Dallas – Fort Worth Office Market Report | Q3 2017

Large Corporate Relocations Propel DFW Absorption
Large corporate relocations continue to generate buzz in the Dallas-Fort Worth real estate market. So far, Far North Dallas has seen more absorption in 2017 than the whole market had in all of 2016. After delivering their 2.1 million square foot headquarters in June 2017, Toyota has occupied the space, accounting for 70% of Far North Dallas’ YTD absorption. 2017 has already exceeded 2016’s annual net absorption by 1.1 million square feet. Multitenant office product has accounted for only 20% of the total net absorption and is lagging behind the same period in 2016 by almost a million square feet. Corporate relocations have been the fuel for this DFW real estate boom, but will this continue?
In September, Amazon unleashed a flurry of speculation by announcing it will build HQ2 — a second headquarters located in another major North American metro. The announcement sparked hundreds of proposals from cities and developers across the metroplex hoping that they have what it takes to attract one of the largest, most innovative companies in the nation. While prices have increased and the labor market is tightening, DFW still compares favorably to many competitors. Amazon already has an office presence in Galleria Towers and over 8 million square feet of warehouse space. Could Amazon be DFW’s next big Toyota?
A Look Ahead
• Major corporate move-ins will boost 2017’s net absorption significantly higher than in 2016. To keep this from being the peak, DFW will need to woo more corporate relocations, as in-market expansions are insufficient to maintain such high demand.
• Construction activity will continue to taper, as major corporate campuses deliver and new groundbreakings slow. So far in 2017, 49 buildings totaling 2.5 million square feet have broken ground, just over a quarter of the 8.8 million square feet that broke ground in 2016. Barring
any major corporate announcements, expect construction starts to slow as vacancy is higher than in 2015 and lenders are skittish about being caught at the end of the cycle.
Market Highlights
• Job growth slowed slightly in DFW, as the metro added less than 100,000 jobs from August 2016 to August 2017. Year-to-date Fort Worth has outperformed Dallas, with employment growth at an annualized 1.6% to 1.1% respectively. The unemployment rate in Dallas increased slightly to 3.9% but continues to trail the nationwide rate of 4.5%. Manufacturing and Mining and Construction led the metro with over 3% employment growth each, while office-using sectors experienced modest 1-2% growth.
• The market delivered 870,000 square feet in Q3 2017, and approximately 40% was leased. After the Toyota North American Headquarters delivered in Q2 2017, the construction pipeline after Q3 was about 57% multi-tenant speculative office, and the overall pipeline was 60% leased or owned.
The overall vacancy rate was flat at 15.5% from Q2 2017 to Q3 2017. The vacancy rate has held steady at 15.5% throughout 2017. Class A vacancy decreased 0.2% to 17.2% from Q2 to Q3, Class B vacancy remained the same as last quarter at 14.7%.
Far North Dallas saw the largest improvement from the prior quarter, dropping from 14.1% in Q2 to 12.7% in Q3 as several new projects saw significant move-ins. LBJ Freeway has the highest year-over-year improvement, lowering the vacancy rate 2.4% to 21.9%. It is likely this trend will continue as tenants experience higher rental rates in the Far North Dallas area, Preston Center, and now along Central Expressway.
Net absorption slowed in Q3 2017, totaling less than 500,000 square feet. The 2.1 million square foot Toyota North American Headquarters registered as being fully occupied in Q2 2017, raising Q2’s absorption total to 2.5 million square feet. Although market-wide absorption is strong, eight of the seventeen submarkets have negative year-to-date net absorption. While there is significant overall growth, it is disproportional in Far North Dallas (3 million SF YTD) and Las Colinas (1 million SF YTD); all other submarkets have seen less than 300,000 square feet of absorption each.
While Class A net absorption is reaching levels not seen since the early 2000s, Class B net absorption shows the opposite trend, with only 116,000 square feet through Q3. This is the lowest total seen in the first three quarters since 2003.
Rental rates continued to climb faster in 2017 than they had in 2016. Overall rates rose 1.5% from Q2 to Q3, reaching $25.47 overall — 5.4% higher than this same time in 2016. Class A rates were up 1.5% as well, rising to $29.45 overall, and Class B rates broke $21 for the first time.
Central Expressway saw the highest increase in rates from $27.21 in Q2 up 10.1% to $29.97 in Q3. Preston Center saw overall rates jump 7.6%, due to the start of construction on Park Plaza at 6517 Hillcrest Ave. The only office building in the elite University Park neighborhood is asking rates of $55 triple net for the 119,000 square foot property. This pushed Preston Center’s Class A average to $42.17, surpassing Uptown’s average of $40.78 for Class A space.

The Tenant Advisor. (2017, October 31).
Dallas – Fort Worth Office Market Report | Q3 2017 [Blog post]. Retrieved from hhttp://www.coydavidson.com/dallas/dallas-fort-worth-office-market-report-q3-2017.

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National and Local Tenants: How to Strike the
Right Balance in Neighborhood Shopping Centers

The internet has permanently transformed the landscape of the retail industry, and investing in retail commercial real estate assets will never be the same. But despite the headlines you might be reading, it’s not all doom and gloom. In fact, capitalization rates for all retail properties in the U.S. dropped from 8% in 2010 to 6.5% in Q1 2017 — lower than rates during the 2006–2008 boom.
While technology will continue to influence consumers’ attitudes and expectations of how they experience retail, one opportunity that will persist for investors seeking steady ROI is the neighborhood shopping center.

Neighborhood shopping centers often include a combination of national credit tenants (NCT) — retail brands that operate on a national level — and local credit tenants (LCT). There is a perception that NCT are more dependable than LCT and yet it’s not hard to find examples such as Blockbuster, Best Buy and Radio Shack that are struggling due to advances in technology and e-commerce.

With the recent closures of several NCT across the country, many investors are looking for shopping center assets with the right tenant mix of both name-brand and local operators.

Neighborhood shopping centers find that strong LCT can prove to be as dependable as NCT due to their customer loyalty, unique services and neighborhood convenience. Often, LCT can offset drops in retail center occupancy when mixed with NCT. This is because an NCT’s decision to close certain locations is typically dictated by analytics derived from the highest-performing locations across hundreds of national stores.

By comparison, LCT typically own their businesses and their livelihoods depend on their success and the relationships they build with customers in the communities they serve. A shopping center with a healthy number of local tenants with steady customer bases can be less dependent on national tenants to drive business.

One interesting example of the appeal of LCT is Warren Buffett’s recent purchase of a 9.8% stake in Store Capital Corp., a single-tenant REIT that primarily leases to mom-and-pop stores. This REIT tends to invest in retailers deemed “internet resistant” or businesses that offer a service, experience or goods that are not found or easily recreated on the internet. When you think of “experience-based business” you might think of entertainment-focused concepts like Pinstack Bowl or TopGolf, but this category can also include nail salons, hair salons, health and wellness businesses, restaurants, dry cleaners, fitness centers and medical offices.

Every shopping center has a unique story, and the ability to craft and present each story is the best way to evaluate tenants, assess their impact on the surrounding community and ultimately decide on the value of each asset.

For the income-oriented investor, well-located neighborhood retail shopping centers that have approximately 25,000–150,000 square feet of LCT can be an effective hedge against the risks of NCT closures and can offer attractive yields with comparable income durability to other retail investments like power centers and malls.

While there is no guarantee of longevity with any tenant, incorporating the right mix of national tenants and established local businesses with strong track records can give an investor a feeling of confidence when making retail acquisitions.

Knowledge Leader. (2017, Sept 11).
National and Local Tenants: How to Strike the Right Balance in Neighborhood Shopping Centers [Blog post]. Retrieved from http://knowledge-leader.colliers.com/brian-cyphers/national-local-tenants-how-to-strike-right-balance-shopping-centers

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Strong job creation drives demand
for commercial real estate

For better or worse, the commercial real estate industry is fundamentally tied to the strength of the U.S. economy. In June the labor market created more jobs than expected, and while wage growth lagged, those new jobs will drive demand across the industry.

All sectors stand to benefit from increased job creation, but the office sector could gain the most — those new hires need somewhere to work, after all. At the same time, the multifamily market is heating up. That’s good news for owners but bad news for tenants, many of whom are struggling in tight markets plagued by a lack of affordable housing.

The labor market fuels job creation, wage growth lags

The economy added 222,000 new jobs in June, according to the Bureau of Labor Statistics. That puts the labor market on pace to create around 2 million new jobs this year. Professional service jobs experienced a strong share of those gains, and the health care sector, social assistance services and food service sector also enjoyed significant growth.

While job growth accelerated, the unemployment rate increased slightly to 4.4% as more people returned from the sidelines to look for work. At the same time, businesses are struggling to fill open positions, and job openings at the national level are at a record high of 6 million. That’s an unusual dynamic, considering many Americans have not fully benefited and recovered from the Great Recession, yet employers are having trouble filling positions. To understand the disconnect, experts largely blame weak wage growth.

“This is not a market we have typically seen,” Manpower Senior Vice President Michael Stull told the New York Times. “We have not before seen unemployment drop, low participation rates and wages not move. That tells you something’s not right in the labor market.”

Wages advanced a mere 2.5% in June, barely outpacing core inflation’s 1.7% growth over the period. The Federal Reserve acknowledged this dynamic in its updated report on the economy, and suggested weak productivity growth over the last several years could explain lackluster wage growth. Despite the tension between wage growth and job growth, the economy added a significant number of jobs in June, and that is going to impact commercial real estate.
More jobs is good news for the office sector

June’s job growth is expected to drive demand for office properties. That is according to a recent report from Marcus & Millichap, which said today’s growing labor market is fueling demand for commercial real estate. That’s especially true for the office sector, considering professional jobs, including those in business and financial services, have grown quicker than the overall labor market. Job growth has helped boost absorption over the last 12 months, and that success is expected to continue throughout the course of 2017.

Further benefiting the office sector, the report said today’s tight jobs market is pushing companies to recruit more recent college graduates. This directly boosts demand for office space and comes at a time when developers are building less office space nationally than they have in recent years. This year, developers are expected to deliver 81 million square feet of office space, far below the 117 million square feet averaged during the 2000s. The combination of slowing office construction and a growing jobs market suggests vacancies will keep falling while rents continue to climb.
Multifamily is poised to tighten further

The Marcus & Millichap report also highlighted how the June jobs figures could impact the multifamily sector. Increased job creation and record high job openings are giving young workers more confidence to move out on their own, but since the single-family housing inventory is near its all-time low, experts said many renters will decide to stay in apartments. Average multifamily vacancy levels hover around 3.8%, and the strong labor market promises to further tighten multifamily markets as more people move to urban centers to pursue their careers.

This increased demand will heat up an already tight sector and pressure rents to rise further. That is good news for multifamily developers, who will likely watch profits grow and demand intensify in their markets. It’s not such good news for tenants, who are largely experiencing weak wage growth and growing rents. That dynamic could intensify the affordable housing crisis, which is reaching new heights according to a recent National Low Income Housing Coalition report, which said that nobody working full-time at the federal minimum wage can afford a two-bedroom apartment at market price anywhere in the country.

June’s run of job creation is good news for the economy, and both the office and multifamily sectors stand to benefit. Wage growth is uncharacteristically failing to keep up with job growth, and employers around the country are struggling to fill vacant positions. While that dynamic has yet to unfold, the commercial real estate industry is in good shape as job growth boosts demand and tightens markets.

Apto. (2017, July 31). Strong job creation drives demand for commercial real estate [Blog post]. Retrieved from http://blog.apto.com/blog/market-update-strong-job-creation-drives-demand-for-commercial-real-estate

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How to Score Your First Listing as a New Commercial Real Estate Broker

Getting started as a new commercial real estate Broker can be overwhelming. Not only are you still learning about the industry, you are doing so while trying to earn an income. This means finding prospects, winning their busineCommercial Real Estate Buildingss and ultimately closing their deal.

It’s easy to forget that even seasoned commercial real estate Brokers started in the exact same spot: trying to score their very first listing. Scoring listings is a common thread between all newbies and successful veterans. After all, acquiring new clients and maintaining existing ones is a commercial real estate Broker’s lifeblood.

So, as a new CRE Broker how do you score that first listing? Short answer: you put in the hard work and never give up. Long answer: you prospect, you define a focus and you ask for it.

Create a Prospect List

You want to build new business in commercial real estate? First step is creating a prospect database in your customer relationship management (CRM) system. Sitting in front of an empty spreadsheet can be quite un-motivating, so our best advice is to just get started! First fill in your database with all of the people you know (family, friends, colleagues, etc.) and then you can work outwards to qualified prospects. How do you find those ‘qualified prospects’? In this helpful article from the CCIM Institute, they share a list of who exactly fits that title. They are:

Someone who needs commercial real estate services;
Who knows they need commercial real estate services;
Who has the authority to act on their need;
Who has the budget to back up their authority;
Who feels a sense of urgency to act;
Who knows your company and has had a positive experience in the past;
Who knows you and likes and trusts you; and
Who is willing to follow your guidance.

Even if a prospect only meets the first few attributes, they are still qualified and worth talking to. If they meet the whole list? Then meet your first listing!

Don’t Spread Yourself Too Thin, Find a Niche

Creating a quality prospect database takes a lot of research and hours. It’s easy for a new commercial real estate Broker to go down a rabbit hole, spinning their wheels on collecting data for prospects that will never turn into listings. Avoid this common new Broker mistake and don’t spread yourself too thin. You know you want listings, so focus on narrowing your search.

To do that a new commercial real estate Broker must first define a target market. This can be done in terms of location (farming a particular market sub-set, MSA or neighborhood) or commercial specialty (retail, office, multifamily, industrial, land, etc.). Is there a specific area or commercial sector that piques your interest or you have familiarity with? By defining a niche a new commercial real estate Broker not only begins defining himself or herself as an expert, they make it much easier to prospect.

A final word of advice on defining your target market: you still need to earn an income, so don’t make it too small.

Just Ask!

As a new commercial real estate Broker trying to score their first listing you need to understand two things: (1) this business is based on referrals and (2) amazing resources are just one conversation or call away. What we’re saying is, if you want to be successful and get that listing, all you need to do is ask. Ask everyone you know to refer you and ask every Broker you meet for advice.

Think about any service provider you have ever needed. Whether a dentist or mechanic, instead of going to Google to search who was in the area you first asked your family and friends who they liked and had good experiences with. The same goes for commercial real estate. To help ramp up your new business and score that first listing you should:

Ask Your Sphere of Influence: Start with the people that know and trust you best: your friends, family and colleagues. They want you to be successful and will be more than willing to tell everyone they know to hire you as a commercial real estate Broker.
Put it Out There: Beyond telling your friends and family, shout it from the mountaintops that you are looking to assist buyers, sellers and tenants in their commercial real estate needs. From social media to networking events to doctor appointments, anyone you meet or come in contact with is a potential prospect.
Be Thankful: To keep all of these people referring your services it’s important to always be appreciative. Be sure to send thank you cards or gifts to anyone who is helping you start your business.

Successful Commercial Real Estate Brokers Never Give Up

While we have provided you tips on scoring your first listing as a new commercial real estate Broker, the truth is there is no “secret sauce” to success. It really comes down to working hard and never giving up. In addition, training doesn’t hurt either.

Rosano Partners. (2017, May 25). How to Score Your First Listing as a New Commercial Real Estate Broker [Blog post]. Retrieved from http://researchrosanopartners.com/blog/score-first-listing-new-commercial-real-estate-broker/

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Summer is almost Here!
Capture Great Property Views with Drone Photography

A few years ago, preparing for summer listings would mean simply having a professional photographer on-site to highlight your property from various angles, allowing the landscape to become a part of the view. Today, however, many commercial real estate agents find that a few great photos just aren’t enough when it comes to selling a property. Getting a few great shots on the digital camera just isn’t enough information. In fact, in many cases, an aerial view of upscale and commercial properties is a growing necessity.

Real estate professionals are turning to professional drone pilots to offer views that were once only available via air travel, such as a helicopter ride overhead. Drones can offer views that are much more complex than just a quick overhead snapshot. You can add sweeping panoramic landscapes to a listing or a video tour to your website with the click of a mouse. Drone photography and videography have set a golden standard that allows commercial real estate agents and property owners to highlight many details that are often left out with traditional photography.


Hiring a professional, licensed drone photographer can make all the difference when you’re planning your listings. While drone photography is still cost-prohibitive for many smaller residential listings, they are a great benefit to agents selling industrial properties, multi-acre lots or farm properties, large estates, or other upscale properties. Simply put, drone photography and videography can make a property look its best, giving a unique perspective to potential buyers and taking images from a vantage point that piques the curiosity – and imagination – of potential buyers.

A drone can get to places that the human eye can’t take in, offering an aerial view of properties that reveal the property size as well as the landscape. For commercial properties, this means you can accurately depict the property’s parking area and the building size in relation to its surroundings. For upscale homes, images captured by drones can offer close-up details such as mason work and an accurate overview of nearby amenities.


According to USA Today, at last count, the Federal Aviation Administration had issued over 500 drone licenses in 2015. About 1/5th of those licenses were permitted to take photo and video footage. With new guidelines expected in 2017, this number is set to increase as demand grows for high-quality overhead photos and breathtaking panoramic views. Because of this, it’s important to do your homework when shopping around for a professional.

Savvy consumers want to see that they’re getting more for their money. While you cannot turn the tide of mortgage trends, you can advertise a property in a way that shows it in all its glory. The best way to do this is to partner with a reputable drone photographer to help you capture all of the intricate details of your upscale and commercial properties.

Getting your buyers to walk through the front door for a showing is the first and more important step in the sales process. Why take a chance with “average” photos or mediocre online tours when you can provide a clean, gorgeous view that helps tell a story that sells? There’s no better time to get a great overhead overview of your properties, including sweeping landscapes and panoramic shots.

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3 Reasons to Switch From Residential to Commercial Real Estate

With the constant fluctuation of the stock market and an uncertain future that some say could lead to a recession (some say we’re already experiencing one), it’s time for you to get serious about investing in assets that will help you secure your future, like real estate.

It’s not that real estate isn’t affected by market fluctuations; it is. But its tangibility provides an extra layer of protection you don’t get with stocks. With a 401k, you could spend your entire life pouring money into your account. Then, by the time you reach retirement age, if the market crashes, you could lose it all.

On the other hand, if the market drops or completely crashes, your real estate property doesn’t just disappear. You may have to wait years to sell it, sell for a lower price, or adjust the amount of rent you charge your tenants, but your asset still exists in the physical world.

This alone is the best reason to start investing in real estate—specifically commercial real estate. Here’s why.

3 Reasons to Switch From Residential to Commercial Real Estate

1. Commercial real estate provides a larger ROI than residential.

As an investor, commercial real estate properties can provide you with a significant amount of extra yearly income, greatly adding to your net worth. Commercial properties can also be a better option than residential properties for a few reasons. Many people assert that it’s easier for them to secure large amounts of capital for a commercial deal than to generate lower amounts for a residential deal.

This is because residential investors are limited to traditional financing and private lenders. Commercial real estate investors, on the other hand, tend to pool their capital resources and many small firms and financial companies are more likely to help in a joint venture because there’s more in it for them.

2. Some commercial properties virtually guarantee ROI.

Of course, nothing in life is absolutely guaranteed, but there are some types of commercial property that are better investments than others, simply due to the nature of the business conducted on the property. For example, the self-storage industry thrives in every season, and revenue doesn’t usually diminish when the market drops. There are millions of self-storage facilities across the United States, which means there are plenty of opportunities to invest.

Sometimes a drop in the market can actually increase revenue for self-storage facilities because when people undergo foreclosure, sell their homes, or downsize to apartments, they need somewhere to store their property.

With self-storage facilities, since the entire building is custom built to accommodate the industry, no matter how many times the business changes hands, it will still be a self-storage facility. The demand for this business is almost always high. And while storage facilities can turn over ownership, they rarely go out of business, making the risk of having a vacant building extremely low.

3. You can increase the value of your commercial property.

Property value for residential properties is determined by a fairly arbitrary process based on the average comps of surrounding properties. So even if you’ve completely renovated your home with massive upgrades, tile imported from Italy, a personal Jacuzzi in every bathroom, and walls lined with gold trim, your property will be valued comparatively with the neighborhood properties.

Commercial real estate takes a more sensible approach to value assessment because while the local comps are still considered, the overall value is based on the amount of revenue generated by the property. Generally speaking, the higher the revenue, the higher the value. This means you can actually stimulate the appreciation of your property by finding ways to increase revenue.

But like any investment, you’ll want to do your due diligence before jumping into an investment. There are many mistakes you could make while investing in commercial real estate. It’s best to learn how to avoid these mistakes from someone who has decades of experience.

Increase Your Net Worth More Rapidly With Commercial Property

Investing in commercial real estate is a lucrative business decision for anyone serious about increasing their net worth and expanding their portfolio with tangible assets. And since our entire society is built around the existence of shopping malls, office complexes, and shopping centers, investing in commercial real estate is a great way to secure your future for years to come.

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Chisholm Trail Parkway Progress Report

Chisholm Trail Parkway benefits many businesses between Fort Worth, Burleson and Cleburne. Angmar Realty has the commercial space you need that is located along Chisholm Trail Parkway. The newest project in Burleson, the Standard at ChisenHall, is located at Hidden Creek Parkway next to Chisenhall Baseball Fields, approximately 17 miles south of downtown Fort Worth. Retail and office spaces available with an estimated completion of 1st Building, Summer 2017. Click here for more information about the Standard at ChisenHall.

Chisholm Trail Parkway Description

The Chisholm Trail Parkway, is a 27.6-mile toll road extending from downtown Fort Worth south to Cleburne. More than 50 years in the making, the toll road was a collaboration between the North Texas Tollway Authority, Texas Department of Transportation, the North Central Texas Council of Governments (NCTCOG), Tarrant and Johnson counties, along with the cities of Fort Worth, Burleson and Cleburne, and Western Railroad and Union Pacific Railroad.
New Speed Limits Approved for CTP

On Aug. 18, 2016, the North Texas Tollway Authority’s Board of Directors approved new, permanent speed limits for the 28-mile Chisholm Trail Parkway.

From Forest Park Boulevard to University Drive, the speed limit will be 50 mph.

From University Drive to Arborlawn Drive, the speed limit will be 60 mph.

From Arborlawn Drive to Altamesa Boulevard, the speed limit will be 65 mph.

From Altamesa Boulevard to north of FM 1216, the speed limit will be 70 mph.

From north of FM 1216 to Industrial Boulevard (near U.S. 67), the speed limit will be
55 mph.

The increased speed limits will not be in effect until the signs are in place. That work is anticipated to be complete in mid-to-late September, weather permitting.

Here’s What Drivers Are Saying About CTP
The Chisholm Trail Parkway was an idea more than 50 years in the making. Now that the toll road is open to the public, connecting drivers to their destination is faster, safer and easier. See what is being said about mobility on the CTP.

“A commute that normally takes 40 minutes took less than 20 minutes…‎Once it is totally landscaped and complete it will be a perfect asset for Fort Worth, Tarrant County and Johnson County. A true work of art.” J. Jordan, Fort Worth

“I took the Chisholm Trail Parkway to work this morning and it was fantastic. Thanks for building it for me! My normal commute takes me around 40 minutes. Today, I arrived at work about 10 minutes earlier…Love it – got my TCU toll tag and everything.” Michael W., Fort Worth

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Source: https://www.ntta.org/roadsprojects/projprog/ChisholmTrail/Pages/default.aspx

Commercial Vs. Residential Real Estate Investing

Commercial Real Estate
Commercial real estate is generally land or buildings intended to generate a profit. Commercial real estate is frequently referred to as investment or income property. Commercial real estate also includes rental residences or properties housing five or more units. However, most commercial real estate is office and retail space and industrial-type buildings. Commercial real estate investing tends to draw in people with much money and business experience or education.

What Is a “Commercial Property?”
Commercial properties may refer to:
•Retail buildings
•Office buildings
•Industrial buildings
•Apartment buildings
•“Mixed use” buildings, where the property may have a mix, such as retail, office and apartments.

Positive Reasons to Invest in Commercial Property
Here are some of the pros of buying commercial real estate over residential property.
Income potential. The best reason to invest in commercial over residential rentals is the earning potential. Commercial properties generally have an annual return off the purchase price between 6% and 12%, depending on the area, which is a much higher range than typically exists for single family home properties (1% to 4% at best).
Triple net leases. There are variations to triple net leases, but the general concept is that you as the property owner do not have to pay any expenses on the property (as would be the case with residential real estate). The lessee handles all property expenses directly, including real estate taxes. The only expense you’ll have to pay is your mortgage. Companies like Walgreens, CVS, and Starbucks typically sign these types of leases, as they want to maintain a look and feel in keeping with their brand, so they manage those costs, and you as an investor get to have one of the lowest maintenance income producers for your money. Strip malls have a variety of net leases and triple nets are not usually done with smaller businesses, but these lease types are optimal and you can’t get them with residential properties.

The Downside of Investing in Commercial Property
While there are many positive reasons to invest in commercial real estate over residential, there are also negative issues to consider.
Time commitment. If you own a commercial retail building with five tenants, or even just a few, you have more to manage than you do with a residential investment. You can’t be an absentee landlord and maximize the return on your investment. With commercial, you are likely dealing with multiple leases, annual CAM adjustments (Common Area Maintenance costs that tenants are responsible for), more maintenance issues, and public safety concerns. In a nutshell, you have more to manage; and just as your tenants have to worry about the public eye, you do as well.
Bigger initial investment. Acquiring a commercial property typically requires more capital up front than acquiring a residential rental in the same area, so it’s often more difficult to get your foot in the door. Once you’ve acquired a commercial property, you can expect some large capital expenditures to follow. Your property might be humming along for a few months and wham, here comes a $10,000 bill to address roofing repairs or a new furnace. With more customers there are more facilities to maintain and therefore more costs. What you hope is that the gains in revenue outweigh the gains in costs, to support purchasing a commercial property over a residential one.

Residential Real Estate
All single-family type homes and one-to-four-family rental residences are considered residential real estate. Condominiums and cooperative units are also included in the residential real estate category for investment purposes. Many people invest in residential real estate by buying homes or similar rental properties and then becoming landlords or even house “flippers.” Flipping a house is simply buying it at a low price and selling it at a higher price, usually after fixing it up a bit.

What Is a “Residential Property?”
Commercial properties may refer to:
•Investment Properties
•Manufactured Homes
•Multi-Unit Properties
•Second Homes (Vacation Homes)
•Single-Family Residences

Investing in Residential
Relatively low start-up costs make it so almost anyone can go into residential real estate investing. If you’re investing in residential real estate to flip it, you make your income on the profit margin between your purchase price and your sale price. However, many people buy residential real estate and become landlords because it’s relatively easy to find paying tenants. On the downside, residential real estate investing may mean you’ll be experiencing landlord property management responsibilities, deadbeat tenants and other issues.

Depth of Involvement
Your required depth of involvement in real estate investing depends on whether you intend to flip the property or become a long-term investor or landlord. Many house flippers are buying homes, fixing them up on weekends and then reselling them. Commercial real estate investing itself can be a bit exotic, with purchase and leasing deal language that’s equally exotic. Though it usually requires more hands-on attention, residential real estate is easier to not only finance but also to manage.

Seller Financing
Owner financing is available with both residential and commercial real estate. Due to the higher down payment requirements for commercial loans, a buyer may turn to seller-assisted financing to help offset these requirements, or, in some cases, eliminating the down payment requirement completely. With residential real estate, which is typically in higher demand, seller-assisted financing is more common with distressed properties, to provide an added incentive for buyers.

Bank Size
If you are new to commercial property investing, staying with smaller, local banks where you can make a personal case for why the bank should make your loan will make the process easier. Local banks may have more of an interest in investing in your local community, and the economic development that local commercial investment brings.

Deloitte Perspectives:
Commercial Real Estate Outlook 2017

Deloitte Reports:  The real estate industry is increasingly influenced by rapid technological advancements and significant demographic shifts, which include growing urbanization, longevity of Baby Boomers, and differentiated lifestyle patterns of Millennials. In addition, macroeconomic and regulatory developments continue to impact profitability. How can companies gain a competitive advantage and drive top- and bottom-line growth? Here are some trends to pay attention to in 2017.

Economic outlook: Growth tempered by higher interest rates?

Gross domestic product growth will likely increase 2.5 percent in 2017, according to Deloitte’s Q3 2016 US Economic Forecast. The modest economic improvement could temper the pace of commercial real estate (CRE) transaction activity.

Volatile global markets have led to continued low interest rates. The Deloitte economics team anticipates the Federal Reserve is likely to raise interest rates in the short-to-medium term. Higher interest rates are likely to increase mortgage costs and could deter real estate investments to some extent.

An improving employment scenario and rising labor participation are expected to result in an unemployment rate of less than 5 percent. The employment-to-population ratio is projected to peak in 2018, as retiring Baby Boomers may reduce the share of employed. The improving labor markets and household wealth will likely boost consumer confidence.

2017 Commercial Real Estate Outlook
Regulatory outlook: Greater compliance costs on the horizon

New accounting standards on lease accounting and revenue recognition will likely increase the compliance and administration costs for real estate investment trusts (REITs) and engineering and construction (E&C) companies.

While increased exemptions under the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) will increase foreign investments in CRE, risk retention rules will likely lower commercial mortgage-backed securities (CMBS) issuance and reduce capital availability in secondary and tertiary markets.

In addition, the Protecting Americans from Tax Hikes (PATH) Act of 2015 will not only ease REIT tax provisions and research and development (R&D) tax credits for E&C companies, it will also increase the flexibility to invest in startups for R&D experimentation. At the same time, corporate tax reforms will reduce flexibility for corporations to spin off real estate assets into REIT structures.

Disruptive trends: Shaking up the CRE marketplace

Collaborative economy. Startups based on the sharing or collaborative economy, like Airbnb or WeWork, are disrupting the way organizations lease and use CRE. Companies face challenges from new competitors that are providing dynamically configurable spaces and flexible leases. Owners need to rethink their approach toward space design, lease administration, and lease duration.

Disintermediation of brokerage and leasing. Technological advancements are making CRE data more ubiquitous and transparent. These changes are enabling online leasing in a cost-effective, real-time manner and threatening the traditional brokerage model. Traditional brokers should consider diversifying their core business focus to include consultative opportunities, invest in data and technology, and collaborate with startups to get ahead in the game.

Competition for talent. A shortage of candidates with strong skills in science, technology, engineering, and math (STEM); rising urbanization; and Millennials’ preference for an open and flexible work culture are changing the employment marketplace and will result in significant competition for talent. There is likely to be greater demand for mixed-use developments as consumers prefer to “live, work, and play” in proximity; office space usage will be redefined and even rationalized. Companies should choose locations in areas that have concentrations of STEM talent and revamp design and development teams to cater to changing consumer preferences.

Last mile. Online retailing, on-demand manufacturing, and innovations in speed and mode of delivery (such as same-day delivery and e-lockers) are disrupting the retail and industrial markets. Demand for large retail and industrial spaces will contract, and there will be a blurring of lines between these two property types. For example, retail properties could double as fulfillment centers. While retail owners can try different store formats and enhance end-customer experience, industrials should potentially focus on smaller and more flexible spaces within cities to enable faster delivery.

Future of mobility: Emergence of “pay-per-use” is beginning to challenge the model of personally owned vehicles. Along with this, the advent of self-driving vehicles will potentially transform the entire mobility ecosystem. This has the potential to change demand-supply dynamics, free up large parking spaces in prime areas that can be put to different uses, and shift tenant demography. Companies need to be more strategic in analyzing the impact of mobility patterns and options on their long-term revenue and profitability, exploring design changes to existing spaces, and revisiting tenant strategies.

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Pictured from Left to Right: Mica Puryear, Senior Advisor, AngMar Realty; Alex Phillips, Economic Development Manager, City of Burleson; Blake Fanning, President, Citizens National Bank; Tim Windmiller, President, Windmiller Properties; Ronnie Johnson, Councilmember Place 6, City of Burleson; Aaron Stalberger, VP of Operations/Broker, AngMar Realty; David Kirsch, Senior Architect, Windmiller Properties.

Pictured from Left to Right:
Mica Puryear, Senior Advisor, AngMar Realty; Alex Phillips, Economic Development Manager, City of Burleson; Blake Fanning, President, Citizens National Bank; Tim Windmiller, President, Windmiller Properties; Ronnie Johnson, Councilmember Place 6, City of Burleson; Aaron Stalberger, VP of Operations/Broker, AngMar Realty; David Kirsch, Senior Architect, Windmiller Properties.

BURLESON, Texas (August 12, 2016) ─ AngMar Realty and Windmiller Properties, along with City of Burleson officials, its business partners and other special guests, broke ground yesterday to mark the start of construction for “The Standard at Chisenhall,” located at 279 W. Hidden Creek Parkway, in Burleson, Texas. The new 7.5 acre, mixed use development will include 58,600-square feet of retail space and 15,400-square feet of office space and once completed, it will be a vibrant center for both the City of Burleson and the region.
Located approximately 17 miles south of downtown Fort Worth on I35W, the project is located minutes away from Burleson’s town center, Hidden Creek Golf Course, Chisenhall Baseball Fields and the City’s walking trails. The new development will feature state-of-the-art offices, retail spaces and restaurants. A walkway connecting the complex with a nearby pond and the City’s walking trails will provide a natural green space and convenient passage. The restaurants, including local favorites, will provide options for the nearby neighborhoods and apartments, and there will also be an outdoor bandstand and Pavilion for public and private events.
“We are extremely pleased to get started on this project,” said Tim Windmiller, President of Windmiller Properties. “Developments of this size which offer combined retail and restaurant establishments, alongside City amenities, are nonexistent within Burleson and the surrounding communities. By adding ‘The Standard at Chisenhall’ to our community, it will ‘set the Standard’ for the City of Burleson, providing Burleson residents and DFW Metroplex with an attractable and viable option for shopping, dining, and entertainment all in one place.”
Leading the design team in conjunction with Tim Windmiller is David Kirsch, senior architect for Windmiller Properties, along with Michael Constantino, Windmiller’s in-house artchitect. Anticipated completion date of Phase I is slated for first quarter 2017.
“This is a great day for AngMar Realty, Windmiller Properties and the City of Burleson,” said Burleson Councilmember Place 6 Ronnie Johnson. “Because of AngMar and Windmiller’s commitment to the community and foresight toward the growth of our City, we will soon have an incredible new multi-use development for retail, shopping and hosting of all types of events for businesses and citizens alike. We cannot wait to see the new ‘The Standard at Chisenhall’ at its official grand opening/ribbon cutting ceremony.”
For more information about “The Standard at Chisenhall” call 817-501-2246 or visit its Facebook page here or AngMarRealty.com.

© 2014 AngMar Realty, an AngMar Company.