CRE Opinion: From 2008 to 2018, Dallas Looks a Lot Different

Dallas looked a lot different 10 years ago. Klyde Warren Park was still in its planning stages, the Omni Hotel was still four years away from opening its doors, and Thom Mayne was just announced as the designer of the new Perot Museum in Victory Park. I think 2018 feels a lot different than 2008, and it’s not just the landscape in Dallas that has changed.

The high level of north Texas commercial real estate activity and recent stock market volatility has been giving many people flashbacks to 2008 and the great recession. Fortunately, the economy is stronger than it was 10 years ago and the factors that led to the great recession are not in place today, especially in Dallas.

From my perspective, I’ve been through a few of these crashes and corrections, but 2008 doesn’t feel the same as 2018 for a few reasons. The last time around, prices for commercial real estate assets in the Dallas area had exceeded reasonable underwriting standards. As a result, Westmount wasn’t winning many deals and we even stopped bidding them. Today, we continue to see deals at prices that seem to make sense, even though it’s highly competitive. We also aren’t seeing very much in terms of delinquencies and bankruptcies, and our tenants are making money and investing in their businesses.

There has been a lot of talk about rising interest rates and their effect on cap rates. While cap rates are influenced by rising interest rates, many Dallas market deals still offer reasonable pricing. We also know that cap rates don’t always move in lock-step with interest rates.

Westmount is not the only party seeing Dallas differently. Institutional investors view North Texas differently in 2018 than they did in 2008. Dallas has stepped into a different league in the national and international investment view. Dallas has moved up the ladder from where it was previously and is no longer viewed as a boom/bust town, as it was in earlier times.

In Dallas, the employment growth is still stronger than dirt (it’s the best in the country according to the Bureau of Labor and Statistics). The Federal Reserve Bank of Dallas is forecasting employment growth to be at 2.8 percent in 2018. Companies are hiring, growing and moving to North Texas and they show no signs of slowing down.

The Dallas multifamily, industrial, and office sectors also look better today than they did in 2008.

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