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JEFF PRICE - MULTIFAMILY CAPITAL SCOTT BOER - PROJECT AND DEVELOPMENT SERVICES
Multifamily development remains brisk in response to unparalleled The market has calmed down quite a bit since last year. For the last few
population and job growth, making DFW one of the top target markets years, the high demand from commercial construction projects, around our
for multifamily investment by domestic and international buyers. While region and nationally, created an environment of rapidly escalating prices
certain submarkets may experience sluggishness in rental rate growth, and labor challenges. While prices are still rising, that curve has flattened.
that is largely due to units delivering prior to job gains. We believe most In addition, competitiveness is returning to the “buy” side of the business,
submarkets will achieve equilibrium in 2018. There is a strong headwind making it easier to identify, procure, and obtain building materials. The
for development – limited site availability, fewer equity options, increasing reason for this, especially in north Texas, is that many of the “mega”
construction costs, and banks tightening their belts due to new HVCRE campus projects that have been underway are nearing completion. This
regulations. Unit absorption and occupancy, however, remain high is freeing up some labor and making materials more available for projects
compared to history. We also believe the number of properties being in other sectors as contractors look to their 2017 to 2018 business plans.
offered for sale has hit an historic high as developers and owners seeking to Although the market will remain hot with sectors like industrial, retail, and
take advantage of a low cap rate / low interest rate environment, as well as health care seeing dynamic growth, budgeting and timing are becoming
owners with debt maturities are seeing now as the optimum time to trade.
more predictable for our clients.
CRAIG JONES - INDUSTRIAL JEFF ECKERT - AGENCY LEASING
DFW continues to be balanced and healthy. Given last year’s large Our market continues to benefit from tremendous job gains. Office
development pipeline, I expected vacancy to rise a percentage-point, to the absorption is above our 15-year average and rents are higher. What is
low-to mid-sevens. Instead, we have been pleasantly surprised by continued interesting is that Class A has accounted for 85 percent of demand over
high demand that has maintained our vacancy near our historic low. This has the last few years. That’s a signal that tenants want quality space – and are
put upward pressure on rents – which is raising the question of affordability willing to pay higher prices. The driver of this is tenants putting a high
as some tenants are seeing 20-to 25-percent bumps at lease renewal. Overall, value on amenity-rich, walkable neighborhoods, and meaningful property
I believe the market will remain balanced for the next 18 months. For amenities. In some ways, human resource departments are also now at the
example, even though there is now a large variety of options in the 200,000 table in making location decisions because of the importance in establishing
square foot to 500,000 square foot range, which might raise some eyebrows, company culture and maximizing talent acquisition and retention. A spin-
active tenants will likely absorb that space. Combine that dynamic with off we are also seeing is capital reinvestment by existing and new owners to
some slowing of construction, few land options, and a prudent development keep buildings competitive. And, while “make-ready” space / prefinished
community and you have the ingredients necessary to power through 2017 suites have been the exception, it is becoming more common to win
tenants that need space quickly.
and into 2018.
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