DFW COMMERCIAL REAL ESTATE MARKET YEAR IN REVIEW 1.29.2020 - - PowerPoint PPT Presentation

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DFW COMMERCIAL REAL ESTATE MARKET YEAR IN REVIEW 1.29.2020 - - PowerPoint PPT Presentation

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DFW COMMERCIAL REAL ESTATE MARKET YEAR IN REVIEW 1.29.2020 Presented to: 2020 ECONOMIC DEVELOPMENT PARTNERSHIP LUNCHEON Agenda The Big (D) Picture Office Industrial Retail Multi-Family Construction Sales Economy 2 Rowlett Economic

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SLIDE 1

DFW COMMERCIAL REAL ESTATE MARKET YEAR IN REVIEW

1.29.2020

Presented to: 2020 ECONOMIC DEVELOPMENT PARTNERSHIP LUNCHEON

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SLIDE 2 Rowlett Economic Development 1.29.2020 2

Agenda

Construction The Big (D) Picture Multi-Family Office Sales Industrial Economy Retail

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SLIDE 3 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

120,700

Jobs added in the last year

29.7 Minutes

Average commute time

7,539,711

Total population

3.0%

Unemployment in Dallas.

#1

Places 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
  • r are working towards “tier one”
research institution status. Increase in employment
  • ver the last year

3.2%

10,676,844

Will live in the DFW area by 2030

$63,812 3,870,400 34.7 21,200 410+ 2.88 M

The Big (D) Picture

Q4 2019

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SLIDE 4 Rowlett Economic Development 1.29.2020 4

The Big (D) Picture

Q4 2019

OFFICE

INVENTORY 330 MSF VACANCY 14.6% 12 MO. NET ABSORPTION 5.7 MSF UNDER CONSTRUCTION 7.2 MSF INVENTORY 434 MSF VACANCY 4.5% 12 MO. NET ABSORPTION 2.5 MSF UNDER CONSTRUCTION 5.5 MSF INVENTORY 835 MSF VACANCY 5.4% 12 MO. NET ABSORPTION 22.5 MSF UNDER CONSTRUCTION 29.3 MSF INVENTORY 848K Units VACANCY 7.4% 12 MO. NET ABSORPTION 24K Units UNDER CONSTRUCTION 39K Units

RETAIL INDUSTRIAL MULTI-FAMILY

*Owner Occupied Included
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SLIDE 5 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 deliveries for the year. Uber had the biggest lease with its Epic 2 deal, and when combined with its Epic 1 lease, signed ofg 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.

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SLIDE 6 Rowlett Economic Development 1.29.2020 6

The Year in Review

Office

2019 High Profile Deliveries Inventory Tenancy: Single vs Multi 12 Mo. Absorption: Single vs Multi Largest Signed Leases for the Year

American Airlines Corporate Campus Pioneer Natural Resources Charles Schwab Westlake Campus The Epic Nokia HQ Offjces at The Realm Harwood No.10 4200 American Blvd 1,700,000 SF HEB/Mid-Cities/Arlington Single Tenant 777 Hidden Ridge Dr 1,125,366 SF Las Colinas Single Tenant 3101 Schwab Way 580,000 SF Westlake/Grapevine/Southlake Single Tenant 2550 Pacifjc Ave 294,820 SF Deep Ellum/White Rock 94.0% Leased $35.00-$37.00/NNN 3201 Olympus Blvd 250,000 SF Las Colinas Single Tenant 4400 Sam Rayburn Tollway 235,921 SF Upper Tollway/West Plano 37.7% Leased $30.00/NNN 2850 N Harwood St 231,098 SF HEB/Mid-Cities 67.8% Leased $38.00-$40.00/NNN 23% 77% 51% 49% Lockheed Martin 431,579 SF 5401 N Beach St East Northeast Ft Worth Start Date: April 1, ‘20 Tenet Healthcare 372,931 SF International Plaza I Quorum/Bent Tree Start Date: Feb 1, ‘20 Uber Technologies 634,245 SF The Epic 1 & 2 Deep Ellum/White Rock Start Date: Jan 1 ‘20, Aug. 1 ‘22
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SLIDE 7 Rowlett Economic Development 1.29.2020 7

The Year in Review

Office

2 4 6 8 10 12 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Millions of SF

Yearly Construction Starts

(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 Millions of SF Inventory SF Vacant Available Percent % Total

Inventory & Vacancy

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SLIDE 8 Rowlett Economic Development 1.29.2020 8

The Year in Review

Office

TRENDS

Coworking & Flexible Lease Offjce Space continued to grow, even with WeWork’s issues Flight to quality Rise of the suburbs Amenities arms race

(2) 2 4 6 8 10 2010'S 2000'S 1990'S 1980'S 1970'S Millions of SF 2019 Net Absorption by Decade Built
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SLIDE 9 Rowlett Economic Development 1.29.2020 9

CO-WORKING

There is currently 3.5 MSF

  • f space dedicated to

coworking and fmexible lease providers.

26%

Regus & Spaces 18% WeWork

8%

Boxer

6%

Common Desk

LARGEST PROVIDERS (% Total Inventory)

The Year in Review

Office

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SLIDE 10 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 deliveries for 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 difgerent property types

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SLIDE 11 Rowlett Economic Development 1.29.2020 11

Average Direct NNN Asking Rates

1511 NE Loop 820 1,023,488 SF Commerce 30 - Building A 608,939 SF Cooper I-20 - Building C 401,115 SF Gateway Logistic Center - 3 375,400 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 Millions of SF Inventory SF Vacant Available Percent % Total 5 10 15 20 25 30 35 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Millions of SF

The Year in Review

Industrial

High Profile Deliveries

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SLIDE 12 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 deliveries for 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

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SLIDE 13 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
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SLIDE 14 Rowlett Economic Development 1.29.2020 14

The Year in Review

Retail

What’s Trending?

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SLIDE 15 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 LA 7.5% Vacancy 171,115 units added in 10 years 20,000 units delivered in 2019 52% average price/unit increase in 10 years - luxury Class A product makes up vast majority

  • f newly delivered

inventory

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SLIDE 16 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 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 units LA 1.1 MM Units DFW .85 MM Units Houston .71 MM Units Chicago .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
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SLIDE 17 Rowlett Economic Development 1.29.2020 17

The Year in Review

Construction 100 MSF of total product currently under construction in DFW Half a billion SF added in last 10 years- more than entirety of New Orleans’s CRE market 73 MSF of total product delivered in 2019 52% average price/unit increase in 10 years

Recent Construction Starts

41.9 29.3 8.1 5.2 5.1 2.4 2.1 1.9 0.5 0.4 10 20 30 40 50

Multi-Family Industrial Office Retail Hospitality Health Care Specialty Sports Student Flex

Millions of SF

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SLIDE 18 Rowlett Economic Development 1.29.2020 18

The Year in Review

Sales

Quick Stats

$14.5B

Total Individual Property Volume Total Portfolio Volume Properties Traded Decline in total YOY Transaction Volume

$6.2B 995

  • 9.0%

$21

Billion (USD)

Total 2019 Dallas-Fort Worth Investment Sales Volume

$9.6B

$5.2B

Multi-Family

Industrial

$4.6B

$3.1B

Office

Retail

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SLIDE 19 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 Comparisons

Unemployment & 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 482,218,305 512,509,778 Houston-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
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SLIDE 20 Rowlett Economic Development 1.29.2020 20

The Big Picture

Rowlett

OFFICE

INVENTORY 519,158 SF VACANCY 6.5% 12 MO. NET ABSORPTION 22,362 SF UNDER CONSTRUCTION 16,448 SF INVENTORY 2,296,680 SF VACANCY 4.1% 12 MO. NET ABSORPTION 33,763 SF UNDER CONSTRUCTION 21,600 MSF INVENTORY 1,587,669 SF VACANCY 2.3% 12 MO. NET ABSORPTION

  • 26,645 SF

UNDER CONSTRUCTION 4,500 SF INVENTORY 2,691 Units VACANCY 26.8% 12 MO. NET ABSORPTION 1,128 Units UNDER CONSTRUCTION 958 Units

RETAIL INDUSTRIAL MULTI-FAMILY

*Owner Occupied Included