FEATURE ARTICLE, DECEMBER 2005

2006 Broker Outlook

Dallas

Dallas-area multifamily properties are beginning to see the light at the end of the tunnel with higher occupancy rates because the concessions are burning off. Overall, the market is faring extremely well.

The buying activity throughout the Dallas market for Class A to Class C multifamily properties is way up. The downtown area is booming with new properties and conversions of older buildings such as the Dallas Power & Light building, which has undergone an extensive rehabilitation to Class A multifamily. In the Oakland area, as well as lower Greenville, new construction and renovation for rent and for sale blend an eclectic mix of the old and new to the areas. The Galleria in North Dallas is a hot new place for developers that are developing high-rise luxury condominiums for the affluent North Dallas empty nester who no longer needs or wants a large single-family home and is paying cash for the upscale, high-rise condo.

Properties are turning quickly because of all the California investors that are coming into Dallas. The cap rate and unit prices are much lower in the Dallas market than in California, as they may pay $200,000 per unit there where they can pay $20,000 per unit here.

In order for the market to improve in 2006, there needs to be continued burning off of concessions, which results in high occupancy and, in turn, results in more money for the owner, landlord and developer. In the next year there will be even more conversions happening with older buildings.

— Richard Keeling is senior vice president of multifamily at Dallas-based Henry S. Miller Commercial.

There continues to be investor demand for retail product in Dallas. Dallas always seems to have space open in nearly every category of user — anchor, small shop, freestanding and so on. There are always concepts and chains that are closing stores in Dallas, but the upside is they get absorbed, which speaks volumes of the market.

Leasing activity is at its highest level in years with many major tenants moving into the area. IKEA has opened a 350,000-square-foot store in Frisco; there is a new, 235,000-square-foot Cabela's in North Fort Worth; and Wal-Mart continues to open more locations, with three new stores opening in Dallas/Fort Worth this year. SuperTarget added two new stores in Dallas/Fort Worth in 2005 as well.

Simon Property Group opened Dallas' first open-air mall, Firewheel Town Center, in Garland this year. It features a mixture of lifestyle retailers, mall tenants and big box anchors. Other significant developments include Hunt Properties' DeSoto Towne Crossing, a 700,000-square-foot power center planned for Dallas' southern sector, and Trademark Property Company's Market Street at Montgomery Farm in Allen.

Several submarkets have been growing in 2005, such as West Frisco/Little Elm, Forney, Desoto and intown markets such as Uptown as well as Northeast Tarrant City, Southlake and Coppell. Dallas has really become a 360-degree market as it is growing in every direction.

Small strip centers, as well as lifestyle centers with a mix of uses, seem to be faring better than other property types in Dallas' retail market. The concept of mixing residential, retail and office is just now blossoming in Dallas, and it seems like wherever these centers are, the leasing is brisk and the retailers do extremely well.

In order for the Dallas market to improve next year, the city government needs to get organized. They need to be more pro-business and support retail and growth. In 2006, Dallas will see more lifestyle centers (mixed-use). There will continue to be fallout in the grocery store market with the chains, which will create more opportunities for new users and retailers and/or alternative users for the spaces.

— Vaughn Miller is president of the retail division for Dallas-based Henry S. Miller Commercial.

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