Dallas leading in multiple sectors across Texas and the nation as Rise48 makes its debut into the market
See why Dallas may have some of the best multifamily investment opportunities as its predicted to be the hottest commercial real estate market of 2023. Coming in among the top of the nation in apartment, hotel, and industrial construction, as well as GDP and construction job growth, the DFW market shows no signs of slowing as Rise48 closes on its first Dallas property with more under contract.
Commercial market continues to boom as Dallas-Fort Worth is expected to stay at the top in 2023
Dallas continues to blaze ahead of the pack as it remains No.1 in apartment, hotel, and industrial construction across the country. A recent survey by CBRE Group found that Dallas was ranked top of the nation across the largest 10 U.S. metros for real estate investment opportunities in 2023.
Steve Brown with Dallas News reported that, in 2022, North Texas completed more than $42 billion in commercial transactions, leading the nation for the third consecutive year—with apartment and industrial building sales accounting for the largest volume of property investment. In addition, commercial real estate lenders ranked D-FW as one of the preferred markets for new loans in 2023.
Danny Baker, a CBRE vice chairman, made a statement: “While there is uncertainty in a macro-level, it’s apparent that the apartment sector in D-FW has strong tailwinds and is once again proving resilient, and apartments will continue to be a favored property type for investors.”
This outlook comes against the backdrop of declining commercial property investment that happened last year nationwide as it went down 15% from record levels in 2021. In fact, when surveyed by CBRE, 60% of investors said they will sell fewer properties or not sell at all this year, while more than half said they plan to buy less commercial property. Additionally, many investors are expecting price cuts this year on commercial property of up to 30%—primarily on office buildings and shopping malls.
Despite nationwide uncertainty, D-FW scored No. 2 in the annual Emerging Trends in Real Estate report, making it one of the nation’s hottest real estate markets for investment and development this year. Along with apartment buildings, Dallas is also currently leading the nation in hotel construction. Bill Hethcock with Dallas Business Journal reported that Dallas has 170 projects in the pipeline, totaling more than 20,000 rooms.
Kate Pittman, Vice President of Strategic Partnerships for Premier, shared in an interview with Dallas Business Journal, “The return of business travel and the growing popularity of DFW are two of the factors driving the construction boom. Business travel has now returned to pre-pandemic norms, especially here in Dallas-Fort Worth. DFW is very diversified in its business sector offerings. There are many large corporations that are already headquartered here and also are looking to move here to Dallas. There’s a great cross-section of anything from banking, oil, development, technology and health care. And with business coming back pretty strong and in-person meetings being strong, Dallas is really a hotspot for business travel.”
Pittman also noted that D-FW has strong tourism appeal with pro sports teams like the Dallas Cowboys and Mavericks, as well as the new Universal Studios theme park beginning construction soon in Frisco. She says that now that tourism is picking back up, hotels that had stalled their property improvement projects (PIPs) during the pandemic are now moving forward in droves to meet the demand of returning travelers.
Texas ranks high in GDP and job growth
Dallas Business Journal shared statistics obtained from the latest CivMetrics data, showing that Texas ranked 3rd in GDP growth last year with 4.03% over the last 12 months, as its Q3 came out to $1.8 million. The Q3 growth in 2021 was 2.0% while the yearly change from 2021 to 2022 was 4.0%. Idaho ranked No. 1 in the nation at 5.73% and Tennessee came in 2nd at 4.48%. The national GDP has risen 1.9% since last year and increased by 0.8% over the last quarter.
According to the Bureau of Labor Stastics, Dallas-Fort Worth added the second-highest number of jobs in the nation last year at 234,700, behind only New York City. D-FW also added the second-highest number of construction jobs in the nation at 12,000, behind only the Houston area with 18,000 jobs, according to data supplied by the Associated General Contractors of America.
Similarly, Dallas News reported that D-FW had a record number of commercial building starts last year at $16.7 billion, coming second to New York City. Commercial building starts rose 51% from 2021, while building sector employment was higher at the end of 2022 in 268 of the 358 U.S. metro areas tracked by the construction industry trade association. The sectors that primarily made up the employment gains were heavy and civil engineering construction, utility construction, road and bridge building, and building exterior work.
In addition to construction, Fidelity Investments is set to add another 4,000 jobs to the Dallas market in the first half of 2023 as reported by Benjamin Kail with Dallas Business Journal. Fidelity, the Boston-based financial services firm with a large regional office in Westlake, reported record-high revenue of more than $25 billion in 2022. They also hired more than 17,000 new associates across all job functions and ended the year with more than 68,000 employees worldwide.
Fidelity’s latest push will soon add 502 jobs of its expected 4,000 to Dallas, with 37% being client-facing hires and 26% technology hires. Abby Johnson, CEO of Fidelity, said, “Now is the time to double down on investments in people, technology and services to keep the growth going. We have followed this contracyclical path multiple times during our long history, because it is during periods of market and economic volatility that we see surges in the number of customers who call, visit our Investor Centers, use one or more of our digital channels, or increase their investing activities with us.”
Even with a 13% hit to discretionary assets last year, Fidelity’s mutual funds and managed accounts total $13.9 trillion, making them one of the world’s top money managers—beind only BlackRock with $9 trillion and Vanguard with $8 trillion. Johnson shared that by the end of 2022, Fidelity served nearly 41 million customers with workplace participant accounts (including those with 401(k) plans), 37 million retail accounts, and more than 8 million accounts supported by wealth management firms using Fidelity’s brokerage platform.
DFW leading Texas in apartment occupancy
Bill Hethcock with Dallas Buisness Journal reported that, based on the latest report from ApartmentData.com, Dallas-Forth Worth is leading all major Texas metro areas with an overall occupancy rate of 92.2%. The ranking is based on the best combination of rental rate growth and absorption of apartment units over the past three months across all 37 submarkets in DFW. Houston came in No.2 at 90.4% occupancy and Austin came in No.3 at 90.3% occupancy.
Overall, apartment rents in North Texas submarkets increased 6.3% in the past 12 months to a median of $1,491 per month. In DFW, 69 new apartment communities—totaling more than 18,600 units—have opened in the past 12 months. Additionally, 84 communities with 24,300 units are currently under construction. More apartment construction has been announced or is in the permitting stage as another 192 communities totaling 78,224 units have been proposed. According to ApartmentData.com, DFW currently has 3,400 operating communities with more than 817,500 units.
The increases in apartments and rent have also driven an increase in high-income renters in the city of Dallas. In a rental market report by RentCafe, high-income renters were defined as people who earn $150,000 or more a year and choose to rent an apartment or house rather than purchase. Between 2015-2020, high-income renters increased by 74%, peaking at 17,257 and making up 6% of the city’s total renters.
The study by RentCafe suggests that rising rent prices throughout the country as well as higher mortgage rates within the past year are playing a large role in the increase in people with a higher income choosing to rent rather than buy—particularly in a new trend of millionaire renters.
New buildings going up in downtown Dallas
Spencer Brewer with Dallas Business Journal reported that Texas A&M is increasing its expansion budget on its downtown campus to $150 million, previously at $85 million. The increase is planned to go to the replacement of the Law & Education Building as a “Gateway Building” to house the law school, administrative offices, and other uses.
The complex is planned to feature classrooms and labs as well as flexible research and maker spaces that the public and private sectors can use for academic programs, workforce training and collaborative research. Some of the fields expected to benefit are engineering, emergency management communications, agriculture, health sciences and visualization, and others.
“If you think about it, that’s sort of the Texas way: Go bigger and better whenever you get the chance,” said Texas A&M University System Chancellor, John Sharp. The construction on the Law & Education building is slated to break ground in June and has many industry leaders excited as it could mean new additions to the city’s skilled workforce, economic development, and Fort Worth’s profile as a relocation destination with a Tier-1 university.
Two new towers may be on the horizon in downtown Dallas as well, as Brewer also reported that Dart interests recently acquired the Central Library, located at 500 West 3rd Street, from the City of Fort Worth. While there are no definitive plans, the developer stated that ‘a project featuring two towers makes the most sense for the site’. The library sits on more than two acres within the city’s central business district with close proximity to Sundance Square.
This is Dart’s first project in North Texas as the single-source, family-backed real estate investment and development firm begins to expand into Dallas. “We love the overall Metroplex. We’re particularly enamored with Fort Worth. We think it’s a great opportunity in general,” said Christopher Kelsey, President of Dart Interests. “Our goal is to build something durable and sustainable from an operating standpoint, and then to own it for an extended period of time”.
Dart Interest’s capital provider is billionaire Kenneth Dart, part of the family that owns Dart Container Corp.—the producer of Solo Cup.
The development pipeline in Fort Worth and upcoming commercial projects in North Texas
Spencer Brewer with Dallas Business Journal provided an overview of the development pipeline in downtown Fort Worth as it’s currently at $2.3 billion with over 3,200 multifamily units and more than 1,500 hotel rooms. In addition, civic leaders are more proactively recruiting for office jobs. The Fort Worth Chamber is leveraging fundraising efforts into increased scouting for potential companies.
“We love industrial; it’s our bread and butter. It’s a huge asset for us, and we’re going to continue to push hard for that and be very blessed. It’s a big, distinguishing characteristic of Fort Worth. However, we do need office jobs,” said Brandom Gengelbach, President of the Fort Worth Chamber—as the Chamber currently has 177 projects in the pipeline. Last year, developers in Fort Worth took out 2,381 new commercial building permits, which was a 58% increase from the previous year.
One of the biggest upcoming projects in Fort Worth is a 550-acre business park on Oak Grove Road. Steve Brown with Dallas News reported that Carter Park East is planned to include more than 7 million square feet of buildings, with three warehouses slated to begins construction this summer totaling 1.5 million square feet. Developer Rob Riner Cos and partners Crow Holdings Capital and Clarion Partners began work on this project in 2020, with 560,000 square feet expected to be ready in Q3 of this year. The project will cost $87 million and is scheduled to open in September 2024.
A global apparel firm, SanMar Corp., is planning to open a 415,176-SF distribution center near Interstate 20 in the Tradepoint 20/45 building. The new shipping and warehousing center is expected to open this summer and is nearby a new shipping hub being opened by Nike. SanMar Corp. has been in business since 1971 and is one of the country’s largest wholesale apparel manufacturers. Operating from its eight distribution centers around the U.S., some of the 30-plus brands the firm distributes under include Nike, Eddie Bauer, The North Face, Carhartt and Champion.
A China-based lighting manufacturer, Ledsion Lighting, has relocated its U.S. headquarters and regional distribution center to an industrial space in Dallas. According to Dallas Business Journal, the firm chose to move its U.S. base to a Class B office and warehouse space in the Regal Row Design District area. The 25,730-SF space is part of a single-story wing at Medisend College of Biomedical Engineering Technology with 16-foot clearance heights and three loading docks.
Lastly, a new athletic facility is being constructed at a private school in Dallas. The Dallas International School Sports Facility will be located at 17811 Waterview Parkway is slated to begin construction on May 1st with completion by early November. Owned by City Futsal – Dallas International School, the athletic facility will be over 13,000-SF and cost about $5 million.
Two more Portillo’s coming to North Texas
Paul Livengood and Jay Wallis with Dallas Business Journal reported that Portillo’s will be opening two new locations in DFW—one in Arlington just south of Allen Premium Outlets and the other in Allen just off of Interstate 20 and South Cooper Street. The fast-casual restaurant known for its Chicago street food opened its first location in Illinois in 1963 and currently has more than 70 restaurants in 10 states.
“Texas is an amazing market, and I can’t wait for our fans there to see this showstopper of a restaurant,” said CEO Michael Osanloo in March 2022. “We’ve had fans asking us to bring a brick-and-mortar restaurant there for years. We’re investing in the right people and the right real estate to make this restaurant a home run for them.” Osanloo also said that Texas was the No.1 state for Portillo’s shipping business.
Demand for Portillo’s in DFW has been longstanding as a Facebook group started in 2009 named “Portillo’s wanted in DFW” has reached more than 3,900 members as of February this year. They asked, and Portillo’s delivered.
Rise48 Equity has completed $1.8 Billion+ in total transactions since 2019, and currently has $1.4 Billion+ assets under management in the Phoenix MSA and Dallas, Texas.
