TEXAS SNAPSHOT, FEBRUARY 2012

Amarillo

As a whole, the market in Amarillo appears to be on the upslope, at least as far as activity is concerned, but caution is unavoidable. Amarillo’s market is such that it rarely experiences periods of rapid appreciation or rapid depreciation. Commodity prices and job growth have helped keep our economy somewhat stabilized compared to the rest of the country, but not unaffected. A major drought hit our area that not only impinged on our economic growth but had a negative impact on our consumer confidence.

One area of significant concern lies in the slowing of our commercial construction. According to Amarillo National Bank’s December Economic Analysis, commercial construction is down 64 percent from this time last year and 30 percent year-to-date. That drop hurts all aspects of the commercial real estate market. On the positive side, many projections indicate that this number will slowly reverse and stabilize mid-year.

Several projects on the horizon in the industrial sector offer hope. Bell Helicopter has just announced that it will manufacture a commercial helicopter at its Amarillo facility. This is a first for the Amarillo plant and a welcome addition to the local economy. The Amarillo Economic Development Corp., which was essential to Amarillo bringing in the Bell plant, has already announced financial assistance. The plant currently employs 1,000 workers. This is an obvious boost to the manufacturing sector and will benefit the retail and housing markets as well.

The owner-occupied industrial market is strong but we are seeing some unusual vacancies in the normally stable investor-occupied properties. One such owner-occupied project is Southern Tire Mart’s new $5.2 million facility on Interstate 40, currently under construction. The plans call for a 62,000-square-foot shop with 10 truck bays that will employ a staff of 24. On the other hand, we have several 30,000-square-foot plus, investor-owned industrial properties that have garnered little interest from qualified tenants.

While retail occupancy rates continue to be in the low to middle 90s, there is a feeling of caution among landlords of multi-tenant centers, both large and small. Like in many parts of the country, grocery store anchored centers are seeing the greatest success. While our occupancies are fairly high, the tenant base is less sound than landlords would prefer. There is an underlying fear that individual tenants could fail and significantly cause detriment to the center. In bringing in new tenants, landlords are being asked to put forth allowances that they normally wouldn’t consider. This has the potential to create a bubble that could pop if the economy doesn’t turn around quicker. We are currently experiencing flat rental rates and in a few cases, decreasing rates when a tenant comes up for renewal. That appears to be isolated and not a widespread issue.

Things are looking brighter for 2012 with the announcement that a Houston based partnership has purchased and will subsequently remodel the 48,000-square-foot Coronado Shopping Center. The center has been limping along with below average occupancy and rental rates for several years. The greatest optimism in the retail market comes from the construction of several new free standing restaurants and fast casual dining facilities.

We have seen quite a bit of infill development with the reuse and in some cases, tear down of former car sales locations. Chick-fil-A, Panda Express and McAlister’s Deli have all seen new freestanding locations built in 2011 with new locations for others, such as Chipotle Mexican Grill, Texas Steak Express, McDonald’s and Blue Sky, slated to open in 2012. Another area of optimism lies in the number of new bank locations being built. Citizens Bank is in the process of opening two new locations. They purchased a new property on Coulter with construction currently under way at another site at I-27 and Georgia. The plans call for the 12,000-square-foot facility to be completed in June 2012. Several banks have tied up land for new locations which is an indication of our strong local banking business.

Amarillo’s office market seems to be in the same boat as retail, but with a greater sense of optimism, especially in the downtown area. Absorption continues to be moderate, with new tenants moving into Amarillo to service the oil boom and prospects for wind energy. Occupancy rates hover in the low 90s and Amarillo’s downtown offers some real momentum. Parkhill, Smith, & Cooper filled an 8,500-square-foot vacancy in the former Atmos Building.

With the announcement of a more than $100 million investment and the eventual construction of a multi-purpose event facility and ballpark, convention hotel and several parking structures, the downtown office market will continue to make improvements and should be followed by the development of a greater retail presence in downtown.

One area of uncertainty lies in the medical office market. It has been announced that one of the two owners of Baptist Saint Anthony’s Health System, a major employer with over 2,700 employees, is going to sell their half interest ownership. With such a large stake for sale, many eyes are anticipating the result and what affect this could have on the medical market.

Overall, Amarillo’s commercial real estate market has been fairly static with signs of both optimism and caution. High employment numbers should keep the market stable, with steady growth throughout the year. There are encouraging signs in every sector that could be boosted by a little rain.

— Ben Whittenburg, partner with Amarillo-based Gaut Whittlenburg Commercial Real Estate


©2012 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.




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