Saturday, June 15, 2024 Jun 15, 2024
93° F Dallas, TX
Advertisement
Commercial Real Estate

Greg Biggs: Spec Office Construction in North Texas

With the announcement of three new speculative buildings under construction in west Plano and Frisco, commercial developer optimism seems to have returned to North Texas. These developers are investing millions of dollars on buildings that don’t have a single tenant committed to them. The interesting thing is that it’s not really today’s bet. It’s a bet on the strength of their particular submarket for the fourth quarter of 2014 and first quarter of 2015.
|
Greg Biggs
Greg Biggs

With the announcement of three new speculative buildings under construction in west Plano and Frisco (more details here, here, and here), commercial developer optimism seems to have returned to North Texas. These developers are investing millions of dollars on buildings that don’t have a single tenant committed to them.

It might seem like an unusual, risky step, but is it really? Trammell Crow Co., Granite Properties, and Hall Financial are all very successful, astute developers. Why would they start speculative offices buildings within two miles of each other at the same time? As risky as it may sound, don’t bet against them.

The interesting thing is that it’s not really today’s bet. It’s a bet on the strength of their particular submarket for the fourth quarter of 2014 and first quarter of 2015. Does that mean that these developers are going to wait to lease their buildings? Absolutely not! Their respective leasing teams are going full-throttle with their marketing efforts.

There are a number of factors that come into play as a developer makes the decision to build a speculative office building. Construction costs, financing, submarket momentum, investment community confidence, and, of course, supply and demand all play a critical role in rationalizing speculative development. These experienced developers clearly feel that the far North Dallas Tollway office market momentum justifies their risk.

So, who is going to lease these buildings? Tenants that want the latest and greatest for their employees and clients—and have the business budgets to justify higher rents (low- to mid-$30’s)—will be the ones that will consider new construction. As more companies migrate to the Dallas-Fort Worth area, they recognize that rents in the region, from a national perspective, are still some of the lowest in the country.

All three developers have decided that now is the time to make these big calculated bets on their projects being successful.  In fact, should they have the success that they are counting on, they all have the ability to develop yet more buildings on their respective sites. Bully for them!
Take a drive up the North Dallas Tollway and admire the construction under way at the new corner of Main and Main in the North Texas.

Advertisement