The one caveat that could alter the close-to-the-vest game is another interest-rate cut, says Ben Loughry, one of seven speakers at the sixth annual forecast breakfast for Dallas-Ft. Worth real estate powerbrokers. Loughry isn't alone in his convictions that would be a smart move.
Tarrant County definitely is holding its own amid its chief rivals of San Francisco, San Jose, Los Angeles, Houston, New York-New Jersey and Chicago. Corporate relocations seem to be feeding the region's economy and will continue to do so in the coming year, says Loughry. But, there's a definite slowdown on the horizon. Tarrant County had ended year 2000 with a 20% across-the-board growth. "We don't think that is going to happen in the present economy," says Loughry, managing partner for Integra Realty Resources, one of the event's six sponsors. "We think the markets are going sideways."
It's the big "R" coming home to roost, but any evolving recession isn't going to carry the same impact it did in the 1980s, the experts say. Developers are more savvy these days as they recognize it's better to build less than more given today's economy.
Mark Dotzour, economist for Texas A&M's Real Estate Center, says a recession is inevitable and it will take into midyear before the economy starts to rebound under Alan Greenspan's plan. What that means for Texas, specifically Ft. Worth, is that advantage should be taken of new-found revenue sources - call centers, carrier hotels, a growing wireless telecom industry and booming grocery-anchored market.
One by one, powerbrokers from all walks of commercial real estate had the same message of cautious optimism. Ft. Worth's 2001 retail growth will be driven by grocery-anchored projects, says Nick Ibarra, senior vice president of event sponsor NAI/Stoneleigh Huff Brous McDowell. Drug chain CVS, a new retailer to the region, has five metroplex locations under contract, but it's uncertain if the projects will break ground, according to Ibarra. What can't be discounted is that Texas is a leader nationally in the retail arena, with 39 million sf of space. Average rents will jump from $13.48 per sf to about $15 per sf for most retail spots, he predicts.
Dallas-based Fleming Foods Inc., which had been on a selling spree in 2000, has found a niche grocery market as a big box supplier, says Ibarra. That niche had become more evident within hours of the forecast when Fleming announced it is negotiating with Kmart for a supply contract. Last year, Fleming's Kmart business had totaled $1.3 billion, but now it wants all of the $3.7-billion business from the 2,100 stores. Kmart has announced it is exercising an early out on its existing $2.3-billion contract with Minnesota-based SuperValu as of June 30. SuperValu too is bidding on the one-supplier strategy that Kmart has decided to impose.
In the office sector, 2001 spells higher CBD rents, now an average $19.79 for class-A space, and a higher occupancy than the present 87.42% unless the 487,000-sf Bank One Building comes to market, says Kyle Poulson, vice president of NAI/Stoneleigh Huff Brous McDowell's office division. One buyout has collapsed in recent months for the tornado-ravaged building. Most submarkets have little or no growth this year, he predicts.
The bright spot in the industrial market, says NAI/Stoneleigh Huff Brous McDowell senior vice president Walter Floyd, is the opportunity to build office-warehouse space for tenants needing 5,000 sf to 25,000 sf. Spec building will decline, but that's not a bad sign since it reflects caution in a precarious economy. Many developers are sitting on projects to see what happens with interest rates. "If the interest rate goes down, a lot of these deals will be made," he quickly adds.
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