In commercial real estate, perception and reality are essentially the same thing. Additionally, uncertainty is a toxin to business.
In the 1990s when North Central Expressway was reconstructed, the perception of the project and the uncertainty of how it would impact traffic was debilitating. Brokers ran up and down Central in hopes of catching the flight of tenants out.
In hindsight, the reconstruction was not quite as perceived. It was not a pretty sight, but life and business went on. While the work was under way, there was little new commercial development on Central Expressway; however, the upper Tollway enjoyed an explosive development cycle in the late 1990s. This created a seismic shift to the west.
So now we look down the barrel of the $2.7 billion, five-year reconstruction of LBJ Freeway. Although the scope of this would make Central Expressway blush, the reconstruction of LBJ will have a different impact. After all, LBJ, between Interstate 35-E and North Central Expressway, is not a huge office submarket. The largest concentrations of office space are essentially at the nexus with the Tollway or proximate to Central Expressway.
There is a good argument that, without the reconstruction, we would not have seen much, if any, new commercial construction on LBJ in the next five years. If you buy that, then the reconstruction is LBJ’s greatest hope in enjoying a renaissance down the road, so to speak.
So, although the perception of the LBJ reconstruction is breathtaking, it likely will not have the sea-change effect that North Central Expressway had. And five years hence, LBJ will be an extremely viable and accessible submarket.
In the meantime, once we realize that life will go on during the reconstruction phase, LBJ owners will have to find a way to meet the market, and the middle Tollway submarket will firm up and regain solid footing.
Progress is often painful, and sometimes not pretty, but there are really no viable alternatives.
As vice president of development, Ran Holman heads up North Texas operations for Hines, focusing on the office, industrial, and multifamily sectors. Contact him at [email protected].
