Making Headlines: DFW Real Estate with Dallas Morning News’ Steve Brown

Real estate journalist Steve Brown has chronicled top stories spanning the ’80s savings and loan crash to the innovative developments shaping today’s Dallas-Fort Worth skyline. 

In this episode with host Terry Montesi, Steve Brown covers it all – from the biggest stories of his career at The Dallas Morning News to the even bigger personalities he’s encountered in the real estate industry. 

Plus, Terry and Steve discuss the current state of office, multifamily and retail sectors, as well as DFW development projects making headlines.

Leaning In is published every month, subscribe to stay up to date.

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⁠Steve on the Dallas Morning News


Terry Montesi: Welcome to Leaning In, a commercial real estate podcast hosted by Trademark Property Company.  Join me, Terry Montesi, CEO and founder of Trademark and other Trademark leaders as we talk to industry experts about the future of retail, multifamily, and mixed-use real estate.  Thanks for checking us out, and now it’s time to lean in.

Steve Brown is a fixture in the DFW media world. And he serves as the real estate editor for the Dallas Morning News. And he’s one of the really great real estate journalists in the country. He’s spent over 43 years covering commercial and residential real estate in the DFW Metroplex and has appeared in media outlets across the country. He’s also past president of the National Association of Real Estate Editors.  On today’s show, he and I will talk about nationwide commercial real estate trends along with his thoughts on the top real estate stories of the year.  We’ll also get his views on the state of the office, multifamily, and retail market and wrap up with his memories about the most impactful people he’s covered in real estate and some of the more interesting and impactful projects, all of that plus a whole lot more. Thanks for listening. Let’s lean in. 

Well, Steve, thanks for joining us.

Steve Brown: Sure. I was glad to do it.

Terry Montesi: So, boy, since I’ve been here and even before, you’ve been a fixture in Dallas media for over four decades, which kind of blows my mind.

Steve Brown: You think it blows yours. What about mine?

Terry Montesi: It really blows your mind. Tell us about your journey into a career in real estate journalism and DFW.

Steve Brown: Whoa. I didn’t plan on this at all. In fact, I graduated SMU with a Bachelor of Fine Arts because that’s where the journalism department was back then. And it isn’t an art, I assure you. It may be a skill, but it’s not really an art. And I had never taken a single business class, didn’t know anything about business finance. And I started out at the Morning News all the way back in 1977 as an intern, writing obituaries about dead people and taking notes over the phone from the guy at the police station that was where they were arresting people.

And the second year, amazingly, that I worked for the Dallas Morning News, I worked in downtown Fort Worth. We had an office over here, a bureau, and I came over here as a sort of general reporter in downtown Fort Worth. It was in, I think the building is called the Rattikin Title building. Our office was in there. And I covered everything. I covered court cases and police stuff and some of the Cullen Davis stuff that was going on back then.

So, I did that for a while, and if you remember, we went through a period about then where we were in one of those gasoline shortage things, and you couldn’t get any gasoline. And I was still living in Dallas and driving back and forth to Fort Worth. And I come into lobby, I got to have a job in Dallas. I can’t keep going- and the real estate job was open. And I had done a little real estate early on for the Home Section and things like that. And basically, they gave me the real estate writer’s job, and I went into it, had no idea what I was doing.

I remember one of the first meetings I had with one of our big old time developers, John Ulick, who’s gone now. And it was like, now, what do you do? I had no idea what the man did. He was so kind. There were a bunch of guys like that that said, we’re going to be stuck with this idiot, let’s see if we can train him how to do something. So, I was real fortunate. But yeah, that’s how I ended up here. And it just stuck. Now, I’m in Dallas Fort Worth. If I’d have been in Cincinnati or Kansas City or Omaha or pick a place, there’s no way you can have longevity in real estate writing in those places because real estate is just a sliver. But here, it’s the same as oil and gas in Houston.

Terry Montesi: Massive industry. I just figured out I started my career exactly 40 years ago here in real estate too. So, we’ve been tracking the whole time. So actually, you’re a past president of  NAREE, the National Association of Real Estate Editors. I spoke to y’all last year, if you remember. And you moderated the 2023 Renowned Economic Forecast Panel at the conference a few months ago. Tell us about the nationwide trends that were discussed there and what you’re looking for in the real estate industry over the next 12 months.

Steve Brown: Well, people were beginning to talk about interest rates, but I don’t think anybody had any idea how high they were going. I mean, at the time when interest rates were around 4, everybody was thinking, oh, they’re going to go up a hundred basis points or maybe 200 at the worst. Nobody had any idea that they were going to double.

The other thing that was so prominent back then was everybody was just soundly convinced we were going to have a recession. Remember, it was going to be late last year, and then it was going to be early this year, and then it was going to be late this year. I’ve never seen so many people want a recession in all my life because all the people on the economic side have done is talk about recession, recession. And meanwhile, the American consumer in the economy, we just had the GDP numbers, and it was almost 5%. Is that a recession? I don’t think so. So those were the two things everybody was talking about.

Now, we overshot; obviously, the recession thing is not happening, but we all, again, undershot the interest rate thing. Nobody had any idea of the impact it was going to have. And even the worst-case scenarios people had at the Urban Land Institute and so forth about the impact of higher interest rates, I just don’t think they had any idea what was happening.

Terry Montesi: Yeah. Well, I don’t think it’s going to be real boring next year because anytime there’s uncertainty, there’s a lot of interest in what’s going on. And it’s certainly one of the most uncertain, unpredictable times. So, this is some of the fun stuff I’ve been looking forward to asking you. What are two or three of the top stories that you’ve covered that you think had the biggest impact on the DFW area over your career?

Steve Brown: Well, it had to have been the late 80s, early 90s, the savings and loan and banking crash because as bad as we talk about things might be now, that’s nothing compared to what went on when every damn savings and loan and every local regional bank collapsed.

Terry Montesi: Yeah, remember we also had an energy crash at the same time.

Steve Brown: That’s what took the banks down. Everybody liked to blame the real estate for the bank and savings loan. But those same guys had first made all kind of loans to the oil patch. And the oil patch went down first. And then the real estate market went down. And that was it. There wasn’t anything left.

Terry Montesi: And I’m so glad you mentioned that because often, and I know you’ve done this too, I’m talking to somebody in their 30s or 40s, and I have to tell them about that particular crash. They weren’t around. It was the deepest one in our career. It was the very deepest one.

Steve Brown: The foreclosures – we wrote it at the time – the foreclosures in total were the biggest transfer of North American real estate since the Louisiana Purchase. That’s how much stuff changed hands in foreclosure to all the lenders, houses, office buildings, shopping malls. It was a nuclear event.

Terry Montesi: I tell people all the time that I remember because I had a brokerage company at the time, Huff Brous McDowell and Montesi, you may remember, we were helping sell and lease some of that stuff. And I remember having this book of single spaced, every space in this book was a property, and it was pages and pages. And I remember driving around, we had mapped it out, virtually every property on, it didn’t matter whether it was Preston Road in Dallas or Camp Bowie in Fort Worth, driving down Airport Freeway, almost every single property had gone back to a bad bank. If it wasn’t owned by a billionaire, it had gone back to a bad bank.

Steve Brown: And the RTC, does anybody remember the Resolution Trust Corporation?

Terry Montesi: The FDIC got in the real estate business.

Steve Brown: And it wasn’t just the commercial stuff. The residential market in Texas lost like 30% of its value. And it was so severe that in the new home neighborhoods – this was back when you could do stuff like this, you can’t do this anymore – in the new home neighborhoods, people were going across the street, buying a house for half of what theirs was, moving over there, and then sending the keys on theirs to the lender and saying, here, it’s yours now, because they owed twice on theirs what they could buy the one across the street for. That went on all out in the new home. Now you can’t do that, of course, but that’s how severe all of that was.

Terry Montesi: What was story number two, do you think?

Steve Brown: It was all the big projects, City Place, Victory Park, Legacy Business Park, Alliance Texas, which is huge, City Line, the Galleria, on and on. Those big projects really just changed the environment here because they were multi use, because they were so huge that those were the stories that really I’ve enjoyed the most.

Terry Montesi: And I was thinking you were going to say DFW, but it obviously opened before we started our career, I guess, in the 70s.  

Steve Brown: Just before. Today, this is the 50th year. It’s the 50th anniversary.

Terry Montesi: I didn’t know that. Well, I just learned something. And how about the top two or three most interesting or impactful people in real estate and DFW that you’ve covered and any fun, memorable encounters or stories you like. And you could go for hours, I’m sure.

Steve Brown: I’m sure. Well, just make the list. Trammell Crow, John Stemmons, Henry Miller, Ray Nasher, Gerald Hines, Abby Halliday, Mr. Tandy here in Fort Worth. I would go downtown when I worked over here and visit with Mr. Tandy in his office on the top floor of the Tandy Center. Talk about a character with a big cigar and an even bigger personality. That’s the one thing that I’m not going to insult you. The personality seemed so much bigger back then. They really did. In a lot of cases back then, it was personality first and smarts second. Now I’m not saying they were dumb, but it was that personality that enabled them to just kind of conquer their business because nobody would dare question anything because their personalities were so big.

I’ve really enjoyed meeting all the architects over the years, Pay and Cesar Pelli. My favorite one was Philip Johnson who was one of the oddest characters. And he and I had dinner.

Terry Montesi: Did he do the Crescent?

Steve Brown: Yes, he did the Crescent. He and I and his partner, Burgee, the three of us had dinner at the Mansion when he was working on the Crescent. He was such a character. While we were talking, he sat down and took a cocktail napkin off the edge of the table here and sat down and drew the whole Crescent out on the cocktail napkin. This is the one thing I’ve regretted my whole life.

Terry Montesi: You don’t have it?

Steve Brown: No. In a minute, the waiter came and got it and wadded it up and threw it away. And like a month later, I was going, damn, I wish I had that cocktail napkin. But those are some of the people I really enjoyed visiting with was some of the big architect people like that over the years.

Terry Montesi: That’s fun. You want to tell us any stories about any of those developers you mentioned? Anything that jumps out at you?

Steve Brown: One of my favorite ones was a great old time warehouse developer by the name of J. L. Williams, who is, if you ever heard of him, he had the persona of like a riverboat gambler. He was really a character. And I would go visit him in his office, and the stories he would tell. People were a lot more free with stories and talk back then. John Stemmons was the same way. Now people are much more guarded. With the time we living in, everybody’s worried about something they might say that somebody would be offended by. These guys weren’t worried about anything like that. They just said whatever the hell they wanted to. And you either agreed with them or not. And if you didn’t agree with them, you left.

Terry Montesi: A lot of them came from nothing, so they just like got nothing to lose. That’s super interesting. So you and I just lived through COVID and the COVID shaped DFW commercial real estate market the last few years. Any comments about trends that are still in place that were directly influenced by that or any observations you have about how DFW came through COVID?

Steve Brown: We came through it a lot better than everybody else. There’s no doubt about that. I really have been stunned how hard it is for companies to get their people to come back to work. I don’t understand that. And I go around and tour these new office buildings, and they’re putting in all these pickleball courts and all this kind of stuff. And I’m going, why are y’all doing that? And they go, oh, we got to do this to get people to come back to work. I’m like, well, I thought that’s why they got a check every two weeks. I didn’t think you needed to have pickleball for them to come back.

So, the fact that that’s lagged so long. Now, our company, we’re in the office three, four days a week. We’re not in there every day. And I proved during COVID I can work anywhere, anytime, anyplace, which is fine. But at some point, and it’s got to be soon, soon, soon, I think we’re going to come to a reckoning day and most of the companies, they’re going to say, you’ve got to come back to work. And I don’t think there’s anything wrong with that.

And the one little drawback is going to be a lot of people during COVID decided I can live in Timbuktu and I can drive 50, 60, 70 miles to work. Well, that ain’t going to work. They’re going to have to figure out something else. So that is going to be a downside for that.

Terry Montesi: Yeah. It’s going to be interesting to see. What big projects that you’ve been covering say the last year or so or that you see on the horizon do you think will have the biggest impact long term on the future of DFW and your predecessor will be writing about for years?

Steve Brown: Well, I for sure think that, we just broke ground for it a few weeks ago, that Goldman Sachs Regional campus on the northern edge of downtown. It’s going to be 5000 people that work there. And we all made such a big to-do about the Amazon second headquarters and boohoo that we didn’t get it and all that. I’d much rather have the damn Goldman Sachs campus than we would have ever had the Amazon, particularly since Amazon scaled that way back. That’s going to have a huge impact on that whole area and sort of pull together that uptown downtown area.

Terry Montesi: Connect Victory with uptown.

Steve Brown: The other one is that huge development up in Frisco, the Fields development that the Hunts are- There’re going to be 10,000 houses there, plus huge big retail, mixed use, hotel, all that.

Terry Montesi: And have you been to see the PGA facility?

Steve Brown: Yep. Been to the PGA. And again, when you think that as recently as five years ago, there was nothing up there.

Terry Montesi: Yeah. That happened way faster than I thought it would happen.

Steve Brown: But you drive north on 35 W between where we’re sitting and Denton and watch what’s going on up there. That’s just phenomenal. And this weekend, I drove up to Oklahoma, up to the lake up 35 through Denton and Sanger and all up through places like that that were just like holes in the road a few years ago. And now they’re building all these warehouses up there and all this new retail. So, the growth here is not going to slow down. We had 170,000 people population increase last year, 170,000 people, and all of them have got to have a place to shop, place to buy groceries, place to live, hopefully to work in an office building at some point. So, I mean, it’s just huge what’s going on here.

Terry Montesi: Well, you saw there was an interview with Ross Jr. recently where he said their research shows that DFW will be the largest city in the country by 2050 or something like that.

Steve Brown: So, in other words, as bad as the traffic is now, you wait about 10 years and they better have those flying cars ready by then or you damn sure won’t get anywhere.

Terry Montesi: And he mentioned that too. He mentioned they’re real into transportation of all kinds. You’ve gotten to know the DFW area very well. When you think about somebody from out of town, I’m sure this has happened to you a hundred times minimum, tell me about Dallas and Fort Worth. What’s the difference? Are they the same? How do you describe the differences between Dallas and Fort Worth?

Steve Brown: The old saying always was that Fort Worth was where the West begins and Dallas was where the East peters out. That was what the old saying always used to be. Fort Worth still, and I mean, I think it was last year the census said the fastest growing major city in the country. Fort Worth still has a much more neighborhood, I feel like you can figure Fort Worth out and it’s okay. Dallas, we’ve just gone so far beyond that. And Fort Worth also is still so much emphasis and treasuring of the history, whereas in Dallas, forever, if it’s not tomorrow, I’m not interested in it. I’m interested in today and tomorrow. Yesterday is over and done with.

So, I think those are two big, big differences. Again, the other thing still, and it’s beginning to happen here, is that Dallas is really becoming a series of separate cities. I mean, how many people- Frisco, McKinney, Irving, go on up Grapevine. I mean, I’ll talk to people that go, I haven’t been downtown in 10 years. Well, why would you? You don’t need to.

Terry Montesi: There’s many downtowns.

Steve Brown: If you live in Frisco, you don’t need to go to downtown Dallas. So, I think that’s another great big difference.

Terry Montesi: Well, Fort Worth is, people ask me all the time, and I’ll keep some of my commentary to myself, but it’s definitely more of a boots and jeans sort of ethos in Fort Worth, like you said, a little more okay just being who we are, not always looking to be something new like you said. The office sector in Dallas Fort Worth is one that’s getting a lot of print and talk, and there’s a lot of uncertainty. And I remember just a few years ago with the supposed retail Armageddon coming, nobody wanted to get near retail, which used to be our primary focus.

Well, now thanks to office, retail is looking really good. Mark Gibson on this podcast a couple of months ago said that retail is now a defensive asset class for the first time in Mark’s career. And nobody’s saying that about office right now. So, tell us about what you’re seeing, thinking about relative to the office sector today, and what do you think that story looks like going forward and if you were predicting headlines for next year, the office sector.

Steve Brown: Well, first thing, one thing I’ve learned from doing this forever is nothing is ever as good as people say it is, and nothing is ever as bad as people say it is. So, it’s not going to be as bad. It’s going to be bad. And like I say and other folks say, it’s going to get worse before it gets even worse. I mean, we’re going through a period right now. We’ve got to get people back to work. The numbers I see right now are like midweek in Dallas Fort Worth about 70% population in office buildings compared to the pandemic. Now, Monday is probably closer to 55 or 60%. Friday’s gone. People tell me Friday’s gone forever. I don’t know about that.

So we’ve got to get people back. We’ve got to get the employers, before they are willing to rent more office space, to decide that yes, indeed, we’re either not going to have a recession, or if we’re going to have one, it’s not going to amount to much. So, if those two things happen, people will start renting office space again.

As far as on the investment side, I don’t know how you fix that, Terry, because I was on a story this morning with a REIT that the current interest rate on their current debt is about 3.5% on average. Now, if they went out in the market today to refinance all that, it’d be north of 8. So how do you buy a building? I mean, it’s math. You’ve got to double the income to afford a double debt service. How do you do that?

Terry Montesi: With downward pressure on rents and occupancy.

Steve Brown: And the people out there who think that the interest rates, I still talk to people that go, oh, by this time next year, interest rates will be back down again. It’s like, come on, man, are you crazy?

Terry Montesi: Nobody I talk to.

Steve Brown: There are some people out there, there’s still people that believe in unicorns, whatever. They think that somehow this is- oh, as soon as the Fed sees it- Now, the weird thing I don’t understand at all is in the last year, in Dallas Fort Worth, we have added, the new numbers, 60,000 office jobs and office absorption has dropped by about a million feet. Where are those people? Where are they going? I don’t understand that.

Terry Montesi: Hoteling is causing a lot of people to need less space. The fact that, like you mentioned, people aren’t all coming to the office every day. So, there’s a whole lot of folks, a lot of big companies have gone to hoteling over having your own office. And so, they can get by with less space. I think that’s what’s happening.

Steve Brown: I’m hearing on average 20, 30% less space in every lease.

Terry Montesi: I think that’s the primary reason.

Steve Brown: That’s probably it. Yeah, but some of it, I do believe some of it like call centers I don’t think are ever coming back because there’s really no reason to have those people all sitting around a block in a row doing that when they can be sitting at home and do it. And they monitor their calls. If they’re talking to the dog or whatever, they’re not going to pay them. So that will never come back I really think. I know never is a long time, but I really don’t think that’s going to come back.

And if you look out there, there are a lot of those call center buildings vacant right now. The question comes, when are some of these office assets going to sell? Well, we had one sell downtown last week, and this week, we just had one sale in Plano I’m getting ready to write about. So, we’re starting to see some sales, but the problem is not capital. There’s a ton of money to buy office buildings. It’s just nobody can figure out what they’re worth and nobody wants to buy while prices are still going down. Because it’s that old business of catching a fallen knife. I mean, where are you? So, until we get some clear feeling of that, I don’t think we’re going to see an awful lot trade, some nice stuff, but I don’t think we’re going to see a lot trade because nobody knows what it’s worth.

Terry Montesi: Yeah. Uncertainty reigns in the office sector for sure. Well, we have entered the multifamily business the last three years and we’re, knock on wood, hoping to close and start construction of our first project this year in the next couple of months.

Steve Brown: I think I know which one it is.

Terry Montesi: So tell us about the state of the multifamily business and DFW and a lot of data flying around with supply outpacing demand and downward rent pressure for this moment and where you see things going the next couple of years and your observations on the opportunities and the challenges for this asset class.

Steve Brown: I read that stuff. I read stories like in the Wall Street Journal that talk about the coming apartment crash and all that. And that might be the case somewhere, but I don’t think that’s the case in Dallas Fort Worth. Again, we added 170,000 people last year, and we built 50,000 single family homes. We built 30,000 apartments. Do the math. Where are you going to put those people? So, I agree.

When you build too much of the same thing in the same place at the same time, you’re going to have some short term oversupply. But starts, apartment starts as of right now, year over year, are down 40%. And I was on a panel last week with the head of one of the biggest department companies in Texas. And his starts are down by that much. He thinks two years from now, there’s going to be a huge apartment shortage because we will have not been building any and the population in these Sunbelt cities like Dallas Fort Worth is going to continue to grow, to grow, to grow. And the people aren’t going to be able to afford to buy houses because the mortgage rates are too high.

Terry Montesi: That’s one of our theses.

Steve Brown: He was saying that before the rates went up, he was losing about 20% of his renters to home buying. They’d buy a house. Now he says it’s in the low single digit percentages because none of those people can afford to buy. So, any little short term- Dallas Fort Worth apartment rents year over year are down 1%. That’s really a rounding error. And if starts really are slowing down the way I think they are, I think I agree with what the guy was saying.

I think two years from now, we’re going to be real short of apartments. And now if you’re delivering a project and you can’t lease it up at your pro forma rate, and you’re having to cut your rents and give concessions, I know you’re not going to like that. Your lender’s not going to like that. And for the next 18, 24 months, that might cause some grief.  But I think if we get past that, I don’t think that’s going to be an issue.

Terry Montesi: No disagreement here. So, let’s talk about retail, something you and I have talked about dozens of times over the years. What do you say is a big story or two in retail this year? And where do you see retail, the stories in ’24 and ’25?

Steve Brown: Other than grocery stores, we’re not building any retail. We haven’t built any retail for the last couple of years. Really. So we went through that period, late 80s, 90s, into early 2000s when we were throwing down million foot malls, just clunk, clunk, clunk. That’s over with.

Terry Montesi: And big lifestyle centers, big power centers.

Steve Brown: Right. The stuff that’s come vacant with some of the chains that have gone under like Bed, Bath, and a few, most of that has already been recycled and is filling back up.

Terry Montesi: Actually, Steve, we see most of them that are well located have multiple people interested in the space.

Steve Brown: Right. Now, the one difference that I think will come forward, and the pandemic had something to do with this, is we see so much more of the demand on the restaurant in the entertainment side. People, a consumer, particularly younger consumers, I think have decided that they just don’t need a huge amount of more stuff, but they really want experiences. And in order to get those experiences, I mean, there’s only so much you can do on your phone. If you’re going to want to go climb a wall or throw an ax or have a nice dinner out or go see a movie, it ain’t going to be on your phone unless you’re seriously mentally ill. You understand what I’m saying.

So, I really think experience, retail, restaurant. I think there’s going to be- and we’ve had recently a huge number of announcements of these up on the sort of 121 corridor near Grandscape and up into there. I think we’re going to see an awful lot more of that because again, okay, I can’t afford to get on a plane and go do this for the weekend, but I can sure go do this and get out of the house and do something and have some fun. And I think that’s going to be the next big retail thing.

Again, I’m seeing all these purchases and some of the calls I have, like the call last week with the CEO at CBRE, they were talking about how strong the retail activity was on the investment side. So, people do see that as a good place to put their money. There’s no doubt about it. And again, unlike some other cycles, this cycle is not a case of there not being money; there’s huge amounts of money. It’s just it’s very smart and it’s not going to fritter itself away.

Terry Montesi: I asked, I told you about what Mark Gibson said about being a defensive asset class. I said, tell me, help me understand what changed. He said we stopped building after ’08, and we haven’t built anything. And that’s 15 years of essentially no shop space, no spec space. We’ve had retail built, Steve, but it’s been Walmart, HEB building for themselves or a Tom Thumb with 20,000 feet of shop space, but that’s nothing.

You have more than that getting demoed in virtually every neighborhood. He said it’s because you now have a supply and demand, not imbalance, he said it’s out of balance to the demand side. Whereas it used to be that there was great retail demand, but there was always too much supply back then. Demand wasn’t there, it was just oversupply. Well, now you have healthy demand with no supply.

Steve Brown: Yeah, and we haven’t done that in a long time.

Terry Montesi: No, it’s been a long time. Yeah. So here it is, late October that we’re recording this. What do you say is the commercial real estate story of the year thus far in DFW?

Steve Brown: I think the fact that we’ve had four huge financial institution projects kick off, the Goldman Sachs thing in Dallas, Wells Fargo in Irving, Teachers Insurance out in Frisco at the Cowboys Complex, they’re putting thousands of people in a new tower out there, and finally, Bank of America has announced a new office for over a thousand people on Woodall Rodgers Klyde Warren Park in Dallas.

This whole area is going to end up being the second largest concentration of financial sector workers outside of New York. When you add all the people, Fidelity, Deloitte, Charles Schwab, all these banks, thousands and thousands of financial sector jobs here, and I think that’s- and all the insurance companies that we’ve seen over the years, Liberty Mutual, State Farm, Chase, adding to employment, adding to employment. And it feeds on itself because they create a labor pool, and they pirate people away from each other.

Terry Montesi: It becomes a self-fulfilling prophecy.

Steve Brown: Right. So, I really think that what’s going on this year with starting all those big projects and announcing those projects, I think that is making it really obvious to everybody what a huge financial sector capital we’re going to end up being in Dallas Fort Worth. So, you take that and you take the fact we have such a big play in aviation here. I mean, everybody loves to talk about Austin, Austin, Austin. Austin’s got lots of good tech jobs, but they’re creating 40,000 jobs a year while we’re creating 154,000 jobs a year. Which is the better boom town? I’ll take it. So again, all these financial sector jobs that we’re adding, that’s going to really have a huge impact going forward in this market.

Terry Montesi: Well, and which points to a really diversified economy compared to many, you said compared to Austin. We like Austin. It’s one of the two markets we’re focused on doing ground up development in. And we like Houston, it’s been coming back pretty strong. But there’s no comparison to DFW.

Steve Brown: And that’s been a case for a long time, but we keep underlining that fact here going forward.

Terry Montesi: No doubt. Well, what you just mentioned about the insurance and financial services firms.

Steve Brown: And mortgages. Do you know we’re the biggest mortgage servicing center in the whole country? More people’s home loans get serviced out of these companies here in the Dallas Fort Worth area than anywhere else in the country.

Terry Montesi: So we’re a massive financial services concentration. Yeah, so, the diversity of our economy is something really to celebrate because it’s unlike some markets, Houston in the past has had a bad rep or maybe it was an accurate rep, but they’ve been known as being a little too concentrated in the energy sector. You can’t really accuse Dallas Fort Worth of over concentrating.

Steve Brown: Not really. We have a little bit of everything here, which we have had traditionally. It’s really fit well into what’s going on here.

Terry Montesi: So what about unusual or odd or fun or offbeat story for this year?

Steve Brown: Oh, I don’t know. I think the fact that the workplaces are adding so many frills. There was one announcement the other day that I loved that they’re going to have a shooting gallery. And it’s like, wait a minute, now it’s a virtual hunting thing where along with the golf simulator, they’re going to have a hunting simulator. And it’s like, do you really want people at the office to be thinking about shooting the mooses and whatever while you’re there?

The fact that we’re getting crazier, and I go into some of these new office buildings and oh, they’re incredible. I was in one in Plano the other day. It was like walking into the Meyerson or something. It was just gorgeous in there. That to me is the thing this year that is- because all of that stuff costs money. It costs huge amounts of money, and yet, we’re in this amenity war right now. The same one we saw in apartments has now carried over into the workplace. And I don’t know how they’re convincing some of these corporations to pay for it because they are paying for it.

Terry Montesi: It’ll be interesting to see if that amenities race, if that’s sustainable or if this is a little bit of a fad, because we’re overreacting to people’s working at home and we’re trying so hard to get them back.

Steve Brown: And again, the good thing I tell people is at least with the pickleball business, it’s just some stripes on the pavement and a net. When that fades- And I remember in the 60s when it was bowling. Everybody had bowling leagues. We built all these bowling alleys. Oh, they were building bowling alleys everywhere. And then by the 80s, nobody wanted to bowl anymore. They started tearing all the bowling alleys down. So, these people would tell me, oh no, Steve, pickleball is going to be forever. And I just go, yeah, right, I don’t believe that.

Terry Montesi: Interesting. How about put your real estate investor hat on, where do you see the opportunity over the next five years in commercial real estate?

Steve Brown: First, what’s going on just north of here inGrayson County is incredible.

Terry Montesi: Tell us about that.

Steve Brown: Building all those chip plants up there. I don’t know how many, what the total is now, six, seven, eight, ten billion dollars worth of chip plants.

Terry Montesi: This is Sherman area?

Steve Brown: Yeah, Sherman area. And the fact that that’s going to increase employment up there, those chip plants are going to employ thousands and thousands of people. We’ve already had the pull north going on forever. This really finally is going to meet the prophecy of the Dallas Fort Worth area growing to Oklahoma because that’s really where it is. And I’ve announced a couple of big projects up there on Lake Texoma of thousands of houses.

And with all the jobs that are moving up that way, not just to Sherman, but also McKinney and up that way, I think we’re going to see, the growth up there is- I’m already talking to people who are on the commercial real estate side who are up in Grayson County buying sites and planning deals up there. The other direction is going to be south of Dallas Fort Worth, heading toward Granbury, heading over toward Midlothian, and that way southwest of Dallas on 67, down into Ellis County, huge amount of growth opportunity I think is going to be down that way. Right now, it’s a lot of it housing based, but I think we’re going to see some employment based down there. We’re already building some huge data centers down that way, which don’t employ a lot of people, but they really add to the tax base down there. So, I think South and Southwest are going to finally do real well here.

All that stuff going in Grayson County, if you drive up in Grayson County down 75 and look over there where they’re building those tech plants, it looks like the New York skyline. I kid you not. I’ve never seen so many construction cranes in a row.

Terry Montesi: So you saw that when you went to Oklahoma recently?

Steve Brown: Yes. It really is incredible.

Terry Montesi: Wow. As you look forward the next year or two, what do you expect real estate writers to be writing about?

Steve Brown: Unfortunately, next year is going to be writing about an awful lot of project defaults. I mean, it’s inevitable because if you have a loan, if you have a 3.5% commercial loan that is coming due in early ’24, and you’ve got to go out and get new debt, I don’t know what you’re going to do. And I hear the lenders don’t want the property. The lenders don’t want the property. But the lenders are bound by federal regulators. They can’t just give out free money. So, what’s going to happen? I think, is it going to be as bad as it’s been in the past? No, it’s not going to be that bad.

Terry Montesi: But there’ll be some distress.

Steve Brown: But there is going to really be some distress. Absolutely. I think it’s already starting. I’m already starting to see sort of secondary office buildings that are being declared in default. It’s already beginning. And as I was joking, it’s going to get worse before it gets even worse. But there’s no fix for it.  Unless you drag interest rates back down, which is not going to happen next year probably, I don’t know how you fix it. Now, I’ve enjoyed and I’ve written a lot about converting all these office buildings to apartments. And that will work maybe one out of a thousand times.

Terry Montesi: Jonas and Shawn Todd are doing that.

Steve Brown: I think it’s great. I think it’s wonderful. But you go out here in the boonies, some 10 story office building that’s sitting half empty and, oh, I’m going to turn that into apartments. Who wants to live there? That ain’t going to work. So other people are looking at it. I was reading about a Houston investor that was buying sort of mid to semi high rise office buildings and was going to try to convert them into mini warehouse.

Well, good Lord. First off, you got to watch the live loads there because those things aren’t engineered to have everybody’s camping gear and old furniture. You understand what I’m saying? But that’s not going to solve it. And I don’t know what to do. The cost of tearing everything down does not make sense.

Terry Montesi: It’s going to be long and slow to try to figure it out.

Steve Brown: And some of it will get torn down. I’m already hearing cases where people out near the airport are looking at low rise, old, tired office and saying, well, if we could get this entitled for industrial, let’s just knock that down and build warehouses.

Terry Montesi: Yeah, I think a lot of it will become land. I think municipalities will have to probably subsidize the demolition of some of that because those office buildings are-

Steve Brown: Or subsidize, in the case of some of the inner-city areas, the residential conversions. Because again, we are-

Terry Montesi: They are doing that.

Steve Brown: Yeah. We are going to need the housing. We are already short in the country the last number I saw was 3, 4 million housing units because the housing market really never recovered after the Great Recession. We just haven’t built enough houses, and part of it is for financial reasons, part of it is a bunch of companies went broke that were in the home building business. And then part of it is that the regulations with the zoning and everything else, it’s just hard to build like we used to in the old days.

Terry Montesi: Yeah, I saw Jonas Woods and Shawn Todd talk about that. They said every single one of them that’s happened in Dallas has had material public subsidy. I think they all will. Okay, one last question for you. Most interesting or innovative new developments you’ve seen in the last year or two.

Steve Brown: Some of the stuff going on up in Frisco. I was up there the other day looking at a new project that Craig Hall was doing that has a new apartment. There are three high rise apartment buildings in Frisco within like two miles of each other. Who would have thought that? And Craig, the top floor units on that tower that he just opened up there are going to be like 25,000 a month rent on the top floor of an apartment tower in Frisco.

And he’s also building an office building and a hotel, but the centerpiece, and we’re seeing this in downtown Dallas, we’re seeing it in Fort Worth, are these parks, public space, nice public space with amenities, with art. Again, after COVID everybody wants to go out and do something and be somewhere. And they need an environment to do that in. And bless their hearts, in the old days, they all went to the malls and walked around. I don’t think they really want to do that as much now. They’ll do it some.

Terry Montesi: Unless it’s the Galleria. Right, Steve?

Steve Brown: I’ll put NorthPark in there too. But they really want some kind of space, some kind of what they call an Instagramable space. That’s what we need to build more of. And we are building more. When we were talking about the trail down here and looking out over the river, 30 years ago, nobody wanted to look at the river. It was behind everything and just forget its over there. Now everybody wants to turn around.

Terry Montesi: The Design District is a great example of that.

Steve Brown: Exactly.

Terry Montesi: Well, thanks for your time today. Tell everybody how we can follow you and your beat on social media.

Steve Brown: I’m on Facebook, Steve Brown. I’m on Twitter, @SteveBrownDMN. And I’m on LinkedIn. I put a lot of stuff on LinkedIn as well. I’m on there three, four, five times a day.

Terry Montesi: Great, thanks for your time today.

Steve Brown: Glad to do it.

Terry Montesi: Thank you for listening. Be sure to subscribe so you don’t miss the next episode. To learn more about Trademark Property Company and to see how we elevate the everyday, visit trademarkproperty.com.

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