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Dallas-Fort Worth Ranks No. 1 for Real Estate Investment in Emerging Trends Survey

Prominence as Distribution Hub Lands Region in Top Echelon for Sixth Time in a Decade
October 12, 2018

Dallas-Fort Worth topped the annual Emerging Trends in Real Estate survey conducted by PwC and the Urban Land Institute. Photo courtesy: PwC and the Urban Land Institute.

Dallas-Fort Worth topped the annual Emerging Trends in Real Estate markets ranking on desirability in real estate investment for the second time in three years, helped by the metropolitan area's affordability, available workforce, quality of life, emergence as a distribution hub and its focus on job growth.

The area edged out the Brooklyn borough of New York City for first place. Dallas-Fort Worth has ranked among the top 5 markets six times in the past decade in the survey, which is conducted in a partnership between professional services firm PwC and the Urban Land Institute, a nonprofit research group focused on land use issues.

The real estate fundamentals bolstering Dallas' claim as a top real estate market among investors are expected to extend in coming years, attracting national and global attention, said Byron Carlock, who leads PwC's U.S. real estate practice from Dallas.

Byron Carlock Jr.

"Dallas ranked as the No. 1 market this year, but I think Dallas will continue to reach the top 5 emerging markets going forward," Carlock said. "Those factors helping the ranking are the leadership of the city with a key focus on business, the relative affordability of housing, the available workforce and, the icing on the cake, is the metro area's focus on [things ranging from] quality of life to a company's job growth."

He added that "there's also a tremendous focus on philanthropy, which really puts a nice ribbon around the pro-business and pro-development structure of Dallas, which you don't see in a lot of cities."

Dallas-Fort Worth’s real estate, especially industrial and distribution space, has performed well this real estate cycle. According to CoStar, developers have added about 100 million square feet of industrial space to the region since 2013, with vacancies decreasing and rental rates climbing 35 percent above pre-recessionary levels -- and well above the national average of 28 percent.

By mid-year 2018, Dallas developers had more than 26 million square feet of new industrial space in the pipeline, with about two-thirds of that space being constructed on a speculative basis, according to CoStar data.

Second to Dallas in the Emerging Trends in Real Estate survey was Brooklyn. Rounding out the top 5 were Raleigh-Durham, North Carolina; Orlando, Florida; and Nashville, Tennessee. Dallas has steadily climbed the list ever since ranking as No. 13 in 2009, and has claimed the top spot two times, in 2016 and in this year's survey.

A driver behind Dallas' performance in the survey is tied to North Texas' emergence as an important distribution hub, Carlock said.

"Dallas has become a very important hub with the continued growth of e-commerce, making industrial, once again, a favored product type among investors," he said. "Dallas has the air, rail and truck transportation that allows more traffic and freight to come through, which adds to its continued attractiveness. There's also a lot of developable land that allows for the continued development of Dallas as a hub."

Carlock said he expects Dallas remain atop the annual survey's rankings as it matures as a market. Without a downturn in sight, Dallas could benefit from investment tied to transit and the city's pro-business leadership with Mayor Mike Rawlings.

"Dallas is uniquely poised for smart growth, which is not only population growth, but the growth in the quality of life that surrounds the population growth," Carlock said. "An example of this would be Uber Elevate, which selected the Dallas area and Dubai to test the airlifts. There have also been improvements to transportation, including high-speed rail to Houston adding to the mobility of the workforce."

Rawlings, who has led the city for the past seven years, has helped make Dallas more accessible to businesses, he said, and helped knit the region together with his strong partnerships with mayors of other North Texas cities such as Fort Worth, Frisco, Arlington and Plano.

The growing region, which has 7.4 million residents, is expected lure investors with relocations and new residents, Carlock said. For Dallas-area cities investing in quality of life, such as improved transportation, health care and safety, Carlock said he expects to see continued company relocation and new residents as a result.

But not all cities will benefit the same, he said.

"Those municipalities in and around Dallas that invest in that quality of life, we'll see that growth continuing, but unevenly so with some municipalities, as companies and residents head to quality attributes, such as health care, safety and practical infrastructure, rather than just rooftop development," Carlock said.

As the real estate market since the recession keeps strengthening, Carlock said he expects Dallas to become more institutionally accepted among national and global investors. Once known as the "Cowboy developer market," Dallas has grown into its own, showcasing itself as "an important and diversified economy worthy of institutional development," he added.

"Dallas has grown into a city of choice by institutional capital, and I think we'll see more of that as it becomes more of a gateway city," he said. "The discipline of the capital markets has helped improve Dallas' reputation for having a growing and balanced supply and demand."

PwC and Urban Land Institute researchers assessed real estate industry experts through 750 interviews and more than 1,630 survey responses.

Candace Carlisle, Dallas-Fort Worth Reporter  CoStar Group   
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