Dallas area’s apartment and office building business is bouncing back
February 3, 2011
By Steve Brown/The Dallas Morning News

Next to Dallas’ Victory Park project, construction crews are starting work on a 23-story apartment tower.

In Plano, there was a groundbreaking last week for a 13-story office building.

And a handful of downtown developers are scrambling to get the next office high-rise going.

So much for the commercial construction slowdown.

While the housing market flops around like a fish out of water, commercial investors and developers are ramping up to resume business.

Dallas’ commercial property sector was the last into the building bust and appears to be one of the first out of the exit.

Of course, it doesn’t hurt that the Dallas-Fort Worth area was second in the country in job creation in 2010.

This cycle’s down period has been wimpy compared to what the area saw in the late 1980s and mid-1970s, when the sight of a construction crane in these parts ranked right up there with meeting Bigfoot.

Sure, sure — some commercial building sectors are still shut down.

Retail building has slowed to its lowest point in more than a decade.

And at the start of 2011, only about a million square feet of warehouse space was being built in the Dallas area — not enough even move the needle on the industrial market.

But the apartment and office building business is bouncing back, and investors are clamoring for building buys.

During the fourth quarter, U.S. commercial property prices rose by the near-record rate of 11.9 percent, according to the MIT Center for Real Estate. That pushed the price rise for all of 2010 to a staggering 19.3 percent.

The MIT index reading for the fourth quarter is still about 27 percent below the peak of the commercial market in 2007.

Still, those lenders who decided to sell their foreclosed properties a year ago are probably wishing they hadn’t been so quick to hit the “liquidate” button.

And the bad mortgage holders who opted to “extend and pretend” and give their borrowers more time with wonky deals are looking pretty smart at this point.

If commercial property prices continue to recover, don’t be surprised if those lenders start to sell off packages of their bad loans at much better prices than they would have gotten a year or 18 months ago.

There still plenty of dead cat deals out there that need a redo.

The latest data from researchers at Trepp LLC shows more than $730 million in delinquent or potentially defaulted commercial mortgage-backed security debt deals in the Dallas-Fort Worth area.

That will keep commercial foreclosure notices flying and bankruptcy courts busy for months to come.

But the situation — particularly in North Texas — is much brighter than the pessimistic prognosticators had previously warned.

Courtesy The Dallas Morning News
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