Mixed-use development is not new. It has been around since the shop owner lived in the apartment above the store. Today, however, the term is used to describe an urban environment that allows people to walk easily among a variety of integrated functions.
At first glance, one might think mixed-use development in the Plano-Frisco-McKinney area, known as the Far North submarket, is strictly for big-name developers. Familiar destinations such as Legacy West in Plano and The Star in Frisco underscore this notion, offering retail, restaurants, office, hotels and apartments.
Take a closer look, however, and you’ll see that the region is also starting to add smaller mixed-use projects that provide convenience, amenities and experience for occupants and visitors.
Will the many kinds of mixed-use development happening now in Far North Dallas be sustainable? If the current market reports are any indication, then the answer is yes.
The saying goes that if the vacancy rate in Dallas-Fort Worth (DFW) is less than 20 percent, then the construction cranes come out. CoStar’s Mid-Year 2018 report shows that the DFW office market ended the second quarter with a 15 percent vacancy rate.
Specifically in the Far North Dallas, which also comprises Frisco/The Colony, Quorum/Bent Tree and Upper Tollway/West Plano, vacancy was only slightly higher at 15.7 percent.
In addition, 68.6 percent of new construction in this area is preleased, indicating that the underwriting for these projects is strong and speculative development is down.
Additional support for continued development lies in rising rental rates. Quarter over quarter and as recently as second-quarter 2018, rents have gone up, which is a sign of continued strength.
Follow the Leaders
With the assurance of positive market trends, small developers in the Far North submarket are following the leads of their larger counterparts and adopting the mixed-use philosophy.
A few years ago, a two-acre plot would have been exclusively developed as either retail or office. No one would have thought to include both. But today, there are several examples of small mixed-used developments.
Sage Commercial Ventures LLC is developing Preston Plaza at North Frisco, which will face The Brinkmann Ranch on Preston Road.
A two-story building on the street will consist of retail on the first floor and offices on the second. Another building at the rear of the two-acre property will have medical and office space. Green space in between the two buildings provides room for people to congregate and meets the city’s minimum requirement for open space.
Developers Michael Todora and Lee Boyle have done some purely retail, multifamily and office projects, but this is their first venture in mixed-use. The idea behind it makes sense because even though the property is not located on a hard corner, there is still a cut in the median on Preston Road so drivers can easily enter the parking lot from the north or south.
In addition, the opportunity to diversify development across multiple property types appealed to Todora and Boyle. Small developers also need to hedge against the risk of a downturn in one segment of the market or the other.
Jennifer Neil Farmer is Design Principal at F5 Design Build, the firm working with Todora on his new venture. She sees small-scale mixed-use development as a way to cast a wider net for tenants.
To make the most of the double acreage of Preston Plaza at North Frisco, Farmer and her engineering team planned an underground detention pond to solve the drainage problem along the property’s west side. Through this creative solution, the two buildings will offer some 30,000 square feet of rentable space to Todora’s varied tenants, more than double what would have been possible otherwise.
Another example of small-scale mixed-use development in the Far North involves The Rail District in old downtown Frisco. Nack Development, a boutique-style real estate company headed by Donny Churchman, is developing the project.
The Tower, The Patios, Calaboose and The Nack Theater will have it all: restaurants, retail, office space and apartment and townhome living, as well as a performing arts center. As with other mixed-use developments, the principle behind The Rail District is to get people out, walking, meeting and enjoying the real meaning of face time.
From millennials to retirees, people of all ages appreciate the value of working and living in a walkable, mixed-use community.
Both municipalities and businesses recognize this trend. Zoning regulations that kept residential and commercial separated have loosened, and business owners know that their customers are in these kinds of developments.
Therefore, facts and figures bode well for more mixed-use developments throughout the area. As recently as August, Hunt Realty Investments Inc. purchased the Headquarters Ranch from the estate of Bert Fields Jr.
Located at the northern edge of Frisco, the 2,544-acre site was the largest undeveloped property in Frisco. Along with investment partners Chief Partners LP, CrossTie Capital Ltd. and The Karahan Cos., Hunt plans for commercial, retail, office, single-family and multifamily residential development.
With such a large community drawing people to the area, smaller mixed-use developments won’t be far behind.
— By Jim Breitenfeld, vice president, Henry S. Miller. This article first appeared in the October 2018 issue of Texas Real Estate Business magazine.