Retail remains the darling of the region's real estate markets.
he South Central region has seen most
commercial real estate sectors struggle toward recovery, although retail has
remained strong. In Texas, Dallas-Fort Worth, Austin, and Houston showed retail
growth mirroring each city’s residential increases, according to NAI’s 2005
Global Market Report. Other cities experiencing low vacancies and high rents
are Baton Rouge, La., New Orleans, and Little Rock, Ark.
the office sector, San Antonio has experienced a downturn, but Dallas-Fort
Worth saw more corporate relocations and expansions than any other U.S. city,
according to a study from Conway New Plant Database and Site Selection
magazine. Corporations relocating to or expanding in northern Texas include Del
Monte Foods, Home Depot, and Washington Mutual. In New Orleans, the suburban
Metairie, La., office market continues to outshine the central business
district with almost 90 percent occupancy. In Tucson, Ariz., a shift from
leasing to purchasing pervades, and occupancy is up.
the industrial sector, Texarkana, Texas, had the region’s lowest industrial
flex space vacancy and highest flex space rent at $16 psf. New Orleans has been
experiencing stable but low industrial demand and saw no new construction over
the past year, according to NAI. Phoenix’s industrial vacancy continues to top
11 percent, but a positive business climate is attracting California investors
to the area.
Oklahoma City, multifamily sales broke records last year, and transaction
volume will be high again this year, according to OKCBusiness. In Houston,
multifamily construction has slowed in concert with population growth, but the
market continues to be strong. In Phoenix’s surrounding suburbs of Tempe,
Chandler, and Peoria, Ariz., multifamily sales increased.
the hospitality sector, tourism is expected to increase with development. In
Dallas, for example, as existing projects are completed and a more cohesive
downtown area is developed, further construction in the sector is expected,
according to Ernst & Young’s 2005 National Lodging Report.
a Sun Belt city, Tucson’s population
growth fuels the construction
of new homes and
commercial buildings. The
commercial real estate sector is thriving because Tucson is growing. The
challenge is to accommodate the growth while maintaining our identity as a
great little city.”
C. Larsen, CCIM, principal of Larsen Baker LLC, Tucson, Ariz.
Leads to Downtown Growth
Rock’s central business district continues to expand, encouraged in no small
part by the opening of the William J. Clinton Presidential Center. The $160
million complex helped make the River Market District Little Rock’s
fastest-growing area. The library spurred nearly $7 billion in new retail,
residential, office, and hospitality developments.
NAI Dan Robinson & Associates
photo: Little Rock Convention & Visitors Bureau
large retail markets showed strong improvements throughout 2004, including:
year-end, the city had the highest retail occupancy, 95.5 percent, of any Texas
market. This is an improvement over year-end 2003’s 95 percent occupancy rate.
New retail construction also increased throughout the Austin area adding about
1.5 million sf.
2004 the market’s total retail inventory exceeded 150 million sf for the first
time and the retail occupancy rate exceeded 90 percent for the second time in
15 years. An overall improving economy allowed for an increase in construction
as well. A total of 4.4 million sf of new retail product was added to the market
retail demand throughout last year led to Houston’s highest occupancy levels in
a decade. The year-end occupancy rate was 86.9 percent, up one-and-a-half
percentage points from the previous year. Mall expansions, new Wal-Mart Supercenters,
and HEB grocery-anchored community centers were all part of the city’s active
new construction market.
Antonio’s growing economy shows promise for continued retail property demand.
Nearly 15,000 new jobs were added in 2004, and job growth is expected to
continue throughout this year.
Weitzman Group and Cencor Realty Services
photo caption: Uptown Park Shopping Center
photo: Greater Houston CVB
• The closing of the 500,000-sf Philips
Semiconductor plant skewed the city’s industrial absorption rate to a negative
• 665,000 sf of new construction projects were
completed in 2004. Owner-occupied and build-to-suit projects accounted for
410,000 sf of absorption.
• An excess of for-lease space has swayed the
market in tenants’ favor. But current conditions may not last long — rising
interest rates and construction costs may give landlords the advantage.
Grubb & Ellis
Development Breaks Ground
410,000 sf of luxury condominiums and 200,000 sf of retail, restaurant, and
office space, the Scottsdale Waterfront Residences began construction in
January. Just north of downtown Scottsdale and along the Arizona Canal, the
development will consist of two 13-story towers with 198 residential units, as
well as restaurants and retailers. The development also will house the Fiesta
Bowl headquarters and museum and will feature approximately five acres of
outdoor public space, including an amphitheater, public art, and recreation
paths. The $200 million project’s first tower is slated for completion in 4Q06,
and the second tower will be completed in 1Q07.
photo: H & S International
New Orleans office market slowly is recovering from an abundance of sublease
space, but two factors will test the strength of the market’s impending
recovery: Much of the sublease office space may come back on the market due to
expiring lease terms and several office properties occupied by oil companies
have leases expiring this year and in 2006. Leasing decisions will have big
implications on the city’s future office market fundamentals.
addition, class A office space will continue to see relatively flat rental
rates with unchanged tenant concessions this year, according to Brian Rourke,
CCIM, SIOR, an office leasing broker with NAI/Latter & Blum in New Orleans.
Approximately 200,000 sf of class B office space was added to the market during
1Q05 and large amounts of class C space have been redeveloped into multifamily.
20 miles north of Dallas with a strong local economy, Frisco, Texas, was an
ideal place for John Q. Hammons to build a $40 million, 330-room Embassy Suites
Hotel. Frisco welcomes around 2 million visitors per year, according to
Hospitality Net. The Frisco Sports/Entertainment complex, adjacent to the
hotel, includes the $22 million Dr. Pepper/7UP Ballpark, where the AA Frisco
RoughRiders play, as well as the training headquarters for the Dallas Stars
National Hockey League team. Retail is also one of Frisco’s draws. The 1.6
million-sf Stonebriar Center and the 1.1 million-sf Centre at Preston Ridge
accompany the local area’s more than 200 restaurants.
year will be a good one for Oklahoma City’s multifamily market, according to a
recent National Association of Home Builders study. General economic growth
will lead to increased demand for multifamily housing with the largest jump
predicted for class B properties. Due to increased demand, the average vacancy
rate has dropped to 7.8 percent. With developments in the pipeline and some
already underway, supply is on the rise.
photo: Oklahmoa City Convention and Visitors Bureau