As we look back on another banner year in Dallas industrial real estate, we look forward with a dichotomy of optimism and caution. The optimism is borne from many factors, chief among them our outstanding general business climate. We have consistently added upward of 300 jobs per day in Dallas-Fort Worth for the past several years. Where you used to have to wait a few minutes to make a left turn out of a retail complex, you may now have to wait a few minutes to make a right turn. And while we may curse the traffic, we are certainly digging the economy that’s riding shotgun with it.
Other states’ losses have been our gain as we continue to lead the way on the business-friendly front. Our central location in the U.S. sets the stage for prosperity, certainly, but it doesn’t tell the entire story. While that fact allows salespeople to board a plane in the early morning, conduct business in virtually any U.S. city and be home for dinner (or at least in time to get a decent night’s sleep), there’s more at work here. Our weather is rarely disruptive, we have no state income tax, we have great access to labor, and our cost of living is a bargain, comparatively. No, we don’t have mountains or an ocean view in DFW, but we don’t go without when it comes to restaurants and entertainment. And, to be sure, we have become more and more diverse from a business perspective in this cycle, which has provided a perceived shield against recession. Not that we can avoid it altogether, but “LIFO” (Last In First Out) status is definitely preferred and more likely than in the past.
All that said, history has taught us that all good things come to an end. How long will we continue to have this delicious confluence of low interest rates, low cap rates, high absorption and solid job growth? Our internal clock tells us that it should probably be coming to a close now, but our fundamentals belie it. We often hear the baseball analogy as we mix with our clients and competitors, “What inning do you think we’re in?” I’ve been hearing and saying “the 7th inning” for a while now, conveniently leaving two innings to feed my hope and optimism. But if that was true then, we must be entering extra innings now, so what does the immediate future hold?
2017 will be a pivotal year in determining whether we have achieved some sort of unprecedented rhythm that will be stubborn in the face of recession or, conversely, whether we continue the typical pattern of an undulating economy that runs in five-to-seven-year cycles. Either way, we have our growing pains. Lack of adequate public transportation and availability of water are two challenges, among others, that will eventually need solutions. In the short run, our biggest challenge may actually just be going with the flow, as opposed to talking ourselves into recession simply because we expect history to repeat itself on the same schedule as it has in the past.
The long-term future is bright indeed for Dallas real estate. My vote is that we make no negative assumptions in the short run and hope that it blends into the long run.
John Brewer is a principal in the industrial division for Transwestern’s Dallas office.
