Archive for the ‘Economic Trends’ Category

Predicting the Super Bowl champ by square feet not yardage!

February 3, 2011

Here’s a little peek at a fun news release that went out yesterday regarding Super Bowl XLV.  Read about our brilliant idea of predicting this Sunday’s champ by looking at historical vacancy rates over the past 10 years in the opposing teams’ hometowns.  It was picked up by the Wall Street Journal in yesterday’s Plots and Ploys. 

Here’s the story as it appeared in the Wall Street Journal 


Wall Street Journal
Plots and Ploys

Reading the CRE Leaves

Like many Americans, Roger Staubach thinks he knows who will win the Super Bowl. Like not so many Americans, Mr. Staubach says his analysis is based on comparative office-building vacancies in Green Bay and Pittsburgh.

“You can mark my word: the Packers will prevail,” says Mr. Staubach, who led the Dallas Cowboys to two Super Bowl victories in the 1970s and later became a real-estate tycoon.

Mr. Staubach’s word was relayed in a press release by Jones Lang LaSalle Inc., the commercial-real-estate brokerage where he serves as executive chairman of the Americas. The company says that teams based in cities with a higher percentage of vacant office space have won the Super Bowl “nearly two-thirds of the time since 2000.”

That trend would hand the title to the Packers of Green Bay, Wisc., (office vacancy: 18.9%) over the Steelers of Pittsburgh (office vacancy: 12.1%).

Jeremy Kronman, a broker in Pittsburgh for Jones Lang LaSalle rival CB Richard Ellis Group Inc., wasn’t impressed with his competitor’s forecast. His reasoning for why the Steelers will win: Some of the healthiest office markets in the country—New York City, San Francisco, and Pittsburgh—are also home to three of the most successful Super Bowl teams.

—Anton Troianovski

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Market expectations and reality

January 14, 2011
Notes from our researcher, Steve Triolet

2010 has come and gone, and like many years, there has been a stark contrast between what we thought was going to happen and what really happened.  This holds true for the Dallas Cowboys 2010 season (with their Super Bowl aspirations before the season began) and for the Dallas office market (which was expected to perform poorly throughout the year).

When I look back at both, there’s one large parallel between the two – they both changed dramatically halfway through.  For the Cowboys, did anyone still have any hope of anything positive happening after a one and seven start?  The coaching change did help, the cowboys didn’t go undefeated thereafter, but they were competitive for the remainder of the season.  For the Dallas office market, things looked relatively bleak at the beginning of 2010.  The recession which, had been slow to hit Dallas in comparison to most parts of the country, was still weighing heavily on the commercial real estate sector. For many in the business world there was a secret fear that the worst for Dallas was still yet to come – that we would be as adversely impacted as the rest of the country, but just at a later date.

Dallas was certainly impacted by the national recession.  At mid-year, the total vacancy rate for Class A & B office product was 24.8 percent and the total net absorption was a negative 914,343 square feet (downsizing by tech companies in the Richardson/Plano area being the largest contributors).  Average asking rental rates were in a steady decline, hovering at $20.72 per square foot (full service gross).

In the second half of the year, however, due to a combination of no new office construction, modest job growth, corporate relocations, and an increase in leasing activity, the market has appeared to have turned the corner.  The total vacancy rate at year-end was 23.6 percent, net absorption for the year was a positive 479,116 square feet and rental rates, though not yet rising on a weighted average basis, have stabilized at $20.34 per square foot.  Rents are actually showing the first signs of increase with a handful of landlords raising their on properties that have seen significant rises in occupancy.  Given all the available facts, things look better for 2011 whether you’re a Cowboys fan or just a member of the Dallas business community.

Another major NFL matchup to take place this month

December 3, 2010
Notes from our researcher, Steve Triolet

Double check the schedule all you want, no matter which team is the hottest at the moment, arguably the most important matchup is scheduled to take place in Dallas in mid-December.  That’s win the NFL and the player’s association (NFLPA) will meet to discuss their collective bargaining agreement which will expire in March 2011.  If an agreement is not reached, there is the potential for a lockout next year.

Nobody wants a lockout, but the general consensus in the sports world is that the owners are better prepared for one than the players are (the owners would still receive revenue from television contracts and merchandise sales, while the players don’t have this luxury, and they have limited years to play the game).

The current point of contention between the owners and NFLPA is expanding the regular season to an 18-game schedule (the two extra games would shorten the current pre-season schedule of 4 games to 2).  The union is concerned that the longer season could result in more injuries to players and could potentially shorten their careers.  In November, the NFLPA offered a counter proposal for two bye weeks for each team, to expand each term roster from 53 players to 56 or 57 players, to limit the amount of full contact in training camp, to reduce voluntary off-season workouts, and to reduce the number of years players need to play in the league to become eligible for post-career health benefits.

Outside of this, money is at play.  The owners want the longer season to increase stadium attendance revenue and television viewership revenue, and the players are demanding increased salaries to be prorated for the additional games.

My predictions are that both sides will agree to an 18-game schedule with the two bye weeks, but that the proposal to expand the team roster to 56 or 57 players will be rejected (owners don’t want to pay more players than they already do).  The owners look like they’ll agree to one additional roster spot.   I’m not too sure about training camp and offseason workouts.  Only the players really care one way or another about that issue as it doesn’t directly impact revenue and the average fan doesn’t care how the players prepare for the season – as long as they perform well on the field.

This whole process is sure to take a couple of turns before it’s resolved, and we’ll touch on it again as it progresses.  The possible lockout has potentially very large implications – one could argue that the Dallas Stars are still feeling the impact of the NHL lockout of 2004 – 05.

Super Bowl transportation

November 20, 2010
Notes from our researcher, Steve Triolet

Planes
No doubt DFW Airport will see a spike in air traffic leading up to the big event.  Based upon the Super Bowl Committee’s research, it’s estimated that 100,000 of the 150,000 – 200,000 visitors expected for the game will arrive by air. Commercial airlines are expected to carry 96,000 passengers into the Metro area and 4,000 are expected to arrive via private jet.  Of the 200,000 visitors DFW can expect, an estimated 65 percent of the Super Bowl attendees are corporate executives and business leaders (majority of which travel from out-of-town).  And that doesn’t even include those who will be coming in on private jets.
 
Trains
North Texas is served by three public transportation trains – DART (Dallas), The T (Fort Worth) and the DCTA (Denton County).  Each line will provide Super Bowl spectators the opportunity to travel to the stadium with the purchase of a special pass.
 
…and Automobiles
Recently an Arlington city official announced that it will close major thoroughfares near Cowboys Stadium 10 days prior to the Super Bowl.  Starting January 28, the lanes on the south side of Randol Mill Road will be closed through game day. The lanes on the east side of Collins Street will be closed from January 29 through game day. In addition, the two-way traffic will be redirected to the opposite sides of those roads.
 
But the game day regulations don’t stop there.  Arlington officials have also taken measurements to reduce “ambush marketing” from January 23 through February 7. This will prevent local retailers and restaurants from putting tents up in their parking lots for food-related promotions or selling Cowboys merchandise.
  
Open for Discussion:
How do you feel about the transportation issues facing the Metro area during the Super Bowl based upon the increase of visitors?  Will you be affected?
 

The ‘Boys are bigger off the field

October 27, 2010

Notes from our researcher, Steve Triolet
The NFL is big business; big names and big plays generate even bigger revenues. The league pulls revenue from numerous sources including television contracts, ticket sales and team merchandising. But, only one team can be “America’s Team” and The Dallas Cowboys have earned the nickname.  The ‘Boys have won five Super Bowl championships, 10 conference championships, 10 division championships and 11 players who have been named to the Pro Bowl Hall of Fame.

However, off the field is where the team truly shines (especially in recent years). In early 2010, Bandera Ventures completed a build-to-suit distribution facility for Dallas Cowboys Merchandising. The consolidation and expansion took them from two facilities to one 400,000 SF location at 2500 Regent Boulevard in Irving. Previously they occupied a 100,000 SF distribution facility and a 44,000 SF headquarters at 4251 W. John Carpenter Freeway.  They were able to complete the expansion because they are the only NFL team to design/market/distribute its own merchandise and their sales are virtually unbeaten.  Since 1979 when the NFL began tracking data, The Dallas Cowboys have consistently been among the fop five teams in merchandise sales. In 2009, Forbes magazine estimated that Tony Romo’s jersey was the most popular jersey in the U.S. with over half a million pieces sold! The Dallas Cowboys are also the only NFL franchise with their own retail chain dedicated exclusively to their own merchandise. Opened in 1996, the mall chain now has 35 retail locations throughout Texas, Oklahoma, Louisiana, and Arkansas. In addition, the apparel can be purchased at over 700 retail outlets in the U.S., including Dillard’s, JC Penney and Academy Sports.

The Super Bowl – showcasing North Texas

July 1, 2010
Notes from our researcher, Steve Triolet
Those of us currently living in North Texas already know many of the reasons why the Dallas/Fort Worth area is a great place to live and work–warm weather (okay hot weather nearly half the year), a business friendly environment, and an affordable cost of living.  What you may not realize is that Texas, particularly Dallas and Houston, is more often than not on the short list of locations that business leaders evaluate when they consider relocating or expanding their perspective businesses.  DFW is an attractive target for relocations and expansions because of our growing labor force (we had the largest population growth of any major MSA over the past year), lower priced real estate (both homes and commercial real estate) and tax advantages (no state income or corporate income tax).  We here at Jones Lang LaSalle discuss these issues every day with our clients and prospects.  In a recession, expenses matter more than ever and in recent months, we’ve seen an increase in inquires about relocations to DFW.
 
“I’m currently working with two companies outside of Texas who are considering the region for their headquarters.  Of the many reasons why North Texas is a fit, one stands out in my mind – we’re business friendly.  Jobs grow our communities so it’s obvious they are welcomed.”                –  Jeff Staubach 
 
According to NFL sources, 65% of all Super Bowl attendees are corporate decision makers – most of whom are traveling to the game from other parts of the country.  To many, the Super Bowl is just a sporting event, but to the business world and to North Texas in 2011, it will be a chance to showcase the Metroplex – the people and attractions that have made our area the fastest growing in the nation.  There’s been some recent news coverage on the local networks on the Super Bowl’s impact, how some of the estimates seem too high and cannot be easily defended.  We’re not going to pick a side in that debate, but undoubtably the Super Bowl XLV gives North Texas one more opportunity to showcase what a great place it is.  I think we can all agree that’s a good thing.

How do the office fundamentals compare to industrial?

May 17, 2010
Notes from our researcher, Steve Triolet
After talking about the improving industrial sector in our last blog post, we are taking you through the office fundamentals, which tend to lag behind the industrial sector. This is largely due to the simple fact that the lead time for office construction is several years where a new industrial property can be completed in six to nine months.
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Because of this long construction cycle, the market may have speculative office properties deliver two to three years after the economy has gone into recession.  A prime example of this is 1717 McKinney, Granite’s 371,000 square foot speculative property in Dallas that is scheduled for completion this month.  Currently, only one major tenant, Huitt Zollars, has signed a lease for approximately 40,000 square feet. The remainder of the building is currently available; though rumors indicate one to two other sizable deals are in the works. 1717 McKinney is the last major speculative office project for this construction cycle – and with the recession coming to a close, office market fundamentals are expected to improve in the later half of 2010 which is what we have all been holding our breath for.
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Over the past year the market has been performing poorly with negative net absorption, a rising vacancy rate, and falling rental rates. The first quarter of 2010 did show a glimpse of recovery.  For example, the total vacancy rate dropped from 25.2 to 24.9 percent. This was primarily due to a few large tenants who opted to take advantage of the down market and purchase properties before the market recovered. Occupancy and average asking rental rates which had been steadily falling over the past several quarters had flat lined, decreasing less than one percent from the end of 2009, so the market had essentially hit bottom.
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According to many economists, the Central United States, specifically Dallas/Fort Worth, is leading the way to recovery. We anticipate the market to be looking up when the Super Bowl rolls into North Texas next February.  A lot can happen in nine months – we may even hear rumblings from developers contemplating their next office development. The old Texas Stadium site is looking like prime real estate from where I am sitting.

Will the economy recover in time for kick off?

May 10, 2010

Notes from our researcher, Steve Triolet
While we’re still around ten months away from the next Super Bowl, people are already asking if things will be better when the big game comes to town.  Let’s take a look the local economy today, and what we think the remainder of the year will bring.

According to most economists, Dallas/Fort Worth and other central region markets will lead the way in recovery from the national recession.  The local economy, despite a high number of residential foreclosures, continues to outperform most of the country. We’ve had the highest population growth in the nation over the past year and positive job growth in three of the four past months. The Dallas/Fort Worth unemployment rate currently stands at 8.3%, significantly lower than the national rate of 9.9%.  The current forecast for the local economy shows a 1 percent job growth rate in 2010 and 3 percent growth in 2011.

The DFW industrial market appears, as it often does, to be improving faster than the other commercial real estate sectors including office, retail and multifamily. Manufacturing, which was flat for most of 2009, is now showing signs of improvement. According to the Federal Reserve Bank of Dallas, the manufacturing sector of Texas has been expanding for five consecutive months and manufacturing job growth has likewise been positive, adding 4,700 jobs in the past two months.

Total industrial vacancy held steady at 12.3 percent in the first quarter of 2010. An increase in leasing activity, combined with limited new construction, is expected to push the vacancy rate down as the year progresses. Average asking rents actually edged up to $3.66 per square foot, but this increase was largely attributed to some cheaper blocks of space being leased up, as opposed to landlords raising their rates. A number of large lease transactions resulted in another quarter of positive total net absorption of 344,443 square feet in the period. This was the second consecutive quarter of positive net absorption.

Market fundamentals are expected to improve as the year progresses. Dallas/Fort Worth’s prime geographic location, along with its existing infrastructure, make the market an attractive location for companies looking to expand or relocate operations. Additionally, due to the low cost of doing business and an abundance of land for expansion, Dallas/Fort Worth will continue to strongly compete on nationwide searches. Economic indicators like population and job growth have been a positive catalyst for the local market. Almost all signs point to the fact that a recovery is currently underway. Our hope is that by the time the top two teams kick off next February, today’s encouraging signs will be realized and the market will be in full swing.

What’s in store for the old Texas Stadium?

April 14, 2010

I was just a kid when my dad was tossing around touchdowns.  Most of my memories are tied to Troy Aikman when it comes to Texas Stadium quarterbacks, but as a spectator, I had the pleasure of enjoying countless games sitting beside my dad. Later in its life, Texas Stadium made memories for my son as well.  He was now the one holding his dad’s hand, walking through the same turnstiles, sitting in the same seats I did.  The old stadium might be gone, but we won’t forget the wins and losses. 

So now that Texas Stadium is gone, the next question becomes, what will happen to the old site?  It’s a premium location with three major freeways and average daily traffic counts of over 900,000 vehicles per day.  The 80-acre site would be well suited for a number of potential uses, but currently there are no formal plans or proposals on the table.  The city of Irving has indicated that they’ve received some interest from multiple legitimate developers, but with construction work on the adjacent freeways scheduled to take place over the next eight years, it’s likely that any official announcements on using the site are still years away.

I still haven’t driven by the site, but  I’m sure it will be an odd experience when off to the right I see a pile of rubble instead of the former home to America’s team.

The Super Bowl is about inclusion

April 14, 2010

Notes from our researcher, Steve Triolet
Here at Jones Lang LaSalle, diversity is a major initiative of the company—not just hiring the best and brightest but also promoting an environment where our workforce reflects the wide diversity of our clients across the globe.  What does this have to do with the Super Bowl?  Well, a large percentage of the contracts awarded for the big game go to minority owned businesses.  The program is called the NFL’s Emerging Business Program and in Super Bowl XLIII in Tampa Bay, for example, approximately $4 million in contracts were awarded to 130 local businesses that were minority or women owned.  This active promotion of diversity is something to which the NFL and Jones Lang LaSalle are both committed.

One of Jones Lang LaSalle’s ambassadors of diversity is our Chairman of the Board, Sheila Penrose.  She recently made headlines for diversity in business in the March/April issue of Diversity Executive magazine, where she discussed the benefits of having a diversity and inclusion strategy as a core value of an organization.  In the article, Sheila notes that the diversity of Jones Lang LaSalle’s board members is one example of our company’s commitment to looking more like our global employee and client base.  In her words, “You have to focus on diversity as a priority and commit to it until you succeed.”