While 2020 was a rough year for almost everything including commercial property sales, it marked the first time that the Dallas market led the nation in annual commercial property sales passing both New York and Los Angeles in total sales volume.
Industrial and multifamily led the way, along with some portfolio sales propelling the market to more than $19.7 billion in commercial sales per Real Capital Analytics. The Dallas market has been moving up the national ranks claiming the No. 3 spot in both 2018 and 2019.
From a national perspective, DFW was once viewed as a secondary market rarely cracking the top 10 U.S. markets in total sales volume prior to 2010. Dallas has been ranked in the top 5 markets in the nation in total commercial property sales volume every year since 2015 bringing it out of the shadows of the coastal markets that were previously seen as the top tier investment markets.
From 2010-2020, North Texas led the nation in population growth, adding more than 1.25 million new residents for a growth rate of over 24 percent over the last decade. More than half of this growth came from in-migration, or people moving into the region.
Per a recent study from Cushman and Wakefield, the DFW market is projected to lead the nation again this decade in population growth, as it is projected to add another 1.39 million people between 2020 and 2029. Strong growth, a vibrant economy, a pro-business environment, and a tax-free state have combined to make the DFW market a top choice for investment for institutional and individual investors both domestically and internationally.
North Texas is now the hottest industrial market in the country with over 8 percent of the new industrial space being built in the U.S. is projected to be built in the DFW market in 2021.
While the total volume of commercial property sales fell in DFW by 18 percent, the volume of industrial sales was up 18 percent for the year.
Multifamily sales in DFW were also strong, ending 2020 in the No. 2 spot behind New York City with more than $10 billion in multifamily sales. Office sales in North Texas, like the rest of the nation, were off considerably with the total sales volume in the US at $86.1 billion in 2020 down from $144 billion in 2019, per Statista.
Certainly not surprising, hotel sales for the year were down more than 67 percent in the U.S., with only $12.2 billion in total sales volume per Statista. Retail property sales were also down for the nation by 43 percent as the pandemic shut down retail businesses. However, sales volumes started to rebound in the third quarter and really shot up in the fourth quarter led by the sale of single-tenant net-leased “essential services” businesses including fast-food restaurants, drug stores, grocery stores, and dollar stores. Grocery-anchored shopping centers and out-parcel strip centers soon followed. Cap rates for all of these categories have compressed by 25-100 basis points since the start of the pandemic.
Dallas is off to a great start in term of commercial property sales as it is currently in the No. 2 position behind Boston with $5.8 billion in sales volume for the first quarter of this year and is poised to be at or very near the top spot again!
John Zikos is the Principal and Managing Partner of Venture Commercial Real Estate.