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CONSENSUS BUILDING

There’s more than one way to beat an office glut
By D Magazine |

When we say there is no consensus on the real estate bust/boom, we aren’t kidding. Of course who you are and what your particular market niche is has a lot to do with how healthy your outlook is. We polled a group of industry leaders to see how they view the current state of affairs and what lies ahead.



Dan Dennison, vice president and Texas regional manager for Bellamah Community Development.

I think it will be an excellent year, particularly for entry-level homes. Job formation continues to be very strong, and although some people think things will slow down a bit, it appears that Dallas will be the leading national market for residential starts again in 1985.

The Dallas economy, compared to virtually any other market worldwide, continues to be very strong. There’s a lot of builder optimism out there. Also, the ability to finance and undertake new projects is favorable, and building costs have remained generally stable.

If interest rates remain stable, it will be a real plus. Lower rates are lowering monthly payments for buyers and have allowed purchasing a home-still the American Dream-to be a reality.

At Mountain Creek, our 3,600-acre project in southwest Dallas, we’re responding to market demand by accelerating our development schedules to meet the anticipated and perceived market demand.

We’re investigating potential opportunities to acquire and develop additional properties in 1986. Overall, we’re bullish on Dallas and Texas, and look to enter at least one other Texas market in 1986.



Mike Hutchison, president, Landmark Homes and Landmark Enterprises Development Corp.

A major factor that will affect both the Dallas and national residential real estate markets over the next several months will be the institution of tighter guidelines used by the FNMA to qualify purchasers of new homes. More income will be required to qualify for the same price home than was required last year. In effect, you will get less house for the same dollars.

These new restrictions also encourage prospective homebuyers to make larger down payments. You won’t see much 95 percent financing; that will be the exception, not the rule. Discount points paid by the builder to obtain financing for the buyer have also been limited, and this should force builders to be more competitive in their pricing. I think this is great because it forces builders to sell products rather than financing gimmicks.

As for our Dallas area specifically, I am confident the residential market will remain very healthy through the end of 1986. No major changes will significantly alter our market growth. Our company will maintain an active building program in some 10 or 12 communities during the next year.



James Blythe, president of Cornerstone Commercial Properties, a division of Cornerstone Investment.

Just a few months ago the real estate experts were telling us Dallas had a seven-year supply of industrial warehouse/distribution space. Now, in less than two years, that space is leased and Dallas has no more than a four-percent vacancy rate in these properties. Obviously, many experts were wrong.

Several factors will be controlling the marketplace over the next few months. Price will always be a factor; however, transportation, labor markets, taxes, utilities and, most significantly, proximity to the boss’ residence will be factors to determine growth patterns over the next year.

The primary development effort of Cornerstone in the coming months will be our 189-acre site on Buckner Boulevard just south of its intersection with Thornton Freeway. The tract is the largest rail-served industrial site we could find available within Dallas. We plan to take around three years to fully develop the park, and when it is completed it should contain around three million square feet of space.

However the cycles may be running for some areas and for some types of development, we couldn’t be more optimistic about the potential of industrial space in general and our project in particular.



Harlan Crow, managing partner, Trammell Crow Co.

The office building market in Dallas is overbuilt. We anticipate that rental concessions will continue to go from bad to worse in the next 12 months. The Tram-mell Crow Co. will continue to build the best quality product that we can, and to compete as well as we can given the restraints of the market.

Our top priority in the downtown office market is the completion of 2200 Ross Avenue. Early indications are favorable for leasing, notwithstanding the fact that the market is overbuilt.



Tom McCartin, president of the marketing division, Criswell Development.

My estimate is that construction will begin to drop considerably in the next few months, while absorption remains strong. Our local Dallas economy is simply too strong, our location too good for too great a decline in activity. Developers see windows that will open up some ways down the road, but in the near to intermediate term I think you will see a lot of plans put on hold until the market can catch up.

One reason I believe leasing will continue strong is that I am convinced Dallas is about to become an international city in every sense of the word. Foreign companies are waking up to us and we are waking up to them. The influx of foreign companies will generate a great deal of new leasing activity.

Criswell intends to remain flexible over the next year, with the ability to move into new market opportunities both geographically and product-wise.

The Criswell centerpiece is certainly our downtown Fountain Place with its signature architecture and dramatic landscaping. We are on schedule with leasing activities and I have no doubt we will remain on schedule.



William C. Duvall, president and regional partner, Lincoln Properties Co.

The Dallas metropolitan area has experienced a slowdown in new construction during the last six months, due to extensive speculation concerning overbuilt markets both downtown and in the suburbs. Fortunately, the economy is good and business growth has reached record levels in many markets, so recently completed office space is still being absorbed.

Lincoln Properties Co. has seen tremendous activity in several buildings that were completed in late 1984 and early 1985. These office buildings are currently 70 percent to 80 percent leased and are experiencing continued interest from companies looking for new space. The overall market is strong, and in time we will see a new wave of construction to fill the demand created by the current slowdown.

It is my belief that cautious, well-capitalized developers will continue to experience success in the Dallas market by building high-quality projects in the very best locations.

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