Building Boom, Retailing Bonanza

IN ALMOST ALL segments of land development and building in 1983, Dallas flourished-so much so that since spring, analysts have been tossing the word “overbuilt” around. The supply and demand of houses, apartments, offices, hotels and retail space is a delicate balance. It depends, on one hand, upon citywide economic health; and, on the other, upon the needs of a particular area. Consequently, real estate success takes a knack for prophecy. For a housing subdivision announced today to succeed, the demand must be there next year. And for a downtown office tower, the horizon is longer-five years after the ground-breaking. Overbuilding means delays for the developer in getting cash flow from his project. For the typical Dallasite, it can mean bargains for home buying and renting. Or it can cancel the latest architectural opus downtown, meaning that some of the new additions to the skyline may never come out of the ground.

At first glance, the easiest crystal ball-gazing is done by Dallas/Fort Worth home builders, who in 1983 built more houses than those in any other city. According to Ron Witten of MP/F Research, Dallas/Fort Worth issued 30,762 permits for single-family homes. That beats out the former national champion, Houston, by about 1,000 permits. Demand for Dallas houses was healthy, too: 21,000 were sold during the same time period.

The primary factor in home building projections is job growth. And Dallas has that in the cards. Even so, predicting sure health and wealth for home builders isn’t easy. Other things are not always equal, particularly the costs of other kinds of residential property. For example, apartments are going up all over the city. Last year, 60,000 new apartments were started in Dallas and Fort Worth, according to MP/F. Fewer than 20,000 were rented, meaning that a glut of units carried over to 1984. MP/F expects 25,000 units to be absorbed by the renting market this year, but another 60,000 will be completed. Occupancy rates-the percentage of completed apartments filled and providing rental income to the developers-will slide accordingly. At the end of 1983,92 percent of Metroplex apartment space was rented. By the end of 1984, MP/F estimates that occupancy percentage rate will be in the low 80s, which will create more than a few rent wars. Analysts predict that North Irving and Northeast Dallas County are the areas where the best deals will be available.

The apartment glut in Northeast Dallas County will be aggravated, of course, by the rampant overbuilding of condominiums along the Interstate 30 corridor. Building permits for more than 6,000 units were issued by Garland, Rowlett and Mesquite in 1983, and sales have been far too slow to absorb that supply. Many of those condominium developments are under investigation from city, state and federal agencies for possible violations of a variety of real estate, banking and securities laws. But for those looking for housing in the area, prices to buy as well as rent should be unusually low.

It’s no accident that three of the nation’s top 10 commercial developers-Trammell Crow Co., Lincoln Property Co. and Vantage Companies-are headquartered in Dallas. Nor is it coincidence that two others, Houston’s Gerald D. Hines Interests and Toronto’s Cadillac-Fairview, do lots of business in Dallas. In 1983, the city built and leased more office space than any other city in the country. Area builders completed a record 15.7 million square feet of white-collar work space in 1983, almost double that of the record year before. Sixty percent of that was leased.

The steel of Interfirst Bancorporation’s Dallas Main Center structure is halfway up now. Criswell Development is already at work on its 60-story Allied Bank Tower at Ross and Field, and a gargantuan excavation is under way for Rosewood Corp.’s Crescent office/hotel/retail project in the Oak Lawn area.

Commercial real estate is booming. For the shorter term, though, some cautious observers wonder who will take space in the new offices and hotels. The situation is one this year of catch-up-builders trying to find tenants, hoteliers and guests. The same question might be asked of another real estate boom: retail space.

Retailing Bonanza

Add to the shopping meccas of London, Paris, Fifth Avenue and Rodeo Drive a brash newcomer: Far North Dallas. What the area may lack in exclusivity, it made up last year in sheer, upwardly mobile exuberance and volume. When the cash registers stopped after Christmas, Metroplex retailers had rung up annual retail sales of more than $26 billion, 7 percent over 1982. Store developers look for growth, and the citv’s hyperactive home building means dollars for future retailers with the right formula.

The activity began in mid-1982, says Wit-ten. During the second half of 1983, Dallas developers completed 1.7 million square feet of retail space-not including malls.

It wasn’t enough, even for hard-shopping North Dallasites, to have three shopping complexes-Valley View Center, Preston-wood Town Center and Sakowitz Village- and more than a dozen big department stores in a l-by-2-mile area. The Galleria, with Marshall Field’s, Gumps, Tiffany & Co. and Saks Fifth Avenue, opened in the fall of 1982, and Bloomingdale’s swept into ValleyView with great fanfare a year later. And thisyear, Macy’s confirmed months of rumorsby announcing that its first Dallas storewould open in the third quarter of 1985 in theGalleria’s Phase II expansion.

And construction continues. At the end of 1983, Witten reports, Greater Dallas had 3.7million square feet of retail projects underconstruction, most scheduled to be completed in 1984. One-fourth of that is stripshopping centers, half is neighborhood andcommunity centers with supermarkets or discount stores. And the rest is mall space.

That brings up the question: Who will shop these new stores? Will there be more retail outlets than can profitably sell to consumers and more space in the malls and strip centers than can possibly be filled by retailers chasing after those highly desired discre tionary dollars?

The answer is yes. “The plans are to overbuild,” says Charles Glovsky, a retail analyst for Dallas’ Eppler, Guerin & Turner. “The Southwest-Houston and Dallas-is fertile territory.” Glovsky points to the home building going on in Dallas as the source for new customers. But he sees short-term problems. “If retail isn’t overbuilt yet,” he says, “it’s very, very close.” The victims, he believes, won’t be the new boys in town, “but some of the older-line department stores.” Sears, JCPenney and Montgomery Ward are all in for some tough competition from the flashy new upstarts. Hence the recent attention to overhauling store interiors in such stores as JCPenney, Sears-even Lord & Taylor-to keep customers.

“But it all depends on your point of view,” Glovsky adds. “As far as consumers are concerned, you can never be over-stored.”