I love a good comeback story—and it was hard not to be engaged during this year’s Super Bowl. Talk about a nail-biter down to the last seconds!
The Patriot’s “come from behind” win and their “momentum” in the last half was amazing. That got me to thinking about Dallas-Fort Worth’s commercial real estate market and how we have seen a similar come from behind win—and almost unbeatable momentum.
We have tracked the DFW office market over several economic cycles in the accompanying chart. What is important here is how our market has evolved—kind of like the Patriot’s second half offense, and like them, having a little bit of luck thrown in.
I continue to get questions about comparing DFW’s past office market to what’s happening today. The 1980s were an amazing time! In the 80s, we added 100 million square feet of multi-tenant office space, as well as 25 percent to our workforce. That is the period when the largest CBD buildings were delivered, Uptown’s Crescent opened, the Galleria was built, and Las Colinas was created. At the same time U.S. treasuries were at an astounding 15 percent.
As instantaneous as an intercepted pass can shift the direction of a game, our economy changed quickly. DFW entered a protracted recession around 1986 as oil prices plummeted and tax laws changed. This put us behind for more than a decade—kind of like Brady must have felt as his team left the field, unable to gain any meaningful ground in the first half.
The telecom/tech boom of the late 1990s brought us out of that slump. Our high level of office demand, driven by a 23 percent increase in jobs, brought our vacancy under control for the first time. In fact, office vacancy hit its all-time low. Development ramped up quickly to meet this demand—and would have stayed generally in balance were it not for the tech bust a few years later.
Since then, DFW has been a pretty consistent performer. We’ve managed to whittle our vacancy rate down to near all-time lows in this cycle. What is critical here is the momentum we now have. Like the Patriots’ second half, our job gains have been consistent and hard to break. With major relocations and corporate expansions taking occupancy in 2017 and 2018, these gains will continue. And, even though office development is increasing, its scale is still pretty moderate, dare I say “sustainable”, compared to past cycles.
So where does that leave us? Unlike Sunday’s Super Bowl, where the Patriots’ had to hold it together for one last overtime drive, our “economic” game has no end. Tides shift and an intercepted pass or inadvertent fumble can change our momentum. But for now, DFW’s office development looks well managed and a clear come from behind victory in positioning DFW as a more stable and mature market.
Walt Bialas is vice president and director of research for JLL in Dallas.
