at State Farm's CityLine Project in Richardson, Texas, Wednesday, January 20, 2016.
After sales of more than $1.5 billion in high profile properties in 2015, the new year is already looking to continue the hot investment market in North Texas.
With State Farm Insurance’s Richardson campus and downtown’s Chase Tower up for grabs, another $1 billion in commercial real estate is set to trade in the Dallas-Fort Worth area.
Top commercial property brokers say to expect even more trophy properties to wind up on the sale table in the months ahead.
“We remain very optimistic about 2016 because the leasing dynamics in Dallas are so strong,” said Evan Stone, managing director with commercial property firm JLL. “There is a deep bench of investors wanting to be here.”
Property buyers pulled out their wallets last year with some of the biggest North Texas purchases on record.
The Williams Square office complex in Irving and Galleria Towers on LBJ Freeway in Far North Dallas both sold at more than $300 million a pop.
And four downtown Dallas office towers went for prices pegged at more than $120 million.
But new sales offerings for State Farm Insurance’s Richardson office campus and the landmark Chase Tower downtown promise even bigger returns for investors.
The 4-tower State Farm complex is expected to go for more than $750 million. And the 55-story Chase Tower — fresh from a major redo — could fetch $300 million, property brokers say.
“We have quite a few trophy properties in the market and quite a few more are coming,” said Eric Mackey, senior vice president with CBRE. “Prices have hit new levels and that’s a function of achieving higher building rents than we ever have in the past.
“As long as rents continue to go up, I don’t see an issue with pricing,” Mackey said.
Despite a few whopper size properties still on the market, Mackey expects the average deal size this year could drop.
“A lot of the larger properties have just sold,” he said. “The average office building in Dallas is around 200,000 square feet.”
With office rents rising in most Dallas-area business districts, investors are more willing to pay top dollar to own a piece of the city’s skyline.
Last year’s sale of majority ownership in the 60-story Comerica Bank Tower brought more than $160 million. And investors paid $131 million for the 2100 Ross Tower near downtown’s Arts District.
“I think 2015 will go down in the books as the year that downtown Dallas turned the corner relative to its attraction to national, institutional capital,” said Andrew Levy, senior managing director with Holliday Fenoglio Fowler. “Downtown had its share of black eyes in the ’80s and ’90s but the trajectory since then has been consistently up.
“With so many of the major towers trading in 2015 and 2016, it would appear that the national investment community has embraced downtown Dallas.”
Levy agrees that there is no sign of a slowdown,
“The outlook for office investment in Dallas for 2016 is strong,” he said. “The office markets performance in 2015, in which Dallas led the country in net absorption in some reports, seems to have alleviated concerns that our market is closely correlated with the oil and gas industry.”
Recent moves by the Federal Reserve to raise interest rates have so far not caused a pullback in investment property sales, brokers say.
And turbulent times on Wall Street may actually benefit real estate.
“There is a lot of cash on the sidelines,” Stone said. “If you are worried about the stock market, putting it in a hard asset in real estate is a very good hedge.