Working from home has clearly changed the game, and companies are exploring restructuring required time in the office. The DFW market added 104,000 jobs in June, driving the unemployment rate down to 8.4% from 12.8%, which are now comparative to 2017 numbers. The region led the nation in population growth last year, with 130,000 residents moving to the area, and those numbers are expected to grow throughout 2020.
However, as density increases, the needs of residents and companies have fluctuated and the market is adjusting. Office absorption is expected to decrease throughout 2020 as companies make decisions, but bounce back to 1.6 million square feet of absorption in 2021 according to Costar.
It’s no secret that the restaurant industry has been impacted the most. With very limited working capital, small business owners are finding it challenging to keep afloat with limited capacity. However, online sales, delivery and take out options provide additional sources of revenue, and have been instrumental in getting several owners through the storm. Additionally, some restaurants are expanding their outside seating into parking lots, making up for lost sales in the dining room.
As for the apartment sector, although many new developments have begun with relatively high vacancy rates, the surge in population growth has quickly filled these units, which is expected to continue. The shift from the more expensive urban market locations has now turned to walk up suburban developments. DFW still boasts the highest apartment demand in the country according to Costar. Only about 4% of inventory are under construction, creating a pent up need for more unit deliveries.
In recent months, new office projects have been announced in Allen and McKinney, creating a driver with employment and relocations.
Mixed Use developments like the Collin Creek Mall redevelopment, Midtown and The Farm are still moving forward, and receiving activity. The preleasing in DFW’s new retail pipeline is hovering at about 48.2%. Retail concepts are continuing to evolve and improvise to improve sales, creating innovative scenarios for success. Grocers have been particularly successful and looking to expand into high growth submarkets. Retail vacancy rates have fallen close to 6%, but this is still a far cry from figures that crept up to 9% in 2009.
The industrial market hasn’t missed a beat. Given the increase in online sales and grocery deliveries, 2020 has been an overall better better year than 2019. According to Costar, DFW there was 28.6 million square feet leased in the first half of 2020 a 4% increase from last year. There is also approximately 30 million square feet in the pipeline to keep up with demand.
Housing:
The real estate housing market hit the pause button for about a month, but came booming back in May, June and July. New home construction is continuing to see demand. Those prices have risen by 3.9% in Frisco, 5.6% in Plano, and 5.4% in Prosper from July 2019. Inventory is low across the entire DFW market, and time on the market figures dropped over 4.5% over the entire DFW MLS. Many homebuilders are in the site acquisition process again to keep up with demand.
Land Sales and Acquisition:
On the land sales and acquisition side, developers are capitalizing on the continued demand for suburban sites. Institutional capital has taken a back seat, unleashing opportunities for mixed use and apartment developers to start positioning themselves within high demand areas. Since March 18, 2020, there have been 11,538 land closings according to Reonomy. July numbers are still trickling in. During the same time last year, there were 12,551 sales, so although we are down 8.8% from 2019, we are significantly up from the same period during 2018, which was 7,218 sales.