Taylor Burns, Burns Properties
The commercial real estate market in the Tyler metropolitan area experienced one of its best years in 2014. Led by the retail sector, a number of new leases and sales brought a bevy of businesses to the market.
The city of Tyler has a population of around 100,000, while the metro area contains 222,000. Tyler is the retail and medical center of northeast Texas, with a trade area population of 415,000. The city experienced strong population growth of 15.8 percent from 2000 to 2010.
The Tyler economy is fueled by the medical sector, which accounts for 20 percent of all employment. Trinity Mother Frances hospital employs 4,000; East Texas Medical Center accounts for over 3,200 jobs; and the University of Texas Health Center at Tyler has total employment of 865. Because of the outstanding medical facilities in the city, patients from a 14-county area come to Tyler for medical care. Another strong driver for the local economy is the existence of higher education opportunities.
The University of Texas at Tyler continues its strong growth, boasting a total enrollment of more than 6,400, while Tyler Junior College serves 35,000 students. Both of these schools are expanding. UT Tyler’s engineering school has enjoyed impressive growth a pharmacy school is in the works. Tyler Junior College is expanding its nursing program and is enlarging its west campus, which offers technical training.
Other important employers include Brookshire Grocery Co., which has its headquarters in Tyler and currently employs more than 2,500; Trane air conditioning plant, which employs 1,800; Suddenlink Communications, with 1,500 workers; and Target Distribution Center, with 700 employees. John Soules Foods has announced a $19 million expansion of its meat processing facility, which will create 100 new jobs and bring the plant’s total employment to 570.
Retail Trends Upward
The past year saw an explosion of retail activity in the local market, highlighted by the ongoing development of The Village at Cumberland Park, which is located on South Broadway Avenue near Loop 49. This project is being built by Dallas-based The Retail Connection.
The Village at Cumberland Park saw its first stores open in November 2014, and construction continues at the 78-acre site. When completed, this development will contain in excess of 750,000 square feet, making it the largest retail center in northeast Texas. Retailers include Gordmans, Studio Movie Grill, Bed Bath and Beyond, TJ Maxx, DressBarn, Ross Dress For Less, Old Navy, Skechers, Petco, Jo-Ann Fabric and Craft Stores, Versona, and Beauty Brands. Additionally, restaurants locating here include Abuelo’s, Zoe’s Kitchen and Rotolo’s Pizzeria. A Hampton Inn is also being constructed in the center. Immediately south of this development, a new convention hotel is planned, and the City of Tyler will build a convention center adjacent to the hotel.
Elsewhere in the city, Walmart has purchased land on Loop 323 at Highway 31 East, with plans to construct its fourth supercenter in Tyler. Michaels is under construction with a new store on South Broadway, Harbor Freight Tools leased a 36,000-square-foot space on Loop 323, Racquet and Jog has completed a major expansion of its South Broadway store, and Natural Grocers leased a 24,000-square-foot space on South Broadway which is being remodeled for an organic food store.
The Burns Commercial Properties annual retail market survey completed in 2014 found that the overall retail occupancy rate in the market stands at 87.3 percent. Tyler has consistently ranked among the top cities in Texas in retail sales per capita.
Office/Industrial Lags
The office market has not enjoyed the level of growth experienced by the retail sector. The Burns survey found that the occupancy rate for office space in the city is 85.8 percent. The level of occupancy for office buildings has remained between 85 and 90 percent for the past ten years.
While no new multi-story office buildings have been built in the past 20 years, a number of small, owner-occupied structures have been constructed primarily in the Old Jacksonville Road corridor. Most of this development has been the result of local firms taking advantage of attractive interest rates to complete their own buildings.
The industrial market has been relatively quiet. Notable projects include the completion of a 163,000-squarefoot facility occupied by FedEx in the Lindale Industrial Park on I-20, and the purchase of a 303,000-square-foot distribution center by Atwoods, Inc. in the West Loop Industrial Park. Atwoods is an Enid, Okla.-based farm and ranch retailer with 55 stores in five states. This project will add 80 new jobs.
Other activity in the West Loop 323 area includes the construction of a career-tech center high school by the Tyler Independent School District on 25 acres. The building contains 147,000 square feet and will offer vocational training for local students. The Centene Corp. built a 50,000-square-foot office building on Earl Campbell Parkway and the current employment level is 168, which will increase by 60 in the first half of 2015.
Multifamily Occupancy Up
The apartment sector has enjoyed an occupancy rate of around 95 percent. According to a recent survey, rents are averaging around $1.06 per square foot for newer projects. At $0.22, the City of Tyler boasts the lowest property tax rate of any mid to large city in the state of Texas.
This combines with the outstanding medical facilities, mild climate and shopping attractions to make Tyler a popular retirement destination. The development of the East Texas oil field in the 1930s resulted in Tyler being primarily dependent on the energy sector to provide its largest source of economic activity.
The diversification of the economy has made Tyler somewhat immune to the negative effect of lower oil prices. The local business outlook remains bright for the largest city in northeast Texas.
— By Taylor Burns, Owner, Burns Properties. This article originally appeared in the March 2015 issue of Texas Real Estate Business.