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Commercial Real Estate

Ran Holman: Dallas is Growing Up

North Texas has become a legitimate player on all levels of the commercial real estate business.
Ran Holman
Ran Holman

I got into the business in 1986. It was like the final days of Rome. Garish office buildings were popping up everywhere, most poorly conceived, poorly constructed, and in locations that made no sense for high-rise development.

Brokers were getting big fees and Rolex watches for five-year leases with two years of free rent. Everyone was driving new BMWs. Just a year removed from the fraternity house, I found myself at a savings and loans party where The Commodores were the featured band. The Commodores. It was a C-student’s dream.

Problem was, in 1986 that dream was quickly turning into a nightmare. By the time I got my feet under me, there were no Rolexes, no extravagant parties, and those same BMWs now had whiskey dents and bald tires. The Resolution Trust Corporation RTC rode into town and the local paper announced that at current absorption rates, it would be 2016 before the vacant space was taken up. Thirty years of product. You could drive around at dusk and watch the sun set through those empty buildings.

The nightmare lasted a long time, and its repercussions lasted a generation. Dallas was on the red list for many investors, as our 1980s gun-slinging reputation didn’t fit well into sophisticated analytical models. The fear was that we do things that don’t always makes sense, and we do it in a big way. For 20-plus years a lot of investors who played here slept with one eye open. But over the last five years, something has changed. Dallas is growing up—and it is the kids (millennials) who are forcing that change.

Firms like Google, Facebook, and Apple have taught us that office environments, to be desirable, have to do more than their designed function. There is now an experiential component to environments that require them to be more than what they are. This can mean a lot of things.

In Uptown Dallas, you are seeing a financial district unfold, with the Ritz being the center of that universe. That confluence of amenities, parks, arts, sports, the trolley, and general coolness, make this area unique and defined. Most companies considering Uptown know exactly what they want and they are willing to pay for it. A happy employee is typically a productive one, and a few extra bucks in rent pales in comparison to payroll.

But this “urbanism” is not restricted to traditional urban environments. What we are seeing in Legacy and Legacy West in Plano is clearly another example of the sum of components being greater than its parts. Same with the micro market of Preston Center. In these markets we are seeing the highest rents, lowest vacancies ,and lowest cap rates. It is no mistake. These areas are easy to get your mind around. Their energies are palpable.

Corporations are taking note, and so are investors. Dallas is no longer “fly over” territory. It is a legitimate player on all levels of the commercial real estate business.

The 1980s are a distant past, and the long memories of those times are largely gone, save for a few obtuse high rises on the prairie. DFW has grown up. We now do things that make sense, and the sins of our youth are mercifully distant.

Ran Holman is the Dallas market leader for Cushman & Wakefield.