INTERNATIONAL

Russia has “strongly warned” the US not to attack the Syrian army, noting that its air defense weapons in Syria “stand ready to fend off any attack” by US warplanes. Does Obama think that Russia is a JV team also?

Forty-five Afghan soldiers, in the US for training at US military installations, have disappeared. Twenty-five were reported AWOL last year and 20 have disappeared so far in 2016.

NATIONAL

Hillary and Donald dominate the news and will continue to do so until the election is final. There is a lot of uncertainty in the marketplace because of the election, both for the presidential race and the make up of congress and the courts.

Ted Cruz is back in the news to try to keep the Obama administration from giving control of the Internet to a group that would not guarantee free speech and US constitutional values. The US has had a sort of control over ICANN since the Internet was first formed.

The Consumer Confidence Index remains up.

um-consumer-sentiment-index-gdp-recessions

HOUSING MARKET

New home sales are still down in the US, at just over 600,000 units. In our area this is because of a lack of product. The inventory stands at just over four months absorption and needs to be closer to six months. New government regulations on the banks are keeping lot developers from putting enough inventory on the ground.

aug-2016-new-family-homes-sales

The Economist ran an article in its August 20 issue titled Nightmare on Main Street. The focus was on the biggest financial risk in the world today. Some might think that would be Chinese banks or the Euro but the article was about the amount of residential mortgage debt in the US, the world’s largest asset class at $26 trillion, larger than the US stock market. It stated that because the market is subsidized by government guarantees, if it fails, the taxpayers will be forced to pick up a bill worth 2% – 4% of GDP, not far off the cost of the 2008-09 bank bail out.

ENERGY

The price of crude oil went above $50.00 per barrel for the first time since June as US inventories declined and OPEC pledged to reduce supply. If it holds, this will be especially good for Texas. If OPEC’s plan works, the market may rebalance.

RETAIL AND TRENDS

Mixed use, the new retail model that combines retail, residential, office and entertainment, is alive and well throughout the world and especially in the US. According to JLL, we have seen more mixed-use projects put on the ground in the last six months than the last six years previously. Incorporating big sports venues with them is a key to success.

WalMart announced that it will slow store openings and concentrate on online and instore pickups where you order electronically and pick up your merchandise at the store.

Sears Holdings announced that it will close 78 Kmart and Sears stores this summer.

Sports Authority has closed all its 463 stores.

In June, Cabela’s announced that it is going to open a 70,000 S/F store in Atlanta. Then this month Bass Pro announced that it has an agreement to buy Cabela’s for $5.5 billion. This will result in a store count of 184 retail locations.

Craft beer, mostly produced in small, local breweries, brought in about $22 billion in sales in 2015, roughly 16% of total beer sales. An executive at the largest distributor of beer in our area described it to me as “death by 1,000 cuts.” According to the Brewers Association, there were over 4,100 breweries in the US at the end of 2015 and we are opening them at a rapid rate in DFW.

Golfsmith filed for bankruptcy this quarter amid a lower number of rounds played.

I would like to focus in a disturbing trend in the US restaurant industry. Restaurant sales have been under pressure over the last few months and continue to fall. Part of that seems to be from lower spending per household but a part of it is also because there are so many new restaurants being brought on line. Restaurant stocks are under pressure because of this.

oct-2016-nrn-restaurant-indexAnnouncements in this quarter alone:

  • Cosi filed for bankruptcy
  • Darden’s (Olive Garden, Red Lobster) CEO predicted more closures in the casual dining segment
  • Don Pablo’s filed for bankruptcy
  • Logan’s Roadhouse filed for bankruptcy
  • Possible buyers for CKE (Carl’s Jr., Hardee’s) in discussions
  • Red Robin closes, rebrands several stores to increase sales
  • Ruby Tuesday sees same store sales slip, shutters 95 locations
  • Zio’s Italian Kitchen files for bankruptcy
  • Souplanation (Sweet Tomatoes) files for bankruptcy
  • Fired Up, the owner of Johnny Carino’s, files for bankruptcy, citing low oil prices and Obama Care
  • Garden Fresh finds a group to take it out of bankruptcy

The good news is that the restaurant owners seem to be optimistic about the next six months.

TEXAS

Tiny homes, houses of 1,000 S/F or less, are taking off in Texas, mostly in unincorporated areas next to larger metro cities. The Millennials evidently do not want to have too much of their assets tied up in houses. The tiny homes can cost from $15,000 – $65,000 depending upon features.

WalletHub published its top 20 cities for growth and Texas had 9 with Frisco and League City as numbers 1 and 2.

According to the Real Estate Center, Texas job growth stands at an annual growth rate of 1.5% compared to the national number of 1.7%. Texas gained 176,600 new jobs from July 2015 – July 2016.

TxDOT announced a ten-year transportation plan of $70 billion in transportation improvements. This the largest in its history.

Texas recorded $48.3 billion in capital investment in 2015, making it first in the country. Of the $166 billion in capital investment made in the US, almost a third of it was in Texas. Chemical manufacturing facilities accounted for nearly 40% of that, much of it in facilities that use natural gas as its feedstock. Louisiana ranked second.

DFW REGION

Cushman and Wakefield reported that DFW was second only to New York City in new office leasing and construction during the second quarter of 2016. Tenants expanding and relocating into the area absorbed 2.9 million square feet of office space during the quarter. DFW was also second in building with 7.9 million square feet of space under construction at midyear.

DFW will be in the top five in the nation in retail competitions this year according to Marcus and Millichap with 2.5 million square feet. But that is half of the space delivered in 2015. The 1.85 million square foot Nebraska Furniture Mart bumped the number for 2015 though.

DFW had the fourth largest home price gain in the nation at 8.3% in July.

FORT WORTH

The US Senate has OKed $520 million for the Trinity River Vision, the massive water control and economic development project along the Trinity that will enlarge the Fort Worth CBD by about 50%.

De La Vega Group, a locally controlled development partnership, has acquired the Presidio North property on I35W across from Alliance Town Center. The seller was Las

Vegas-based Diversified Real Estate Group. The 90-acre development is scheduled to contain over 500,000 square feet of retail, restaurant and entertainment venues. Hillwood is selling about 15 million square feet of its industrial inventory at Alliance Texas to an international investment group for $1.1 billion.

NORTHWEST FORT WORTH/LAKE WORTH

The F-35 is scheduled to be combat ready this year according to General Herb Carlisle, head of the Air Combat Command. The planes can be seen daily flying from Lockheed across from our Landmark Lakes and Landmark Quebec developments.

The On the Border Mexican Grill is open and doing a great business.

Cheddar’s Scratch Kitchen is going vertical with its construction. The Marriott hotel is about to begin construction.

CHISHOLM TRAIL

It is reported that The Dylan has closed. I expect the Realty Capital/Stoneleigh development to begin construction in the fourth quarter. The Dylan will be directly across the street from our Summer Creek Station Development.

summer-creek-station-development-3rd-qtr-2016

SUMMARY

Texas in general, and DFW in particular, is one of the hottest markets in the US and is now recognized by both national and international investors as an option to the gateway cities in the US. I continue to be bullish, even with the national election looming. But a drastic change in government could make me even more cautious in 2017. Let’s hope we elect good people in all government offices.

Thanks and I hope everyone has a great fourth quarter.

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