVIDERS (% Total Inventory)
The Year in Review Office
Rowlett Economic Development 1.29.2020 10
The Year in Review Industrial
6 MSF net absorption for Q4 2019
South Dallas cluster had highest yearly net
absorption
31.6 MSF under construction
28 MSF of deliveriesfor the year.
Warehouse and Distribution product
made up about 97% of 12 month net absorption
22.5 MSF net absorption for 2019 $5.2B in sales.
5.0% rent growth – highest percentage
among different property types
Rowlett Economic Development 1.29.2020 11
Average Direct NNN Asking Rates
1511 NE Loop 8201,023,488 SF
Commerce 30 - Building A608,939 SF
Cooper I-20 - Building C401,115 SF
Gateway Logistic Center - 3375,400 SF
Inventory Vs. Vacancy Historical Construction Starts
$0
$1
$2
$3
$4
$5
$6
$7
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
0%
2%
4%
6%
8%
10%
12%
650
700
750
800
850
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Mill
ions
of S
F
Inventory SF Vacant Available Percent % Total0
5
10
15
20
25
30
35
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Mill
ions
of S
F
The Year in Review Industrial
High Profile Deliveries
Rowlett Economic Development 1.29.2020 12
The Year in Review Retail
Net absorption and deliveries were lower
this year than they have been since 2011
Northern Suburbs and Far North Dallas area driving most of the
activity in absorption and construction
5.3 MSF under construction
4.2 MSF of deliveriesfor the year. $3.1B in sales
2.5 MSF net absorption for 2019 4.8% vacancy
DFW is still one of the best retail markets
in the country- we love shopping
Rowlett Economic Development 1.29.2020 13
The Year in Review Retail
Steady Tapering as Retail Shifts to Online What’s Old is New Again
Valley View Mall , Redbird Mall & Collin Creek Mall are both seeing multi-billion dollar tear downs and re-births
Retail Spending by Millions of Dollars
$30,000
$31,000
$32,000
$33,000
$34,000
$35,000
$36,000
$37,000
$38,000
$39,000
2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 YTD
Reta
il Sp
end
ing
by
Mill
ions
of D
olla
rs
Rowlett Economic Development 1.29.2020 14
The Year in Review Retail
What’s Trending?
Rowlett Economic Development 1.29.2020 15
The Year in Review Multi-Family
Apartments are the new investor darling with $9.6B in sales- almost half of the year’s total
volume for DFW
39,000 units Under Construction
>24,000 units absorbed for the year
3rd largest market in the country now behind
NY and LA7.5% Vacancy
171,115 units added in 10 years
20,000 units delivered in 2019
52% average price/unitincrease in 10 years -
luxury Class A productmakes up vast majority
of newly delivered inventory
Rowlett Economic Development 1.29.2020 16
Market Asking Rent Per Unit
Unit Absorption by Year
$600$700$800$900
$1,000$1,100$1,200$1,300$1,400$1,500$1,600
2010 Q2
2010 Q3
2010 Q4
2011 Q1
2011 Q2
2011 Q3
2011 Q4
2012 Q1
2012 Q2
2012 Q3
2012 Q4
2013 Q1
2013 Q2
2013 Q3
2013 Q4
2014 Q1
2014 Q2
2014 Q3
2014 Q4
2015 Q1
2015 Q2
2015 Q3
2015 Q4
2016 Q1
2016 Q2
2016 Q3
2016 Q4
2017 Q1
2017 Q2
2017 Q3
2017 Q4
2018 Q1
2018 Q2
2018 Q3
2018 Q4
2019 Q1
2019 Q2
2019 Q3
2019 Q4
DFW Total Class A Class B Class C Built Since 2010
0
5,000
10,000
15,000
20,000
25,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
The Year in Review Multi-Family
LARGEST MARKET INVENTORIES
NYC 1.9 MM unitsLA 1.1 MM Units
DFW .85 MM UnitsHouston .71 MM UnitsChicago .62 MM Units
DC .62 MM Units
AVE. RENT/UNIT IN PREMIER SUBMARKETS
NYC - Lower West Side & Financial District - $4,485
LA - Venice Beach & Downtown - $2,750
DFW - Uptown/Park Cities - $2,098
Houston - Downtown Houston - $2,325
Chicago - Downtown Chicago - $2,533
DC - Downtown DC - $2,425
Rowlett Economic Development 1.29.2020 17
The Year in Review Construction
100 MSF of total productcurrently under
construction in DFW
Half a billion SF addedin last 10 years- more than entirety of NewOrleans’s CRE market
73 MSF of total product delivered in 2019
52% average price/unitincrease in 10 years
Recent Construction Starts41.9
29.3
8.1 5.2 5.1 2.4 2.1 1.9 0.5 0.40
10
20
30
40
50
Multi-Family Industrial Office Retail Hospitality Health Care Specialty Sports Student Flex
Milli
ons
of S
F
Rowlett Economic Development 1.29.2020 18
The Year in Review Sales
Quick Stats
$14.5BTotal Individual
Property VolumeTotal Portfolio
VolumeProperties Traded Decline in total YOY
Transaction Volume
$6.2B 995 -9.0%
$21Billion (USD)
Total 2019 Dallas-Fort WorthInvestment Sales Volume
$9.6B
$5.2BMulti-Family
Industrial
$4.6B
$3.1B
Office
Retail
Rowlett Economic Development 1.29.2020 19
The Year in Review Economy
120,700 12-Month Job Growth
#2 in Nation
1 Million people added in 8 years
MORE NEW RESIDENTS THAN ANY METROPOLITAN AREA IN THE COUNTRY
Texas Major Metro ComparisonsUnemployment & 12-Month Job Growth* (Based off most recent BLS data)
2.5% 3.0% 3.6% 2.9%
Austin Dallas Houston San Antonio
+29,000 +120,700 +85,500 +33,700
Metro 2017 GDP ($ Billions) 2018 GDP ($ Billions)
New York-Newark-Jersey City, NY-NJ-PA 1,698,122,298 1,772,319,824
Los Angeles-Long Beach-Anaheim, CA 995,114,475 1,047,661,346
Chicago-Naperville-Elgin, IL-IN-WI 659,855,041 689,464,744
San Francisco-Oakland-Berkeley, CA 509,382,318 548,613,361
Washington-Arlington-Alexandria, DC-VA-MD-WV 515,553,994 540,684,444
Dallas-Fort Worth-Arlington, TX 482,218,305 512,509,778Houston-The Woodlands-Sugar Land, TX 447,521,203 478,778,576
Boston-Cambridge-Newton, MA-NH 439,144,366 463,570,556
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 422,539,181 444,148,100
Atlanta-Sandy Springs-Alpharetta, GA 380,224,121 397,261,292
Rowlett Economic Development 1.29.2020 20
The Big Picture Rowlett
OFFICEINVENTORY519,158 SF
VACANCY6.5%
12 MO. NET ABSORPTION22,362 SF
UNDER CONSTRUCTION16,448 SF
INVENTORY2,296,680 SF
VACANCY4.1%
12 MO. NET ABSORPTION33,763 SF
UNDER CONSTRUCTION21,600 MSF
INVENTORY1,587,669 SF
VACANCY2.3%
12 MO. NET ABSORPTION-26,645 SF
UNDER CONSTRUCTION4,500 SF
INVENTORY2,691 Units
VACANCY26.8%
12 MO. NET ABSORPTION1,128 Units
UNDER CONSTRUCTION958 Units
RETAILINDUSTRIAL MULTI-FAMILY
*Owner Occupied Included