DFW COMMERCIAL REAL ESTATE MARKET YEAR IN REVIEW 1.29.2020 Presented to: 2020 ECONOMIC DEVELOPMENT PARTNERSHIP LUNCHEON
Agenda The Big (D) Picture Office Industrial Retail Multi-Family Construction Sales Economy 2 Rowlett Economic Development 1.29.2020
The Big (D) Picture Q4 2019 DFW Market Facts 10,676,844 Will live in the DFW 7,539,711 area by 2030 $63,812 2.88 M Total population MEDIAN HOUSEHOLD INCOME TOTAL HOUSEHOLDS 120,700 Jobs added in the last year DFW has 43 Fortune 3.0% 1,000 companies Unemployment in Dallas. located in the metro. 410+ 3,870,400 3.2% TOTAL JOBS CITY PARKS Increase in employment over the last year Highly educated workforce #1 The area is host to 15 major universities and 7 community Places for business and career college districts, combining to -Forbes total over 366,000 enrollees. Multiple universities have achieved or are working towards “tier one” 21,200 34.7 29.7 Minutes research institution status. Average commute time MEDIAN AGE ACRES OF TOTAL PARK LAND AREA 3 Rowlett Economic Development 1.29.2020
The Big (D) Picture Q4 2019 OFFICE INDUSTRIAL RETAIL MULTI-FAMILY INVENTORY INVENTORY INVENTORY INVENTORY 330 MSF 835 MSF 434 MSF 848K Units VACANCY VACANCY VACANCY VACANCY 14.6% 5.4% 4.5% 7.4% 12 MO. NET ABSORPTION 12 MO. NET ABSORPTION 12 MO. NET ABSORPTION 12 MO. NET ABSORPTION 5.7 MSF 22.5 MSF 2.5 MSF 24K Units UNDER CONSTRUCTION UNDER CONSTRUCTION UNDER CONSTRUCTION UNDER CONSTRUCTION 7.2 MSF 29.3 MSF 5.5 MSF 39K Units *Owner Occupied Included 4 Rowlett Economic Development 1.29.2020
The Year in Review Office Over half of the year’s 1.9 MSF net absorption 5.7 MSF net absorption absorption was single $4.1B in sales. for Q4 2019 for 2019 tenant/build to suit activity. Rent growth cooled for Uber had the biggest Class B product, turning lease with its Epic 2 negative for the 7.2 MSF under 7.3 MSF of deliveries deal, and when quarter. Class A rent construction for the year. combined with its growth slowed as well Epic 1 lease, signed ofg but was still positive. for over 600,000 SF. 5 Rowlett Economic Development 1.29.2020
The Year in Review Office 2019 High Profile Deliveries American Airlines Pioneer Natural Charles Schwab The Epic Nokia HQ O ffjces at The Harwood No.10 Corporate Campus Resources Westlake Campus Realm 4200 American Blvd 777 Hidden Ridge Dr 3101 Schwab Way 2550 Pacifjc Ave 3201 Olympus Blvd 4400 Sam Rayburn Tollway 2850 N Harwood St 1,700,000 SF 1,125,366 SF 580,000 SF 294,820 SF 250,000 SF 235,921 SF 231,098 SF HEB/Mid-Cities/Arlington Las Colinas Westlake/Grapevine/Southlake Deep Ellum/White Rock Las Colinas Upper Tollway/West Plano HEB/Mid-Cities Single Tenant Single Tenant Single Tenant 94.0% Leased Single Tenant 37.7% Leased 67.8% Leased $35.00-$37.00/NNN $30.00/NNN $38.00-$40.00/NNN Inventory Tenancy: Single vs Multi Largest Signed Leases for the Year 23% 77% Uber Technologies Lockheed Martin Tenet Healthcare 634,245 SF 431,579 SF 372,931 SF 12 Mo. Absorption: Single vs Multi The Epic 1 & 2 5401 N Beach St International Plaza I Deep Ellum/White Rock East Northeast Ft Worth Quorum/Bent Tree Start Date: Jan 1 ‘20, Aug. 1 ‘22 Start Date: April 1, ‘20 Start Date: Feb 1, ‘20 51% 49% 6 Rowlett Economic Development 1.29.2020
The Year in Review Office Annualized Rent Growth 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% (1.0%) (2.0%) 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3 2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4 Class A Class B Total Yearly Construction Starts Inventory & Vacancy 335 15.5% 12 Millions of SF Millions of SF 330 15.0% 10 325 14.5% 8 320 315 14.0% 6 310 13.5% 4 305 13.0% 300 2 295 12.5% 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Inventory SF Vacant Available Percent % Total 7 Rowlett Economic Development 1.29.2020
The Year in Review Office TRENDS Coworking & Flexible Lease Offjce Space Flight to quality Rise of the suburbs Amenities arms race continued to grow, even with WeWork’s issues 2019 Net Absorption by Decade Built 10 Millions of SF 8 6 4 2 0 (2) 2010'S 2000'S 1990'S 1980'S 1970'S 8 Rowlett Economic Development 1.29.2020
The Year in Review Office CO-WORKING There is currently 3.5 MSF of space dedicated to cowork ing and fmexible lease providers. LARGEST PROVIDERS (% Total Inventory) Regus & Spaces 18% 26% WeWork 8% 6% Boxer Common Desk 9 Rowlett Economic Development 1.29.2020
The Year in Review Industrial 5.0% rent growth – 6 MSF net absorption 22.5 MSF net absorption highest percentage $5.2B in sales. for Q4 2019 for 2019 among difgerent property types Warehouse and South Dallas cluster 31.6 MSF under 28 MSF of deliveries Distribution product had highest yearly net construction for the year. made up about 97% of absorption 12 month net absorption 10 Rowlett Economic Development 1.29.2020
The Year in Review Industrial High Profile Deliveries 1511 NE Loop 820 Commerce 30 - Building A Cooper I-20 - Building C Gateway Logistic Center - 3 1,023,488 SF 375,400 SF 608,939 SF 401,115 SF Average Direct NNN Asking Rates Inventory Vs. Vacancy Historical Construction Starts 850 12% $7 35 Millions of SF Millions of SF $6 10% 30 800 $5 25 8% $4 20 750 6% $3 15 4% 700 $2 10 2% $1 5 650 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 $0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Inventory SF Vacant Available Percent % Total 11 Rowlett Economic Development 1.29.2020
The Year in Review Retail Net absorption and DFW is still one of deliveries were lower 2.5 MSF net absorption the best retail markets 4.8% vacancy this year than they have for 2019 in the country- we been since 2011 love shopping Northern Suburbs and Far North Dallas area 5.3 MSF under 4.2 MSF of deliveries driving most of the $3.1B in sales construction for the year. activity in absorption and construction 12 Rowlett Economic Development 1.29.2020
The Year in Review Retail Steady Tapering as Retail Shifts to Online What’s Old is New Again Retail Spending by Millions of Dollars $39,000 $38,000 $37,000 $36,000 $35,000 $34,000 $33,000 $32,000 Valley View Mall , Redbird Mall & Collin Creek Mall are $31,000 both seeing multi-billion dollar tear downs and re- $30,000 births 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 YTD 13 Rowlett Economic Development 1.29.2020
The Year in Review Retail What’s Trending? 14 Rowlett Economic Development 1.29.2020
The Year in Review Multi-Family 52% average price/unit Apartments are the new increase in 10 years - investor darling with 171,115 units added in 20,000 units delivered luxury Class A product $9.6B in sales- almost 10 years in 2019 makes up vast majority half of the year’s total of newly delivered volume for DFW inventory 3rd largest market in 39,000 units Under >24,000 units absorbed the country now behind 7.5% Vacancy Construction for the year NY and LA 15 Rowlett Economic Development 1.29.2020
The Year in Review Multi-Family Market Asking Rent Per Unit $1,600 $1,500 $1,400 $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $600 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 DFW Total Class A Class B Class C Built Since 2010 AVE. RENT/UNIT IN PREMIER SUBMARKETS Unit Absorption by Year LARGEST MARKET INVENTORIES NYC - Lower West Side & Financial District - $4,485 25,000 NYC 1.9 MM units 20,000 LA - Venice Beach & Downtown - $2,750 LA 1.1 MM Units 15,000 DFW - Uptown/Park Cities - $2,098 DFW .85 MM Units 10,000 Houston - Downtown Houston - $2,325 Houston .71 MM Units 5,000 Chicago - Downtown Chicago - $2,533 Chicago .62 MM Units 0 DC - Downtown DC - $2,425 DC .62 MM Units 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 16 Rowlett Economic Development 1.29.2020
The Year in Review Construction Half a billion SF added 100 MSF of total product in last 10 years- more 73 MSF of total product 52% average price/unit currently under than entirety of New delivered in 2019 increase in 10 years construction in DFW Orleans’s CRE market Recent Construction Starts 50 41.9 Millions of SF 40 29.3 30 20 8.1 5.2 5.1 10 2.4 2.1 1.9 0.5 0.4 0 Multi-Family Industrial Office Retail Hospitality Health Care Specialty Sports Student Flex 17 Rowlett Economic Development 1.29.2020
The Year in Review Sales $21 $9.6B $4.6B Multi-Family Office Billion (USD) $5.2B Total 2019 Dallas-Fort Worth $3.1B Industrial Investment Sales Volume Retail Quick Stats $14.5B $6.2B 995 -9.0% Total Individual Total Portfolio Properties Traded Decline in total YOY Property Volume Volume Transaction Volume 18 Rowlett Economic Development 1.29.2020
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