DFW COMMERCIAL REAL ESTATE MARKET YEAR IN REVIEW · DFW COMMERCIAL REAL ESTATE MARKET YEAR IN REVIEW 1.29.2020 Presented to: 2020 ECONOMIC DEVELOPMENT ... 2019 Market Overview: Dallas-Fort

DFW COMMERCIALREAL ESTATE MARKETYEAR IN REVIEW

1.29.2020

Presented to:

2020 ECONOMIC DEVELOPMENT PARTNERSHIP LUNCHEON

Rowlett Economic Development 1.29.2020 2

Agenda

Construction

The Big (D) Picture

Multi-Family

Office

Sales

Industrial

Economy

Retail


MEDIAN HOUSEHOLD INCOME TOTAL HOUSEHOLDS

TOTAL JOBS CITY PARKS

MEDIAN AGE ACRES OF TOTAL PARK LAND AREA

DFW Market Facts

120,700Jobs added in the last year

29.7 MinutesAverage commute time

7,539,711Total population

3.0%Unemployment in Dallas.

#1Places for business and career

-Forbes

DFW has 43 Fortune 1,000 companies located in the metro.

Highly educated workforce The area is host to 15 major universities and 7 community college districts, combining to total over 366,000 enrollees. Multiple universities have achieved or are working towards “tier one” research institution status.

Increase in employment over the last year

3.2%

10,676,844 Will live in the DFWarea by 2030 $63,812

3,870,400

34.7 21,200

410+

2.88 M

The Big (D) Picture Q4 2019


The Big (D) Picture Q4 2019

OFFICEINVENTORY

330 MSF

VACANCY14.6%

12 MO. NET ABSORPTION5.7 MSF

UNDER CONSTRUCTION7.2 MSF

INVENTORY434 MSF

VACANCY4.5%



INVENTORY835 MSF

VACANCY5.4%



INVENTORY848K Units

VACANCY7.4%

12 MO. NET ABSORPTION24K Units

UNDER CONSTRUCTION39K Units

RETAILINDUSTRIAL MULTI-FAMILY

*Owner Occupied Included


The Year in Review Office

1.9 MSF net absorption for Q4 2019

Rent growth cooled for Class B product, turning

negative for the quarter. Class A rent

growth slowed as well but was still positive.

7.2 MSF under construction

7.3 MSF of deliveriesfor the year.

Uber had the biggest lease with its Epic 2

deal, and when combined with its

Epic 1 lease, signed off for over 600,000 SF.

5.7 MSF net absorption for 2019 $4.1B in sales.

Over half of the year’s absorption was single

tenant/build to suit activity.



10%

32%

27%

18%

13%

Full Serv

icePlus E

NNNNegotiab

leOther

Partnership. Performance.

2019 Market Overview: Dallas-Fort Worth

Class AClass B

Total Market

$30.42 15.5% 5,850,056 1,840,265 1,187,698 6,608,185 6,373,966 2.7%$21.70 14.5% 87,427 190,278 712,194 667,743 792,567 -0.6%$26.06 15.0% 5,937,483 2,030,543 1,889,892 7,275,928 7,166,533 1.3%

168,086,159 144,849,951312,936,110

659 1,9022,571

Avg Gross Rate Vacancy 12 Mo. Absorb Q4 AbsorbCoworking Space YTD Deliveries Under Constr YOY Rent GrowthRBA SFBuildings

“Dallas-Fort Worth continues to poistion itself as one of the premier Tier I markets in the country.”- Greg Langston, Principal & Managing Director

Q4 2019

2019 High Profile Deliveries

Inventory Tenancy: Single vs Multi

12 Mo. Absorption: Single vs Multi

Market Cap Rate

6.7%

12 Month Sales Volume

$4.18 BRecent Major Sale Activity

Quick Facts

Market Talking Points

Largest Signed Leases for the Year

Avison Young | 1920 McKinney Ave, Suite 1100 | Dallas, TX 75201 | 214.559.3900 © 2020 Avison Young—Dallas, LLC. All rights reserved. E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young.

• Construction pipelines picked up in 2019 after cooling for the previous two years. New product continues to drive absorption in the metro, with products built in the 70’s, 80’s & 90’s all posting negative 12-month absorption. This flight-to-quality trend will likely continue across the market, creating a sort of hybrid bubble where the metro is not over-built, but a glut of unpopular older product sits vacant.

• Net Absorption for the metro has been driven by single tenant build-to-suits in recent years, thus helping keep vacancy rates consistent even as millions of square feet of new product delivered.

• Steady job growth helped DFW recently cross the milestone of having 1 million office using jobs. Total non-farm employment for the metro now sits at nearly 3.5 million jobs.

• WeWork’s fall from grace cast some uncertainty onto the coworking landscape, but look to smaller local players and companies with better cash setups continue to drive growth in the flexible leasing sector.

Gross Direct Rent Changes Most Common Rent Structures

American Airlines Corporate Campus

Pioneer Natural Resources

Charles Schwab Westlake Campus

The Epic Nokia HQ Offices at The Realm

Harwood No.10

4200 American Blvd1,700,000 SF

HEB/Mid-Cities/ArlingtonSingle Tenant

777 Hidden Ridge Dr1,125,366 SFLas Colinas

Single Tenant

3101 Schwab Way580,000 SF

Westlake/Grapevine/SouthlakeSingle Tenant

2550 Pacific Ave294,820 SF

Deep Ellum/White Rock94.0% Leased

$35.00-$37.00/NNN

3201 Olympus Blvd250,000 SFLas Colinas

Single Tenant

4400 Sam Rayburn Tollway235,921 SF

Upper Tollway/West Plano37.7% Leased$30.00/NNN

2850 N Harwood St231,098 SF

HEB/Mid-Cities67.8% Leased

$38.00-$40.00/NNN

Pioneer Natural Resources HQ

One AT&T Plaza

1900 Pearl

Premier Place

One Twenty Five

1 2/19

9/19

4/19

11/19

11/19

$584M

~$250M

$181M

$143M

$99M

$519/SF

~$259/SF

$724/SF

$313/SF

$226/SF

KDC

Dundon Capital, Woods Cap Mgmt

Lincoln Property/Goldman Sachs

CBRE Global Investors Ltd

KBS Strategic Opportunity REIT

Riyad Capital, PRP

Hana Financial Group

STRS Ohio

GlenStar Properties

Keppel-KBS US REIT

DATE OWNER/SELLER BUYER PRICE PSF

23% 77%

51% 49%

Lockheed Martin 431,579 SF

5401 N Beach StEast Northeast Ft Worth

Start Date: April 1, ‘20

Tenet Healthcare 372,931 SF

International Plaza IQuorum/Bent Tree

Start Date: Feb 1, ‘20

Uber Technologies634,245 SF

The Epic 1 & 2Deep Ellum/White Rock

Start Date: Jan 1 ‘20, Aug. 1 ‘22

7,539,711 Total Population

4th Largest Metro in US

120,700Jobs added Nov. ‘18-Nov. ‘19

3.2% YOY Growth

3.1%Unemployment

.4% Lower than US average

Sources: US Census Bureau, and Bureau of Labor Statistics

Source: Real Capital Analytics

10%

32%

27%

18%

13%

Full Service Plus E NNN Negotiable Other

10%

32%

27%

18%

13%


32%

27%

18%

13%

10%

$21

$22

$23

$24

$25

$26

$27

$28

$29

$30

$31

1/1/19 2/1/19 3/1/19 4/1/19 5/1/19 6/1/19 7/1/19 8/1/19 9/1/19 10/1/19 11/1/19 12/1/19

DFW Total Class A Class B

0

2

4

6

8

10

12

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Mill

ions

of S

F

Yearly Construction Starts

Net Absorption, Net Deliveries & Vacancy

12.5%

13.0%

13.5%

14.0%

14.5%

15.0%

15.5%

0

0.5

1

1.5

2

2.5

3

3.5

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

Mill

ions

of S

F

Net Absorption SF Total Deliveries SF Vacant Available Percent % Total



10%

32%

27%

18%

13%

Full Serv

icePlus E

NNNNegotiab

leOther

Partnership. Performance.

2019 Market Overview: Dallas-Fort Worth

Class AClass B

Total Market

$30.42 15.5% 5,850,056 1,840,265 1,187,698 6,608,185 6,373,966 2.7%$21.70 14.5% 87,427 190,278 712,194 667,743 792,567 -0.6%$26.06 15.0% 5,937,483 2,030,543 1,889,892 7,275,928 7,166,533 1.3%

168,086,159 144,849,951312,936,110

659 1,9022,571

Avg Gross Rate Vacancy 12 Mo. Absorb Q4 AbsorbCoworking Space YTD Deliveries Under Constr YOY Rent GrowthRBA SFBuildings

“Dallas-Fort Worth continues to poistion itself as one of the premier Tier I markets in the country.”- Greg Langston, Principal & Managing Director

Q4 2019

2019 High Profile Deliveries

Inventory Tenancy: Single vs Multi

12 Mo. Absorption: Single vs Multi

Market Cap Rate

6.7%

12 Month Sales Volume

$4.18 BRecent Major Sale Activity

Quick Facts

Market Talking Points

Largest Signed Leases for the Year

Avison Young | 1920 McKinney Ave, Suite 1100 | Dallas, TX 75201 | 214.559.3900 © 2020 Avison Young—Dallas, LLC. All rights reserved. E. & O.E.: The information contained herein was obtained from sources which we deem reliable and, while thought to be correct, is not guaranteed by Avison Young.

• Construction pipelines picked up in 2019 after cooling for the previous two years. New product continues to drive absorption in the metro, with products built in the 70’s, 80’s & 90’s all posting negative 12-month absorption. This flight-to-quality trend will likely continue across the market, creating a sort of hybrid bubble where the metro is not over-built, but a glut of unpopular older product sits vacant.

• Net Absorption for the metro has been driven by single tenant build-to-suits in recent years, thus helping keep vacancy rates consistent even as millions of square feet of new product delivered.

• Steady job growth helped DFW recently cross the milestone of having 1 million office using jobs. Total non-farm employment for the metro now sits at nearly 3.5 million jobs.

• WeWork’s fall from grace cast some uncertainty onto the coworking landscape, but look to smaller local players and companies with better cash setups continue to drive growth in the flexible leasing sector.

Gross Direct Rent Changes Most Common Rent Structures

American Airlines Corporate Campus

Pioneer Natural Resources

Charles Schwab Westlake Campus

The Epic Nokia HQ Offices at The Realm

Harwood No.10

4200 American Blvd1,700,000 SF

HEB/Mid-Cities/ArlingtonSingle Tenant

777 Hidden Ridge Dr1,125,366 SFLas Colinas

Single Tenant

3101 Schwab Way580,000 SF

Westlake/Grapevine/SouthlakeSingle Tenant

2550 Pacific Ave294,820 SF

Deep Ellum/White Rock94.0% Leased

$35.00-$37.00/NNN

3201 Olympus Blvd250,000 SFLas Colinas

Single Tenant

4400 Sam Rayburn Tollway235,921 SF

Upper Tollway/West Plano37.7% Leased$30.00/NNN

2850 N Harwood St231,098 SF

HEB/Mid-Cities67.8% Leased

$38.00-$40.00/NNN

Pioneer Natural Resources HQ

One AT&T Plaza

1900 Pearl

Premier Place

One Twenty Five

1 2/19

9/19

4/19

11/19

11/19

$584M

~$250M

$181M

$143M

$99M

$519/SF

~$259/SF

$724/SF

$313/SF

$226/SF

KDC

Dundon Capital, Woods Cap Mgmt

Lincoln Property/Goldman Sachs

CBRE Global Investors Ltd

KBS Strategic Opportunity REIT

Riyad Capital, PRP

Hana Financial Group

STRS Ohio

GlenStar Properties

Keppel-KBS US REIT

DATE OWNER/SELLER BUYER PRICE PSF

23% 77%

51% 49%

Lockheed Martin 431,579 SF

5401 N Beach StEast Northeast Ft Worth

Start Date: April 1, ‘20

Tenet Healthcare 372,931 SF

International Plaza IQuorum/Bent Tree

Start Date: Feb 1, ‘20

Uber Technologies634,245 SF

The Epic 1 & 2Deep Ellum/White Rock

Start Date: Jan 1 ‘20, Aug. 1 ‘22

7,539,711 Total Population

4th Largest Metro in US

120,700Jobs added Nov. ‘18-Nov. ‘19

3.2% YOY Growth

3.1%Unemployment

.4% Lower than US average

Sources: US Census Bureau, and Bureau of Labor Statistics

Source: Real Capital Analytics

10%

32%

27%

18%

13%


10%

32%

27%

18%

13%


32%

27%

18%

13%

10%

$21

$22

$23

$24

$25

$26

$27

$28

$29

$30

$31

1/1/19 2/1/19 3/1/19 4/1/19 5/1/19 6/1/19 7/1/19 8/1/19 9/1/19 10/1/19 11/1/19 12/1/19

DFW Total Class A Class B

0

2

4

6

8

10

12

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Mill

ions

of S

F

Yearly Construction Starts

Net Absorption, Net Deliveries & Vacancy

12.5%

13.0%

13.5%

14.0%

14.5%

15.0%

15.5%

0

0.5

1

1.5

2

2.5

3

3.5

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

Mill

ions

of S

F

Net Absorption SF Total Deliveries SF Vacant Available Percent % Total

(2.0%)(1.0%)0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%

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

Annualized Rent Growth

12.5%

13.0%

13.5%

14.0%

14.5%

15.0%

15.5%

295

300

305

310

315

320

325

330

335

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

Milli

ons o

f SF

Inventory SF Vacant Available Percent % Total

Inventory & Vacancy



TRENDS

Coworking & Flexible Lease Office Space

continued to grow, evenwith WeWork’s issues

Flight to quality Rise of the suburbs Amenities arms race

(2)

0

2

4

6

8

10

2010'S 2000'S 1990'S 1980'S 1970'S

Mill

ions

of S

F

2019 Net Absorption by Decade Built


CO-WORKINGThere is currently 3.5 MSF

of space dedicated to coworking and flexible

lease providers.

26%Regus & Spaces

18%WeWork

8%Boxer

6%Common Desk

LARGEST PROVIDERS (% Total Inventory)



The Year in Review Industrial

6 MSF net absorption for Q4 2019

South Dallas cluster had highest yearly net

absorption


28 MSF of deliveriesfor the year.

Warehouse and Distribution product

made up about 97% of 12 month net absorption

22.5 MSF net absorption for 2019 $5.2B in sales.

5.0% rent growth – highest percentage

among different property types


Average Direct NNN Asking Rates

1511 NE Loop 8201,023,488 SF

Commerce 30 - Building A608,939 SF

Cooper I-20 - Building C401,115 SF

Gateway Logistic Center - 3375,400 SF

Inventory Vs. Vacancy Historical Construction Starts

$0

$1

$2

$3

$4

$5

$6

$7

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

0%

2%

4%

6%

8%

10%

12%

650

700

750

800

850

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Mill

ions

of S

F

Inventory SF Vacant Available Percent % Total0

5

10

15

20

25

30

35

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Mill

ions

of S

F

The Year in Review Industrial

High Profile Deliveries


The Year in Review Retail

Net absorption and deliveries were lower

this year than they have been since 2011

Northern Suburbs and Far North Dallas area driving most of the

activity in absorption and construction


4.2 MSF of deliveriesfor the year. $3.1B in sales

2.5 MSF net absorption for 2019 4.8% vacancy

DFW is still one of the best retail markets

in the country- we love shopping



Steady Tapering as Retail Shifts to Online What’s Old is New Again

Valley View Mall , Redbird Mall & Collin Creek Mall are both seeing multi-billion dollar tear downs and re-births

Retail Spending by Millions of Dollars

$30,000

$31,000

$32,000

$33,000

$34,000

$35,000

$36,000

$37,000

$38,000

$39,000

2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 2017 Q2 2018 Q2 YTD

Reta

il Sp

end

ing

by

Mill

ions

of D

olla

rs



What’s Trending?


The Year in Review Multi-Family

Apartments are the new investor darling with $9.6B in sales- almost half of the year’s total

volume for DFW

39,000 units Under Construction

>24,000 units absorbed for the year

3rd largest market in the country now behind

NY and LA7.5% Vacancy

171,115 units added in 10 years

20,000 units delivered in 2019

52% average price/unitincrease in 10 years -

luxury Class A productmakes up vast majority

of newly delivered inventory


Market Asking Rent Per Unit

Unit Absorption by Year

$600$700$800$900

$1,000$1,100$1,200$1,300$1,400$1,500$1,600

2010 Q2

2010 Q3

2010 Q4

2011 Q1

2011 Q2

2011 Q3

2011 Q4

2012 Q1

2012 Q2

2012 Q3

2012 Q4

2013 Q1

2013 Q2

2013 Q3

2013 Q4

2014 Q1

2014 Q2

2014 Q3

2014 Q4

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

DFW Total Class A Class B Class C Built Since 2010

0

5,000

10,000

15,000

20,000

25,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

The Year in Review Multi-Family

LARGEST MARKET INVENTORIES

NYC 1.9 MM unitsLA 1.1 MM Units

DFW .85 MM UnitsHouston .71 MM UnitsChicago .62 MM Units

DC .62 MM Units

AVE. RENT/UNIT IN PREMIER SUBMARKETS

NYC - Lower West Side & Financial District - $4,485

LA - Venice Beach & Downtown - $2,750

DFW - Uptown/Park Cities - $2,098

Houston - Downtown Houston - $2,325

Chicago - Downtown Chicago - $2,533

DC - Downtown DC - $2,425


The Year in Review Construction

100 MSF of total productcurrently under

construction in DFW

Half a billion SF addedin last 10 years- more than entirety of NewOrleans’s CRE market

73 MSF of total product delivered in 2019

52% average price/unitincrease in 10 years

Recent Construction Starts41.9

29.3

8.1 5.2 5.1 2.4 2.1 1.9 0.5 0.40

10

20

30

40

50

Multi-Family Industrial Office Retail Hospitality Health Care Specialty Sports Student Flex

Milli

ons

of S

F


The Year in Review Sales

Quick Stats

$14.5BTotal Individual

Property VolumeTotal Portfolio

VolumeProperties Traded Decline in total YOY

Transaction Volume

$6.2B 995 -9.0%

$21Billion (USD)

Total 2019 Dallas-Fort WorthInvestment Sales Volume

$9.6B

$5.2BMulti-Family

Industrial

$4.6B

$3.1B

Office

Retail


The Year in Review Economy

120,700 12-Month Job Growth

#2 in Nation

1 Million people added in 8 years

MORE NEW RESIDENTS THAN ANY METROPOLITAN AREA IN THE COUNTRY

Texas Major Metro ComparisonsUnemployment & 12-Month Job Growth* (Based off most recent BLS data)

2.5% 3.0% 3.6% 2.9%

Austin Dallas Houston San Antonio

+29,000 +120,700 +85,500 +33,700

Metro 2017 GDP ($ Billions) 2018 GDP ($ Billions)

New York-Newark-Jersey City, NY-NJ-PA 1,698,122,298 1,772,319,824

Los Angeles-Long Beach-Anaheim, CA 995,114,475 1,047,661,346

Chicago-Naperville-Elgin, IL-IN-WI 659,855,041 689,464,744

San Francisco-Oakland-Berkeley, CA 509,382,318 548,613,361

Washington-Arlington-Alexandria, DC-VA-MD-WV 515,553,994 540,684,444

Dallas-Fort Worth-Arlington, TX 482,218,305 512,509,778Houston-The Woodlands-Sugar Land, TX 447,521,203 478,778,576

Boston-Cambridge-Newton, MA-NH 439,144,366 463,570,556

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 422,539,181 444,148,100

Atlanta-Sandy Springs-Alpharetta, GA 380,224,121 397,261,292


The Big Picture Rowlett

OFFICEINVENTORY519,158 SF

VACANCY6.5%

12 MO. NET ABSORPTION22,362 SF

UNDER CONSTRUCTION16,448 SF

INVENTORY2,296,680 SF

VACANCY4.1%

12 MO. NET ABSORPTION33,763 SF

UNDER CONSTRUCTION21,600 MSF

INVENTORY1,587,669 SF

VACANCY2.3%

12 MO. NET ABSORPTION-26,645 SF

UNDER CONSTRUCTION4,500 SF

INVENTORY2,691 Units

VACANCY26.8%

12 MO. NET ABSORPTION1,128 Units

UNDER CONSTRUCTION958 Units

RETAILINDUSTRIAL MULTI-FAMILY

*Owner Occupied Included

Documents

DFW COMMERCIAL REAL ESTATE MARKET YEAR IN REVIEW · DFW COMMERCIAL REAL ESTATE MARKET YEAR IN REVIEW 1.29.2020 Presented to: 2020 ECONOMIC DEVELOPMENT ... 2019 Market Overview: Dallas-Fort