2015 Tarrant County Commercial Real Estate Forecast

Ken Wimberly, CCIM had the pleasure of attending the Commercial Real Estate Forecast presented by the Real Estate Council of Fort Worth on Monday, January 19, 2015. As always, it is entertaining to hear the predictions of the real estate pundits. For your education and entertainment, he has summarized his notes for your reading pleasure.

The Good, The Bad, The Predictions

Keri Redford, MAI
Jay Redford
Integra Realty Resources DFW, LLC

  • Texas grew 3.9% over prior 12 months
  • Unemployment in Texas is at 4.9%, down from 6.1%
  • Interest rates are expected to rise….upwards towards 5%…..not a terrible thing
  • Oil prices now under $50 per barrel…..could have a significant impact on the Texas economy
  • Multifamily absorption will remain positive; Cap rates to be flat to rising
  • Population growth should help retail demand, but oil prices could stagnate demand
  • Cap rates to remain relatively flat in retail
  • Industrial absorption to remain positive in DFW; rent growth to remain level
  • 1.3M of SF was absorbed in the DFW office market last year
  • Fort Worth-Arlington was ranked as Best Place to Live in Texas by Forbes for 2014

Economic Development in Greater Fort Worth

David Berzina
Fort Worth Chamber of Commerce

  • Nation is now consistently adding over 200,000 jobs per month
  • 6 new mixed use developments representing 10,500 acres of new development
  • Walsh Ranch – 7,000 acres to develop; first phase of the development to start coming on-line in 2016
  • Rock Creek Ranch – 1,755 acres located on Chisholm Trail Parkway
    • Donated 80 acres to Tarleton State for a new campus
    • Will be mixed use development
  • Chisholm Trail Ranch – MF and SF development planned on both sides of CTP; homes will start coming on-line in late 2015
  • Clearfork / Edwards Ranch – 2M SF of office, 2,500 MF units; 1.2M SF retail; Neiman Marcus to be retail anchor
  • Waterside – former Lockheed Martin recreation area; 63 ac; 300,000 SF retail, dining, office; Whole Foods to be first anchor; construction began in late 2014
  • Pate Ranch – starts at dead end of Bryant Irvin; 500,000 SF of commercial and high end housing; 200 acres for housing; 85 Ac mixed use; 10 AC commercial
  • Trinity River Vision – bridge construction is now underway (will take 3 years); then 4 year channel construction; project will be complete in 2023
  • Fort Worth Stock Yards – 900 AC TIF is now in place; 1M SF of mixed use retail, entertainment, hospitality, and residential projects
  • FW Multipurpose Arena – 14,000 person capacity; public/private partnership approved last year
  • FW Hospitals had $5.5B impact on FW community last year
  • Alliance – generates over $400M annually in retail sales
  • FW was a finalist for the $1.3B Tax Incentive Tesla plant that ended up in Reno, NV

1980 – FW had 400,000 residents
2015 – FW has 800,000 residents
2000-2014 – FW was fastest growing city in the nations
Expected to surpass 1M residents in 2025
FW adds a new resident ever 25 minutes

TEX-Rail – will be delivered in 2018 – rail service from downtown to DFW Airport
2014 saw $3.5B in road projects delivered in the DFW Metroplex
2014 – over 11,000 residential and commercial permits were issued in FW (3,304 new single family homes)

Construction Market

Peter Beck
The Beck Group

With regard to construction prices, all bets are off now due to oil prices; this may improve the labor component to construction prices

Trends in the construction industry

  • Huge inefficiencies in the design and construction of buildings
  • The future will deploy technologies with will “analyze” building behaviors
  • Prefabrication and 3D printing (in next 10 years)
  • Precise energy forecasting and management of any building design
  • “Optioneering” – the ability to analyze millions of different alternatives to maximize ownership objectives

Retail Trends

Stephen Coslik
The Woodmont Company

  • Dramatic increase in retail development in FW and Tarrant County
  • Banks continuing to require 20% to 30% equity
  • 13 Retail Developments coming up in FW in 2015
  •  I-35W and N. Tarrant – Costco there now; Target is being developed next to Costco – it is the ONLY Target being developed in Texas in 2015
  • 3 different sites competing for new Outlet Shops (NEC Hwy 170/I-35W; SWC 115/1-35W; SEC Beach St/I-820)
  • Proposed H-E-B development in Hudson Oaks
  • Grocery industry is still driving much of the retail development today
  • Albertson’s acquired Safeway – now the largest Grocer in America
  • Minyard Food Stores is expanding in the market with 12 new stores
  • H-E-B now owns at least 17 sites in DFW – when will they start a heavy push on construction?
  • Wal-Mart plans for 2015 – 2 new super stores; 1 new Sam’s; 5 new Neighborhood Market
  • Winco opening 13 new stores in DFW
  • Sprouts – 2 new stores in 2015; 5 new stores in 2016
  • Retail development has moved from Box development to mixed-use entertainment developments……the EXPERIENCE matters!
  • CAP Rates to continue downward plunge
    • Ground Lease – 4.0% to 4.5%
    • Credit Single Tenant – 5.0% to 6.0%
    • Quality Power Centers – 5.0% to 6.25%
    • B & C Centers – 7.0% to 8.5%
  • Developers are now hoping to earn just a 9% cash-on-cash return (compared to a desire for 12% cash-on-cash returns from years past)
  • 80,000 SF of retail is vacant on W7th Street (PARKING is a HUGE ISSUE)
KW Net Lease Advisors