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The coronavirus could be the crisis that finally propels the tech-averse real estate industry into the 21st century. Location matters less, now that the office is the kitchen. Size matters more, now that everyone is at home. And the best way to the kitchen. Size matters more, now that everyone is at home. And the best way to the building’s amenity package — it’s peace of mind walking from the lobby to the living room. These are the touchpoints for a host of new or newly valuable technologies emerging in the post-Covid housing market, from rent-regulated apartments to luxury condos. They range from robotic furniture that reimagines itself inside our shrinking walls, to contactless apps designed to bring neighbors together. They are futuristic takes on prosaic features, like ultraviolet wands in air ducts, and “Ghostbusters”-inspired blasters to hose down Amazon boxes. Some may be passing fads. Still, the ones that stick could have long-term implications for a stubbornly analog industry, even as some critics have raised concerns about data collection and privacy. And it remains unclear whether these improvements will reach the workaday housing market, or remain a luxury niche. Click to read more at www.nytimes.com.
Since the start of the pandemic back in March 2020, the economy has suffered millions of lost jobs. Of course, this has had a direct impact on the commercial real estate market. But compared to the office and retail sectors, the industrial market has been much more resilient. In fact, there is some evidence showing that Covid-19 has fueled warehouse demand in Dallas-Fort Worth. We spoke with Dan Spika, SIOR, Executive Vice President and Principal of the Office and Industrial Division for Henry S. Miller Brokerage, to get his take on North Texas’ healthy industrial market. What is your overall perspective on the DFW industrial market since the pandemic started and looking toward the future? The industrial market was in and is still in great shape. Even before the pandemic and the resulting economic downturn, the industrial real estate market in North Texas was booming. Not long ago, The Dallas Morning News reported that some 30 million square feet of new warehouse space is planned around DFW. As a CRE asset, an industrial building is very stable. All indications are that will not change. How has the increase in e-commerce shopping impacted the need for industrial space in the DFW area? Consumers are finding ways to purchase goods that do not require in-store shopping. One method that was popular before coronavirus and even more so now is e-commerce. People buying online expect to receive their merchandise immediately, which requires retailers to have a so-called ‘last mile’ location for inventory. You only have to look at Amazon’s new distribution center near DFW International Airport that is more than one million square feet to understand the importance of that last mile. What makes DFW the preferred location for warehouse and distribution centers? First of all, Dallas-Fort Worth is easily accessible to and from any part of the country, including both coasts. Our central location as well as convenient transportation and distribution networks make the region a logistical hot spot. Labor costs here are less than they are on the east and west coast, too. DFW also offers a lower cost of living, great school systems and an overall good quality of life. So right now we’re seeing an influx of many different types of companies, especially from the west coast. What are developers doing vis-à-vis the industrial market? Developers are looking for land! North Tarrant County, Denton, Forney and Terrell are all good locations. South of I-20 is still relevant, too, because land is a bit cheaper there. But it’s difficult to find anything near DFW, Flower Mound, Carrollton or Lewisville. What has been the impact on tenant leasing and rents? Leasing activity has been keeping up with new supply as indicated by a vacancy rate of only four or five percent. And rents are going up as fast as landlords can get to the new sites. And how do investors feel about DFW’s industrial market? They are very bullish on DFW. I haven’t noticed investors being scared off by the pandemic. In fact, I think they’re recognizing the industrial market’s stability, which will likely increase interest for the foreseeable future. Click to read more at www.henrysmiller.com.
Tesla Gigafactory Texas sprawls over 2,000 acres and may prove to be a key component of the Austin City Council’s development initiatives in the area. The Austin City Council held a meeting on November 12 and approved a resolution for the development of East Austin. Tesla Giga Texas’s ecological paradise would fit perfectly in East Austin’s changing environment. The Council’s resolution tasked City Manager Spencer Cronk to create a broad, long-term development plan to support East Austin’s growth and potential of economic development. “(This resolution) brings some much needed focus to a long-neglected part of East Austin that’s basically on the precipice of really experiencing considerable growth,” said Council Member Natasha Harper-Madison. “This is our opportunity to really get it right and get ahead of unfettered growth with more proactive action in this area.” In drone operator Joe Tegtmeyer’s recent video, he noticed a large clearing across State Highway 130, which was part of the land Tesla purchased for Gigafactory Texas. Workers started working on that part of Giga Texas’ massive land area in August and early September, but Tegtmeyer said that activities in the location started ramping this past week. Click to read more at www.teslarati.com.
The beauty of Cedar Hill is really unmatched in North Texas. The community of about 50,000 has found a home in the middle of nature, bordered by Cedar Hill State Park and Cedar Ridge Preserve. “You can live in the Hill Country and drive to Dallas in 30 minutes,” said Kim Buttram, economic development director of Cedar Hill Economic Development Corporation. Protecting that beauty is an important part of the planning process in Cedar Hill, which dedicates 20 percent of its land to the preservation of nature. To do so, city leaders have also been very thoughtful about where and how companies can settle, thrive and expand. The EDC has also played an important role. “One thing our EDC is really good at is anticipating the land use and preparing the land for the appropriate use,” Buttram said. “It’s been instrumental in laying the groundwork and infrastructure to support industry.” The result is the city’s industrial district, which includes the Cedar Hill Business Park. “The planning of the industrial district has always been one of the most pivotal things for the city because it positions industry within the natural environment,” said EDC marketing and research manager, Andy Buffington. “The leadership of the city has really taken that to heart to be discerning. It’s always been a very delicate balance.” Incorporated just over 30 years ago, the business park boasts tenants such as Dallas Aeronautical Services, Delta Steel and PepWear. As we go to print, only three lots totaling 21.3 acres remain available, for which the EDC is seeking out tenants focused on advanced manufacturing. “We have several long-tenured tenants in our business park. That’s almost 30 years’ worth of relationship building,” Buffington said. Click to read more at www.rednews.com.
Transwestern Real Estate Services (TRS) announced that Yang Ming Marine Transport Corp. has leased 34,541 square feet at Reserve at Westchase, located at 3250 Briarpark Drive in Houston. According to Transwestern research, this is the largest new deal done in the Westchase submarket since COVID-19 hit. Transwestern’s agency leasing team of executive vice president David Baker and associates Jack Scharnberg and Kristen Baker executed the lease on the heels of closing two new direct deals of 50,000 square feet and 3,500 square feet, as well as the completion of the lobby renovation. JLL’s Don Foster represented the tenant, which was previously located at 3 Sugar Creek Center in Sugar Land. “Despite virtually no property tours being conducted due to social distancing guidance and economic uncertainty, our team had been tracking every expiring tenant across Westchase and West Houston,” said David Baker. “We contacted over 200 tenants and brokers with leases expiring in the next four years to share this incredible Class A office opportunity and economic value.” Reserve at Westchase is a four-story, 194,919-square-foot building in the amenity-rich Westchase submarket. The building was recently renovated and features expansive floorplates that provide space for larger tenants to lease an entire floor with room to grow instead of having to separate their workforce across multiple floors. With an accessible location, park-like setting and abundance of nearby amenities, Reserve at Westchase is one of the best values in West Houston offering 125,000 square feet available for lease.
Heading into 2020, forecasts for the Texas construction industry called for continued expansion, boosted by the state’s strong job market and continued growth. As we wrap up the year that was, we’re reflecting on the pandemic’s impact by talking to experts from Dodge Data & Analytics and Cumming. “In the early days and weeks of the crisis, many parts of the country shuttered construction activity putting people out of work,” said Dodge’s chief economist, Richard Branch. “As the economy has reopened, construction activity has recovered somewhat, but the impact of the still very weak economy has meant the delaying and cancelling of planned projects.” Experts expect the rebound will not be as lengthy as it was following the 2008 recession. While it took 10 years for construction volume levels to bounce back after that, they predict volume will return to 2019 levels in three to four years. “Projections this time last year had a steady growth in the market for construction volume between 3 percent and 5 percent (dependent upon the sector and geographic location). However the pandemic has reduced these to a contraction in 2021 of approximately 7 percent, with a reversal positive 7 percent in 2022 and between 4 percent and 5 percent for the following years,” said Dan Pomfrett, Cumming’s vice president of forecasting and analytics. So where does Texas stand at this moment? Through nine months of 2020, total building construction value in the Lone Star State is down 6 percent from the same time period in 2019. Pomfrett attributed some of that slowdown to the petrochemical industry. “The impacts of lower fuel prices, production rate changes and, in some cases, a pause on construction are starting to ripple through the region,” he said While hospitality and retail sectors are garnering headlines for taking the brunt of the pandemic’s blow, Pomfrett said green shoots are starting to be seen “particularly in the renovation and repurposing of existing buildings.” Another bright spot is housing, per Branch. “Within Texas, the residential market stands out as a clear winner driven by strong single-family activity, while nonresidential buildings are on the decline,” he said. According to Dodge research, San Antonio is showing the most growth, posting a 10 percent year-to-date gain for building construction, largely built on the strength of single-family activity. “On the other end of the spectrum is Houston,” said Branch, “which is down 17 percent through nine months as that metro is not only dealing with COVID-related impacts, but also very low oil prices.” “Overall our view of the Texas market is a positive one. There will be some peaks and troughs, which will be both region- and sector-specific, with burgeoning sectors such as tech and biopharm becoming more prominent,” Pomfrett said. “The key to the successful bounce-back of the region will be the availability of skilled labor.” That is a major component of Pomfrett’s observations: the challenge to deliver the workforce needed when construction volume regains momentum. “Worker productivity is being affected by local government regulations, close-downs and social distancing requirements, which curtail utilization, subsequently leading to either the need for additional labor to offset this or project schedules being extended,” Pomfrett said. In addition, sectors such as hotel and transportation will take years to recover due to reduced traveling, while other sectors will have to adapt going forward. “The office sector could see less demand for space as a growing number of companies shift to remote work,” Branch said. “Education construction (particularity college activity) may be altered by a shift to more online learning.” He and Pomfrett both predict long-term impacts on the construction industry, though they anticipate Texas will be able to recover more quickly than many other markets. “Compared to other similarly sized states (California, New York and Florida), Texas is overall in relatively better shape,” said Branch. “Florida total construction is down 4 percent on a year-to-date basis, but the percent declines in California and New York are in the double digits.” The saying goes “Everything’s bigger in Texas.” Fingers crossed that applies to economic recovery and the future of the construction industry.
