DALLAS-Goodbye 2002. Hello 2003. Unfortunately, the turning calendar isn't going to mean a turn in the direction of the Dallas-Fort Worth office market, say two seasoned executives who've seen the best and the worst of times in the North Texas real estate market.
Research teams are putting their finishing touches to fourth-quarter calculations while those professionals pounding the pavement or mentoring the teams that are out there know all too well that it's not going to be a rosy report. And, very little will be changing for a long time to come, concur John Aldrich, president of Colliers International's Dallas office, and Jack Eimer, president of Transwestern Commercial Services' central region.
Dealmakers know fourth-quarter leasing historically is sluggish. This year's fourth quarter seemed slower than usual, Aldrich says.
As 2003 kicks off, Aldrich predicts it will be a year of stabilization, a year when building owners work particularly hard to renew tenants instead of dangling their best incentives in front of the newcomers or holding back in hope that the market will swing in their favor before it's time to sit down at the bargaining table to re-up a tenant. More building owners are likely to start pounding on doors to cut deals now in exchange for a renewed longtime commitment from a reliable tenant.
“2003's going to be a very tough year,” Aldrich tells GlobeSt.com. “I think it could be 2005 before anybody starts making money again.” That doesn't mean that history is going to repeat itself. It's not like the 1980s when lenders were banging on building owners' doors. The bittersweet reality is that hanging on in tough times can be good too.
Aldrich firmly believes it will be the end of 2003 before there are any significant changes in the region's office market. Eimer says the same thing. “In looking ahead to 2003, I believe it will be as tough as this year,” he says.
Eimer, like Aldrich, says 2003 is going to be a year of renewal…lease renewals, that is. “Renewals and tenant retention have become one of the most important things for landlords today,” Eimer emphasizes to GlobeSt.com. “Landlords will be very aggressive with renewals just as they were in the second half of 2002.”
Eimer says he noticed a slight uptick in the fourth quarter. If his calculations are correct, fourth-quarter renewals were running 10% to 20% higher than in years past.
With the New Year dawning, what's the best case scenario for Dallas-Fort Worth? Stabilization in the marketplace, Eimer says as he echoes Aldrich's very statements. But, Eimer says he wouldn't want to be any place else because Dallas will bounce back quicker than its metro counterparts. “When it starts to turn, it will turn quickly but I'm sure it won't be in 2003,” he predicts.
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