Commercial real estate outlook improving

By STEVE BROWN / The Dallas Morning News

North Texas commercial real estate experts expect further recovery next year and say they hope the market will be mostly righted by 2012.

The same can be said of the economy.

“We made it through 2009 and are still here,” D’Ann Petersen, business economist with the Federal Reserve Bank of Dallas, said Friday. “We are starting to see some positive signs.”

Petersen predicted “moderate economic growth next year” for the Dallas-Fort Worth area at a breakfast meeting sponsored by The Dallas Morning News.

The commercial property business will follow the economy’s lead. “It will lag any rebound,” Petersen said.

Moody Younger, who manages Grubb & Ellis Co.’s Dallas office, said he’s already seen a great change in business.

“In 2009, you could not find a deal,” he said. “Our revenues are twice what they were last year. In 2011, we will see a lot more.”

Office tenants are more willing to step up and sign a lease, he said.

“Office is leading us out of it this time,” said Younger, who predicts that D-FW office occupancies will be back in shape by 2012. “I think we will take off pretty fast.

“If you are a developer, by the end of 2011 you need to think about building.”

Petersen said jobs in the professional and business service sector have been among the fastest-growing, which will help the local office market and its 23 percent vacancy.

“We are starting to see some export growth, and that will help the industrial building sector,” she said.

The apartment market is considered the country’s strongest real estate industry. And Addison-based Behringer Harvard has been one of the top nationwide apartment investors over the last couple of years.

“When we started buying multifamily in 2008, we would be the only bidder,” Behringer Harvard president Robert Aisner said. “We are now seeing a huge amount of money that believes multifamily will lead the rebound.”

Aisner said his firm is looking at additional property buys.

“Hotels are getting an awful lot of interest,” he said. “If you can buy hotels now, you assume you are at the bottom.”

Total U.S. commercial property investment last year was about $50 billion, Aisner said. That’s down from $500 billion in 2007.

“It’s coming back but coming back slowly this year,” he said.

Herbert Weitzman, chairman and founder of Dallas-based Weitzman Group, said it will be “three years on the outside” before the D-FW shopping center market recovers from the recession.

North Texas has about 190 empty big box stores with more than 3 million square feet of space, he said. But the overall vacancy rate is still significantly less than it was in the late 1980s downturn.

“We think we are stabilized, and retail sales are getting better,” Weitzman said. “If you are creative and stay in business long enough, there will be some great opportunities.”

With retail construction at a virtual standstill, merchants are slowly filling up empty space – even sites that might have once been passed over. “We are filling up centers today that we couldn’t fill up in better times,” he said.

Most of the retailers that have made it through the down economy will survive, Weitzman said.

“We have bottomed out – that’s the good news.”