Commercial Real Estate

CRE Opinion: Don’t Flinch!

Is the North Texas commercial real estate industry prematurely anticipating a downturn?

Colin Fitzgibbons of KDC.

Back when I was in elementary school, we used to play a game where—in the wonderful wisdom of young boys—the point was to try to make your buddy flinch in any way possible. If he did, you got to punch him in the arm, and if he didn’t, he got to punch you in the arm. What fun!

As we closed the first quarter of 2017 last week, I was reminiscing about that silly game and how it relates to the commercial real estate market in our fair city.

By all measures, we should be feeling confident and optimistic about our near and long-term prospects. Job growth continues. People still flock to Dallas-Fort Worth in droves. The stock market keeps soaring to new heights. We’ve enjoyed record leasing numbers in the last three years and have seen multiple landmark investment sales in many submarkets.

And yet, it feels like we are collectively flinching in the face of a looming downturn for no good reason at all.

At KDC, we’ve done a lot of thinking about what has driven this wave of corporate consolidations North Texas has experienced in the last five years. It’s doubtful there’s anything particularly groundbreaking to most of you on this list, but it’s helpful to be reminded about what makes our region so dynamic. In no particular order:

– Business friendliness (right to work, no state income tax, tort reform, incentives, etc.)

– Proven, deep, and growing labor pool

– Two phenomenal airports in DFW International and Dallas Love Field

– Low cost of living and high quality of life

– Central time zone

(We would be interested in hearing any other reasons you have for Dallas-Fort Worth’s growth, but that top five is a good place to start.)

Nothing on the above list has changed enough to make us flinch.

Texas continues to rank as one of the most business-friendly states in the union, and we should all be very mindful to help keep it that way. North Texas’ population growth continues to rank highly amongst our peers, providing the necessary employees to fill the growth we’ve seen from major companies like Toyota, Liberty Mutual, State Farm, Brinker, Rolex, and KPMG, among many blue-chip corporations from a diverse set of industries that have made tremendous investments in North Texas.

Our airports are growing, too, adding flights, services, and amenities that enhance their competitiveness in the global market.

To be sure, this wave of corporate activity has had a financial impact. Salaries are rising, construction costs have increased, home prices have gone up, and rents have risen across the board. But, North Texas is still a relative bargain compared to major cities on the coasts, and we continue to be bowled over by stories from our clients about how much their employees enjoy the quality of life all across North Texas.

This cycle of positive growth has been active since around 2012, and the sheer length of this upswing has caused some to flinch as they’re squinting for signs the market is turning. But we run the risk of creating a self-fulfilling prophecy and punching ourselves in the arm with this line of thinking. Significant demand from office users is still out there, and we are confident the growth factors listed above will continue to fuel the wave of corporate consolidations, in the near future at the very least.

Anyone reading this is probably too old to be punching anyone in the arm, but it’s my opinion that we shouldn’t be flinching yet, either.

Colin Fitzgibbons is a vice president at KDC.