Dallas Diagnosis: Friendly Policies and In-Migration Draw Investor Interest

The favorable business environment and a growing population in Dallas has caught the attention of commercial real estate investors and developers.

Multifamily, retail, industrial and healthcare markets have created strong demand, rising property values and rent growth, experts say. Katy Carmical, partner with Hunton Andrews Kurth, moderated a discussion on capital markets and investment at a Commercial Observer forum in Dallas on April 18, as industry leaders talked about strategies in North Texas and the risks and opportunities that can be found. 

Mark Roberts, managing director of research at Crow Holdings Capital and also at SMU Cox Folsom Institute for Real Estate, said he’s been working in Dallas since the late 1970s. He noted the diversity shift over time in terms of the companies leading the market. First, energy, finance and transportation companies were the key drivers in the market. American Airlines, Exxon and Fidelity, for instance, moved to major campuses in the 1980s. Today, a number of Fortune 500 companies have moved headquarters or outlets to Dallas.

“The economy used to be a lot more volatile,” Roberts said. “We would go through swings with booms and busts on job growth. For people trying to sell property, it was really tough: By the time you get a building finished, all of a sudden we’d be in a recession. It’s gotten a lot more stable and diverse now. Chicago has been a city that has a diversity index that’s basically equal to the nation, so it moves with the nation. Dallas is in about the same place right now.”

Roberts said there were concerns last year that the industrial market was building too much space.

“But shoot if we didn’t get it absorbed,” he said. “Occupancy rates remain 1 percent below the long-term average. That’s a big deal. … Dallas, I think it will continue to be a magnet for investor capital.”

Roberts added that the diversity and stability in Dallas and Texas as a whole adds to the benefits of favorable political policies and regulations. Tony Fineman, senior managing director and head of originations at Acore Capital, said they are very focused on Dallas and all of Texas, and also cited the business-friendly approach.

“The key thing to us as we look at other markets in this country where the policies of the government are anti-growth, anti-investment; look at Dallas and Texas: People are still moving here. There’s still migration into this city,” Fineman said. “The truth is these markets are resilient. The growth is fostered here. So we’re really bullish on lending here.” 

Sondra Wenger, senior managing director and head of commercial real estate for the Americas at CBRE Investment Management, said her company remains very active in looking for investment opportunities in Dallas. 

“Dallas has above-average economic and demographic growth, very low cost to do business with a highly skilled labor force,” she said. “We recently did an investor intention survey, in which CBRE talked to 100-plus investors across the country, and Dallas was ranked No. 1 in terms of places where investors want to invest.”

Jay Porterfield, executive director at PGIM Real Estate, said Dallas led the nation in apartment deliveries over the past two years.

“That would have the potential to be a little bit scary or cause problems in the market,” he said. “But because of so much in-migration, because of so much job growth, most of those have been absorbed or are being absorbed. … There are a lot of markets in the country that if you had those kinds of deliveries, you’d have some big occupancy problems. Dallas has just performed like a champ.”

Colin Fitzgibbons, president at Dallas-based Hunt Realty Investments, said the region has seen much less distress and fewer defaults than they were expecting. 

“I keep saying, ‘Man, this year hasn’t started out that bad,’” he said. “It’s starting to feel like it’s going to be a good year, actually. In the last six weeks, we’ve had a lot more conversations with office-focused brokers. There’s a big deal on the market all of the sudden and we haven’t had one of those in a while. We always kind of thought Dallas would be relatively insulated or recover faster from whatever happened. … It feels like we’re trending.”

Gregory Cornfield can be reached at gcornfield@commercialobserver.com.