Regardless of location and product type, all developments start from the same humble beginnings: land. As 2017 comes to an end, the investments and land division team at Younger Partners has released its annual DFW Land Absorption Report. Robert Grunnah, the report’s author and leader of Younger Partners’ land investments division, explains the key takeaways.
Absorption of undeveloped or underutilized land in North Texas continues at record pace.
Employment centers are evolving. As Plano/Frisco, North Fort Worth, and other areas within DFW become strong job hubs, all types of asset classes follow. Younger Partners names several areas along the U.S. 380 corridor with emerging residential markets as active land investment markets ready for development. These cities include Celina, Prosper, Aubrey, and Melissa. There has been more investment in land in DFW in the last two years than in the previous six, Grunnah says. “Sophisticated income-producing investors are looking at replacement costs, and land is looking more attractive,” he says.
Low cap rates, purchase prices exceeding replacement costs, and decreased retail demand have made some investments riskier. But income-producing assets still have stiff competition, according to the report.
External factors are making land investments more attractive.
Things are priced to perfection and buyers are getting more cautions, but there’s never been more interest in land investment.
There’s increased interest in outer lying areas (particularly in the concentric circles surrounding DFW), according to the report. Those investments are more attractive in comparison to oil and gas, stocks and bonds, technology and other real or perceived riskier investments, according to the report.
The so-called fairway is still a great buy. So is Southern Dallas. And West DFW. And, well, everywhere.
The stretch of land bounded in Interstate 35 East and U.S. 75 from downtown Dallas up to the Red River continues to be a great buy. “If you can hold on long enough, you don’t have much risk there,” Grunnah says.
Southern Dallas continues to attract new and seasoned developers looking for land to match up with short-term development plans. The next ring out, from Forney to northeast Rockwall to Princeton, still has lower prices per acre. West DFW has attractive short- and long-term investments.
“This cycle is going to end. If I wanted to invest, I’d go father west and wait for the next cycle,” Grunnah says. Long-term holds still look attractive in south Cedar Hill and down into Ellis County as well, according to Grunnah.