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More people moved to Dallas-Fort Worth, Texas, than to any other metropolitan area in the United States last year.

The population there increased by 162,250 between July 1, 2006, and July 1, 2007, according to a new U.S. Census Bureau report.

The census measures metro areas with the biggest population increases, as well as the fastest-growing metro areas.

St. George, Utah; Raleigh-Cary, N.C.; and Gainesville, Ga., were also among the fastest growing metropolitan areas in the United States.

Indeed, eight out of the top ten fastest growing metro areas were located in the South, and the South also accounted for more than half of the 50 fastest growing regions.

The Sunbelt is the fastest growing part of the country because in large part thanks to its lower cost of living - from housing and groceries to taxes. The region has been one of the fastest growing for years now. Growth breeds more growth: as more people move to an area, there is increasing demand for goods and services, which creates more jobs.

A few cities were among both the fastest growing and the areas with the biggest population jumps. And two of those double-hitters were in North Carolina. Raleigh, N.C., was the third fastest-growing metro area, up 4.7%, and ranked 12th with a population gain of 47,052. Charlotte, N.C., was the 7th fastest-growing metro area, up 4.2%, and ranked 6th with a gain of 66,724.

Raleigh and Charlotte have been growing rapidly for close to 30 years, according to Bill Tillman, state demographer of the North Carolina Office of State Budget and Management. Research Triangle Park, a science and technology hub, and the increasing number of national banks based in Charlotte are the area’s biggest draws.

How strong was the local economy last year? Check out this number: Business expansions and relocations in Fort Worth increased 68 percent in 2006, according to local officials.
It’s good to see that our tax abatements are paying off.

That’s a remarkable increase, even on a small base, because the comparison figure wasn’t a gimme. A year earlier, Fort Worth was also the leading city in the Metroplex in new business projects.

The Fort Worth Chamber of Commerce compiles the expansion statistics, which are submitted to Site Selection magazine. The trade publication annually recognizes the states and cities that lead the country in this kind of activity, and Texas has been No. 1 for two consecutive years.

Among metro areas, the Metroplex usually ranks among the elite, placing second in 2005 to Chicago and first in 2004, ahead of Detroit. The newest ranking will be published in a few months, and the area will report a sharp increase in economic-development deals, led by 64 in Fort Worth, up from 38 the year before.

To be included in the magazine’s count, a project must create at least 50 new jobs, add 20,000 square feet of new space or represent an investment of at least $1 million. There were more than 450 such deals in the Metroplex last year, according to the chamber.

It’s also notable that Fort Worth had 13 more projects than Dallas, even though Dallas is much larger.

Fort Worth can point to several strong economic numbers these days; in the central business district, for instance, the office occupancy rate is 96 percent. The business expansions may be my favorite, because they reflect the appeal of the Metroplex to outsiders.

Some growth is expected to occur naturally, simply because of the region’s size and the fact that more companies are expanding and diversifying their headquarters’ functions.

But Fort Worth is on a roll, with those 64 projects alone totaling almost $1.4 billion in investment, and it could continue for several years.

“Things are just teed up for Fort Worth right now,” says Rob DeRocker, a partner at Development Counsellors International, a New York firm that advises companies on where to expand. “The business climate in Texas, by our surveys, is the best in the country, no matter how you define it. And Fort Worth has a lot of good, municipally led development, especially in downtown. That creates a certain centrifugal force,” DeRocker says.

“Fort Worth has a history, which people like, but it’s also reinventing itself. It has a real there there.”

Tax abatements and other incentives get a lot of attention in economic development, especially in Texas, because Gov. Rick Perry uses a cash fund to close relocation deals. DeRocker says that incentives “tend to be tiebreakers,” but Texas usually starts at second or third base in most competitions, because of other advantages.

The state has no income tax, a strong pro-business environment and, at least in the Metroplex, a large labor force and consumer market.

David Berzina, who heads economic development at the Fort Worth chamber, says the vitality of downtown is a key factor in attracting new projects, even if companies end up choosing a location on the outskirts of the city.

Low costs for construction and labor make a difference. But the labor supply is crucial, too.

CUNA Mutual Group, which provides financial services to credit unions, considered a handful of cities for a regional headquarters, including Jacksonville, Fla.; Oklahoma City; and Kansas City, Mo.

In the Metroplex, it weighed sites in Plano, Arlington and Fort Worth. Ultimately, it selected the CentrePort development on the eastern edge of Fort Worth, near Dallas/Fort Worth Airport.

A key metric, Berzina says, was the number of potential employees who live within a short commute and would be attracted by the yearly pay, which ranges from almost $40,000 to $60,000.

Fort Worth agreed to a 10-year tax abatement and fee waivers valued at $747,640; to get all of that, CUNA has to meet several requirements, including having 25 percent of its 500 hires from Fort Worth, 10 percent from the central city.

“You got to have a hook to get the attention of these companies,” Berzina says about the incentives.

In his view, the offers are a lot more important to smaller cities, which often adopt a sales tax to generate revenue for economic development. They can then dangle cash awards in exchange for new jobs.

“Fort Worth gets outbid on incentives on almost every deal that’s proposed,” Berzina says.
Fort Worth doesn’t have to match the offers, but it can’t ignore them, either.

To get a $75 million expansion with ConAgra Foods, the city had to compete with Ardmore, Okla., whose incentives were valued at six times higher than Fort Worth’s. Of course, Ardmore can’t provide a similar pool of potential hires or a distribution network that’s in the same league.

Fort Worth won the project, but it agreed to $4 million in incentives, contingent on ConAgra meeting its pledges on minority contracting and hiring Fort Worth residents.

Many of last year’s deals didn’t involve any public money. Berzina says Whirlpool agreed to put a large distribution center in the Carter Industrial Park, south of the central city. Fort Worth had an existing facility that was available when Whirlpool needed it, so it quickly made the short list.

Likewise, when the city misses on a deal, often it’s because it doesn’t have the inventory, and many companies don’t want to take on the expense or time in new construction.

One business proposition that didn’t work out, Berzina says, involved a cellphone-programming company in Miami. It had heard about the cash in the Texas Enterprise Fund and wanted to know what it could get.

The maximum from the state was $1 million, based on the size of the operation. But the company wanted at least twice as much, Berzina says, so the deal died there.
That’s reassuring. Even the strongest markets have to say no sometimes.

While the nation’s financial markets struggle to deal with an economic downturn, Fort Worth and Tarrant County appear to be insulated from the issue.

That was one of the messages delivered by real estate leaders at the 2008 Tarrant County Real Estate Forecast on Jan. 23.

“We don’t have a bad market but we don’t have a great market,” said Rob Sell, a partner and co-founder of Village Homes LP. “We’re a normal market, with some ups and some downs, which is usual for any normal market.”

Job growth related to the Barnett Shale and affordability continue to insulate Fort Worth and the county from a sluggish housing market and weakening economy, they said, and the trend should extend for a good while longer.

“If you think you’re going to hear doom and gloom, that’s not what you’re going to hear,” said Ben Loughry, managing partner of Integra Realty Resources DFW. “If you’re going to pick someplace in the United States to be, Tarrant County-Fort Worth is an ideal place to be in the real estate business.”

Citing the seven construction cranes visible from his own office building on West First Street, Loughry said that most market sectors, from office to retail to industrial, are expanding, and that the slowing local housing market – although faring much better than other areas nationwide – will bounce back after the presidential election in November.

Fort Worth has become one of the best cities for growth and job creation in the nation, he said. Forbes recently ranked Fort Worth – the 18th largest city in the United States – as the fifth best city in the nation for jobs in 2008 and one of five Texas cities in the top 20 along with Austin, Dallas, Houston and San Antonio. The Fort Worth-Dallas area is now the fourth largest metro area in the country, with an average of 140,000 new residents moving here per year.

“We’re the second best area for retirees,” Loughry added. “That has a lot to do with our health care system and our housing costs.”

Loughry singled out significant developments coming online for delivery in 2008 or 2009 that will add to an already healthy market, including the Lancaster Corridor redevelopment, expanded riverfront development and the Seventh Street play, consisting of Cypress Equities, Museum Place, Montgomery Plaza and So.7.

Loughry predicted that the Fed will drop interest rates at least one more time this year and that retail sales will soften due to consumer pull back.

“The economy will be sluggish this year,” he said. “Historically, housing has usually led all sectors in a downtown, which we can trace to about September 2006. The upswing will occur after the elections with housing leading the pack.”

Until then, the “deer in the headlights” look will prevail, but that overall, Fort Worth should fair well in comparison to the rest of the country, he said.

“The great news for Tarrant County in 2008 is that we have strong county and city leadership combined with an attitude of creating opportunities,” he said. “And as to the Barnett Shale? The Barnett Shale was your flu shot in getting past the economic downturn.”

Where housing is headed

Sell also pointed to the increased Barnett Shale activity and steady job creation as key factors to 2008 being a good year for Fort Worth real estate buyers, especially in the luxury market.

According to the Multiple Listing Service, 26 homes priced above $1 million were sold in 2007 and Sell expects to see a continued robust high-end market.

“Fort Worth has broken through the million dollar high-end market and the Barnett Shale has helped that,” he said. “We’re going to see the high-end market soar to new heights in 2008 in new developments and older neighborhoods.”

Sell referred to upscale projects both delivered and under construction – including Villa de Leon, 1301 Throckmorton and Le Bijou – as setting the high water mark for upper-end homes in the central business district.

He said the brunt of the housing downturn is being felt in the oversupplied suburbs, and predicted that developers and builders will continue to cut back in new building until speculative houses are finished and excess inventory is sold.

Sell also predicted that 2008 will be a short-lived buyers market but with many opportunities.

Office market scene

Class A building sales will continue to be active, according to George Duncan Jr., senior vice president of Southwest Corporate Services for The Staubach Co. He predicted that Fort Worth’s CBD will see positive absorption rates but that rents will be flat in 2008 because of the many projects expected to be delivered this year, including The Carnegie, Museum Place, One Hundred Lexington and the Cantey Hanger Plaza.

“All this expansion gives us new opportunities that we haven’t seen in a very long time,” he said, adding that there would be no new construction announcements in the CBD this year.

Duncan also said Class B and C construction is moving up, but added that because of that, tenants can expect to see an increase in rents.

“Some tenants are moving to West 7th because of increased rents downtown and because many of the landlords are offering free parking there. Parking is becoming an issue downtown. We’ll see more migration out of the CBD but the risk to market will be the same.”

While a housing downturn continues in other areas of the country, particularly in California and Florida, and a current threat of a recession is in the air, Texas’ economy remains relatively healthy. Affordable housing, a lower cost of living and cost of doing business, rising employment opportunities and attractive lifestyle are drawing more people than ever to Texas. These and other circumstances point toward a Texas-sized boom over the next 25 years.

The Texas economy has been doing very well. It slowed down just a bit in 2007 but nothing like what’s gone on at the national level. It’s running ahead of the U.S. economy. Employment has nearly doubled. There’s record low unemployment around the state and it’s more or less maintaining those state levels. There is tremendous personal income and population growth.

The housing market in Texas is still relatively strong. In 2007, it was down a little bit from ‘06 but it was a mixed bag. There were a number of communities in Texas where ‘07 was a record year that outperformed ‘06, places like Abilene, Wichita Falls, Midland-Odessa, San Angelo and Beaumont. There are pockets and submarkets in this area too that are going gangbusters and other pockets where the bottom is falling out.

Tarrant County’s existing home sales dropped 5.4 percent in 2007, but sales were still on line with the record levels of recent years. The national average suffered a 13 percent drop. 2008 is predicted to be a good year locally, but no records would be broken.

Immigration – foreign and domestic – will be the major contributor to Texas population growth during the next two decades and those new residents will increase home sales. From 2000 to 2007, 3 million people moved to Texas, a 14.6 percent jump in the population, making Texas the fastest growing state in the country.

In the next 25 years Texas will add another 13.6 million people. That’s the equivalent of another Metroplex, metropolitan Houston and metropolitan San Antonio with enough left over to add another Corpus Christi.

Texas has a very young age profile, and when you stretch that out over the years, that’s about 20 percent more than the Boomers. That’s your future market. They’re not there yet, unfortunately, you’ll have to wait awhile. But they’re coming.

Until those young people become old enough to be employed and purchase homes, the Boomers will continue to be the housing target, for primary as well as secondary homes, Gaines said.

Predictions say foreclosures will remain high throughout the first quarter of 2009, and the adjustable rate mortgage resets will be significant through the second quarter of next year. Year-to-date November 2007, monthly foreclosure filings in Texas were down 13 percent when the U.S. rate was up 57 percent.

In short, Texas still has a very positive economic outlook. Jobs are still being created, people are still working, people are moving to the state and the business climate is still pretty good. It’s still very good, quite frankly.