Chris Burrow, Henry S. Miller
The booming land market in north Texas reflects a convergence of economic and demographic trends resulting in a dramatic expansion of residential communities, new mixed-use developments and the transformation of retail centers across the region. The result is higher land values, shifting land uses and developers, planners and designers adapting to the evolving lifestyles of a new generation of workers.
Demand for well-located land parcels across multiple property types is reaping handsome returns for landowners. The land market in Dallas/Fort Worth is experiencing strong transaction volume and record prices due to a range of factors.
Developers are responding to strong housing demand by building new residential communities that are accessible to Dallas/Fort Worth employment centers.
Multifamily construction continues as some 360 people move into the region daily, many not ready for home ownership. New mixed-use developments are catering to a steady stream of corporations relocating to the area and seeking work settings that provide live/work/eat/play environments.
Neighborhood grocery stores and restaurants are multiplying to support growing demand, while regional malls are being repurposed as spending habits shift.
These trends have played a major role in the growth of urban centers like Dallas’ central business district, Uptown Dallas and Fort Worth’s West 7th since the recovery began in 2010. But land prices as high as $250 per square foot in Dallas’ downtown Arts District and Uptown or $50 per square foot in Legacy West don’t necessarily work for every project.
As a result, corporate headquarters and regional offices are sprouting up in the suburbs along with the mixed-use projects they often anchor.
Residential Development
Residential community development has accelerated as developers seek to meet housing demand. Per acre prices in Frisco and McKinney have doubled since 2010. But higher lot prices are making it more difficult to provide affordable, entry-level homes, according to Residential Strategies Inc. in Dallas. Production builders are looking further afield to secondary markets in order to produce affordable homes. As a result, land transaction volume is high and values continue to increase in those areas.
For example, in the Collin County town of Princeton, Macavity Co. of Mesa, Ariz. recently acquired 860 acres for Whitewing Trails, a master planned community with homes to be priced from the low $200’s to low $300’s. In an effort to meet the demand of today’s homebuyers, the project will incorporate a trail system, a large clubhouse, community pools, parks, playgrounds, and athletic fields, according to Lane Spencer, principal of Macavity.
In McKinney, the successful Trinity Falls residential community caters to the next level homebuyer with homes priced from the $300’s and up. The 1,700-acre development includes hike and bike trails and over 450 acres of open space. The project was recently acquired by award-winning community developer Johnson Development Corp. of Houston, which is planning a major expansion at Trinity Falls in coming months.
Strong demand for new residential development sites in north Texas may continue for some time. Projected annual population growth and employment trends call for between 48,000 and 65,000 new residential units per year in Dallas/Fort Worth over the next several years.
With the limited supply of single-family homes coming on the market, multifamily construction is taking up the slack and continues at a rapid pace. Multifamily project starts are continuing, in part due to the shortage in single-family housing. But given projected population and employment growth in Dallas/Fort Worth, the multifamily units are being quickly absorbed with current occupancy hovering around 95 percent.
Relocations Fuel Mixed-Use
A growing workforce and corporate relocations are influencing the increase in new mixed-use development projects in Dallas/Fort Worth. Corporate relocations are continuing with over 100 completed or announced for the metro area since 2010. Mixed-use development is also shifting from urban zones to the suburbs.
New projects emerge from corporate relocations, with companies aiming to meet the evolving tastes and desires of their employees. There are over 60 million millennials, comprising a powerful demographic segment, and leading companies know these young professionals are critical to their growth and success. Mixed-use components that appeal to today’s workers include walkability to restaurants, fitness centers, retails stores, trails and open space. These desires — and the need for plenty of parking — often work against building in urban areas.
Charles Schwab’s recent announcement of a 500,000-square-foot, $100 million project on 70 acres at Hillwood’s Circle T Ranch in Westlake is a good example. Schwab wanted to be in a corporate campus environment close to airport. Schwab also likes the Circle T Ranch mixed-use development, which is already home to financial service powerhouses TD Ameritrade and Fidelity.
Schwab will have access to a top-flight fitness center, a 200-room hotel, nearby residential developments, parks, trails and plenty of open space. More mixed-use projects are being announced. In McKinney, The Village at McKinney is a proposed mixed-use development site fronting U.S. Highway 75 and Laud Howell Parkway. Henry S. Miller Co.’s Land Advisory Group of Dallas is working in concert with the owners and the City of McKinney to market the project to developers.
“The city recognizes the area around U.S. 75 and Laud Howell Parkway as a prime location for a range of commercial opportunities in a mixed-use environment,” says Jennifer Arnold, long-range planning director for the City of McKinney. “Transforming this area into a regional hot spot for retail, entertainment, recreation and a corporate campus will help anchor the next wave of growth and development in the city.”
According to the Dallas Business Journal, over 100 companies have expanded in or relocated to Dallas/Fort Worth since 2010, occupying nearly 12.5 million square feet. Not all are locating in major mixed-use projects. Instead, many are choosing new, state-of-the-art office buildings with their own self-contained mix of uses and amenities.
For example, Dallas-based Cawley Partners is reinvigorating the North Dallas Tollway north of LBJ Freeway, with office buildings catering to growing companies. Cawley’s Knoll Trail Plaza office building is 100 percent leased and the recently completed Tollway Center is in the lease-up stage.
“We know we’re competing against live, work, play environments across Dallas and, as a result, we’re investing in a wide range of first class amenities to attract the best companies,” says Bill Cawley, CEO of Cawley Partners. “The buildings we’ve developed along the tollway during this cycle all feature restaurants with plated food alternatives, high-end fitness centers and rooftop tenant lounges. The results have been great.”
Retail Transformations
Land uses for retail sites have shifted dramatically since the Great Recession. Demand for neighborhood grocery stores, restaurants, drug stores and discount warehouse stores is strong. But the pace of traditional shopping center development has declined as the retail sector adjusts to major store closings and shifting buying habits.
E-commerce is only partly to blame for these changing spending patterns. A consistent trend in recent years is shoppers choosing to spend their discretionary dollars on entertainment, travel and leisure. Regional malls have been most impacted by these new consumer buying patterns. Developers and owners are responding and are renovating or, in some cases, literally repurposing malls starting at ground zero.
For example, the former Valley View Mall at Preston Road and LBJ Freeway in Dallas is being transformed into Midtown Dallas, one of the largest redevelopment projects in the city. The project is a public/private partnership between Dallas-based Beck Ventures and the City of Dallas. Midtown will include office buildings, retail, multifamily, a hotel and a five-acre park. Hillwood Urban recently announced plans for a 200,000-square-foot office building at Midtown, a significant endorsement of the project.
The Shops at Willow Bend on the Dallas North Tollway just south of Legacy West in Plano is also undergoing a major overhaul.
Neighborhood grocery store construction is active in the region with operators focusing on sites in close proximity to new housing developments and major thoroughfares. San Antonio based HEB alone has acquired 16 sites for neighborhood stores in Dallas/Fort Worth. With their Central Market stores already a big success in the market, that concept is designated as the primary format for expansion in the area, according to the company.
In addition to those sites, HEB recently acquired six Sun Fresh stores in Dallas, Grapevine and McKinney. With corporate relocations continuing and local companies expanding in a healthy business climate, the pace of new development in Dallas/Fort Worth’s suburban markets continues to be strong.
WalletHub recently announced the result of their most recent survey of real estate markets across the U.S. Their analysis compared 300 U.S. cities across 16 key metrics to help prospective homebuyers find the most attractive real estate markets.
The result? Frisco, McKinney, Richardson, Allen and Plano are all included in the top ten of the 300 U.S. markets surveyed. With the quality of life in Dallas/Fort Worth suburban markets attracting national attention and corporate relocations continuing, the current real estate cycle appears to be on course to stay strong into 2017 and beyond.
— By Chris Burrow, vice president, Land Advisory Group, Henry S. Miller. This article originally appeared in the October 2016 issue of Texas Real Estate Business.