The Front End of a Dynamic Cycle
The theme of our newsletter last year was “Accelerating”, highlighting that our economy was improving at a healthy pace, with our capital markets, housing and consumer confidence all on a solid and steady upswing. The emphasis was how fortunate we are to be based in Texas, which continues to lead the way in job creation, favorable cost of living, and overall business health.
One year later, we have accelerated from a period of stabilization and recovery to the front end of a dynamic cycle.
Existing vacancies are quickly dwindling, as all of Texas’ major markets are showing occupancy rates nearing all-time highs. DFW’s retail market is almost at 90% occupancy, its highest rate since 2007, and we expect that occupancy will continue to further improve over the next two years. At year-end 2012, Houston’s occupancy rate hit 89.5%, Austin was at 94%, and San Antonio was at 90.2%. The result is the incubation of new retail development. We are expecting new construction to more than double last year’s levels, with TRC’s Connected Development Services collaborations leading the way with over three million square feet of new development in the Texas, Arkansas and Oklahoma markets.
Why such a dynamic picture when only two short years ago we were struggling to come out of a deep recession? For those of us who do business in Texas, the answer is simple. Jobs. Last year Texas added more residents to its ranks than any other state in the country, accounting for nearly 19% of the new population growth in the U.S., where we have only 8% of the country’s population. We have replaced 100% of the jobs lost during the recession, adding almost 300,000 jobs in 2012 alone, with an annual growth rate of 2.6% compared to 1.4% overall for the country. As such, our recovery compares very strongly to the overall economic recovery nationwide. Unemployment is currently at 7.5% compared to 6.3% in Texas. Dallas, Houston, Austin and San Antonio continue to rank among the top markets in the U.S. in new job growth and housing is rebounding in lock step.
With regard to TRC, we are in a dynamic phase as well.
This past year, we opened in Austin, our fourth office in Texas, which has grown to eleven strong, extending the depth of our very talented leasing, property management and investment teams. Companywide, we currently have 85 teammates, with additions made across all our business lines over the last year, including adds in brokerage, finance, property management and investment, reflecting our broad growth as a company. We also enjoyed the successful IPO’s of two more of the TRC Connected Capital’s portfolio companies and brokerage was up over 20%, as we represented our clients for right at $1 billion in consideration. Our tenant-driven investment collaborations led to over 600,000 square feet of acquisitions, taking the TRC Connected Acquisitions over 1.25 million square feet in the last 18 months, enabling TRC to continue to deliver extraordinary results and growth opportunities for our clients.
Our client base also continues to grow, with our representation of over 240 retail and restaurant chains and over 25 million square feet of property listings in 287 centers, an increase of 13% over last year, as TRC continues to be engaged to lead our clients expansion programs from coast to coast and now cross border into Mexico and Canada. So, clearly more action ahead with retail store openings at a five-year high with almost 80,000 new stores planned to open over the next two years, up 11% from last year.
Further, 2012 was an active year in the redevelopment arena.
Our 391,000 square foot Village on the Parkway project in North Dallas is taking shape, with Whole Foods opening in July of this year and AMC Theatre under construction. We are also actively redeveloping our recent acquisition of Willowbrook Plaza in Houston, led by the conversion of a 92,000 square foot former furniture store into the retail trio of Bed Bath & Beyond, Buy Buy Baby and Cost Plus World Market. Our most recent acquisition of a vacant Target in San Antonio will turn empty space into a strong multi-tenant center. Finally, our record recapitalization of Arlington Highlands shopping center at the end of last year was one of the largest retail transactions in the country.
The exclamation point on what will be a very dynamic period for TRC is our development collaborations. These tenant-driven developments are in six different markets across Texas and Arkansas, totaling over three million square feet of new projects.
2012 was a very strong year across the board; one that reflected strong returns in the investments we have made in all aspects of our business. We are excited about 2013 as we continue to actively invest in both the real estate and operating company fronts. We are well on our way to becoming one of the top retail brokerage, advisory and investment firms in the country. Our team, clients and partners are the invaluable cornerstones in which our successes continue to be built. We thank you all, and as always, we look forward to staying connected and to all of our opportunities ahead.