Selecting Dallas-Fort Worth’s top real estate stories in a normal year is difficult. Choosing them in a year as active as 2014 was nearly impossible. D CEO editors began the process by analyzing traffic for our D Real Estate Daily website. (Stories getting the most page views, for example, involved 7-Eleven, Henry S. Miller Cos., and State Farm.) We also surveyed the 90-plus contributing editors to D Real Estate Daily to get their perspectives. Next, we reviewed the top transactions in our DealTicker. We narrowed all the options we came up with down to a group of about 20 stories. Then we pared that list to get the final 15. We didn’t just seek out big deals. Instead, we looked for those news events that we felt had the greatest impact on North Texas. And, based on the momentum that seems to be continuing across all sectors of the market, selecting DFW’s top real estate stories isn’t likely to be any easier next year.
1. Toyota. Toyota. Toyota.
It has been eight months since Toyota announced it would relocate its corporate headquarters from California to North Texas. The market is still on a giddy high, and the buzz won’t wear off for a while. The carmaker will employ 4,000 at its new $350 million campus in Plano, but the impact of its move extends far beyond that. “Some venture that it could create a four-fold ripple effect in our economy,” says Brad Selner, managing director at JLL. “That will hinge on secondary jobs from suppliers that want to be located close to the campus, housing sales to relocating employees, and basic consumer spending.”
Selner and JLL colleagues Michael Sessa, Meredith O’Connor, Paul Whitman, Brooke Armstrong, and Torrey Littlejohn represented Toyota in its super-secret search.
The company’s relocation puts a huge stamp of approval on the region, at a time when a number of other corporations are looking at the area. “It’s a great validation of our marketplace and an unprecedented win for the city and state,” Selner says. “This decision, by a brand like Toyota, will cause other companies to evaluate how and where they operate. That’s the real multiplier.”
2. Uptown Development Boom.
My desk in the D newsroom on the 21st floor of St. Paul Place looks out at Uptown. The veiw is rapidly changing. A half-dozen new office projects are planned or underway, as developers scurry to meet demand for new space. Harwood International was first out of the gate with its 22-story Frost Tower, which will be ready for occupancy this coming spring. Crescent Real Estate Holdings has kicked off construction of its 530,000-square-foot project, McKinney & Olive. Nearby, KDC and Invesco have broken ground on 1920 McKinney. And Hines just brought in Cousins Properties as a development partner on the 230story Victory Center.
The velocity of activity—and the lease rates developers are securing—have taken the market by surprise, says Robert Deptula, principal at Transwestern. “The brokerage community is shocked that our clients have stepped up to pay the rents,” he says. “Rents in the Crescent area are now in excess of $50 per square foot, fully loaded, all in. There have never been $50 rents in Dallas, even when adjusted for inflation.”
But it’s not just an office party. A number of the construction cranes looming over Uptown are for multifamily projects. Some developers are targeting both markets. RED Development is working with Street Lights Residential on Akard Place, a 800,000-square-foot mixed-use tower at Field Street and Cedar Springs Road. And Trammell Crow Co. is privately showing brokers designs for its new project along Klyde Warren Park at Pearl Street. Plans call for 513,000 square feet of office space and 275 apartments.
The development’s primo location will differentiate it from competitors, says Jeff Ellerman, vice chairman at CBRE. “Professional services firms are wiling to pay more to be in Uptown, but they want to be as close to ground zero—the Ritz-Carlton/Klyde Warren Park area—as possible,” he says. The Trammell Crow project “could attract a major corporation, with the panoramic views and the chance to have their name in bright lights on top of the building. There isn’t a better signage opportunity in the city.”
3. The Cowboys Head North.
Like others, I had a snarky opinion of what’s now called AT&T Stadium as it was being built. Then I took a pre-opening tour of the Arlington complex—and was floored. Say what you want, but Dallas Cowboys owner Jerry Jones knows how to bring on the “wow” factor. He’s certain to do the same thing with The Star, his new 91-acre mixed-use development in Frisco.
The project, off the Dallas North Tollway at Warren Parkway, will be anchored by the Cowboys’ world headquarters, a 300-room Omni hotel, and a 12,000-seat events and training facility—a partnership between the Dallas Cowboys, the City of Frisco, and the Frisco Independent School District. The remaining land—about 66 acres—will be used for office, retail, and restaurant space.
Jones is stepping up with “an unqualified financial commitment that would exceed probably as much as anybody,” he says. “You can’t put more on the line or make a bigger endorsement of not only what we think of Frisco, but what we think of the future of Frisco.” So let’s do the math: The city of Frisco + Jerry Jones’ deep pockets + the allure of the Cowboys brand = a project whose development value will easily top $1 billion.
But it doesn’t end there for Frisco. According to the city’s mayor, Maher Maso, three other nearby projects have created a “$5 billion mile” along the Dallas North Tollway from Warren Parkway north to Lebanon Road. “It was all instigated by the announcement of [the Cowboys] project,” Maso says. “They created that synergy, to where there are multiple things going on.”
4. Grocery Store Wars.
Mark Reeder, executive vice president at SRS Real Estate Partners, says the sector is seeing growth across the board. “We have Walmart, Target, Albertson’s, ALDI, and new entrant WinCo battling it out on the value side,” he says. “Existing full-service providers such as Kroger, Market Street, Tom Thumb, and Brookshire’s are trying to increase store count and market share. HEB has sites scattered across DFW. And trendy, healthy options such as Central Market, Whole Foods, Sprouts, Trader Joe’s, and Fresh Market are opening more stores.”
Herb Weitzman, chairman and CEO of The Weitzman Group, says grocery stores are largely immune to Internet competition. So they’re not seeing the downsizing that other retailers are experiencing. “[Population] growth and sales volume is why every concept that is here is working hard to maintain and expand its market share,” Weitzman says.
5. Breakup at Henry S. Miller Cos.
Greg Miller promised big changes when he took the helm of his family’s venerable commercial real estate firm following the death of his father in early 2013. And he delivered. In August, Miller ousted Sam Kartalis, Robert Grunnah, and Greg Trout, three top executives who had spent most of their careers at the firm.
“When my dad died, I inherited his company,” Miller says. “And up until a few months ago, it was very much his company, with the same people in leadership and the same policies in place. For better or worse, I finally made it my own, come what may.”
Kartalis, Grunnah, and Trout had been trying to engineer the sale of the groups they led within the organization. “The Miller company was maturing into a development-ownership situation,” Grunnah says. “It didn’t conflict with brokerage but put us in competition.” The same held true for appraisal and property management, they believed.
The execs knew it was time to break away, but didn’t want to go through the hassle of starting their own firm. They connected with an eager buyer, Oklahoma City-based WholeLife Cos. Inc. “We put together an offer, it was turned down [by Miller], so here we are,” Kartalis says.
He, Grunnah, and Trout now run Novus, a full-service, commercial real estate affiliate of WholeLife Cos.
Henry S. Miller Cos., which celebrated its 100th anniversary in 2014, will continue to evolve, Miller says. “In such a competitive industry, you have to be constantly changing and adapting and improving,” he says. “Otherwise, you get left behind.”
6. Big Lease Deals Downtown.
Downtown Dallas often gets blamed for pulling down the region’s real estate stats, with higher vacancies and lower lease rates than some of its submarket counterparts. But not this year. Landlords in downtown buildings scored big renewals and brought in even larger new deals, boosting absorption in the third quarter alone by nearly 750,000 square feet.
Santander Consumer USA took occupancy of 372,000 square feet at Thanksgiving Tower, and two San Diego companies, Omnitracs and Active Network—both owned by Austin-based Vista Equity Partners—relocated their HQs from San Diego to Dallas. Omnitracs, a fleet management services company, leased about 100,000 square feet in KPMG Centre. Active Network took another 125,000 square feet in the same building.
CEO Darko Dejanovic says the company wanted to consolidate several U.S. offices into one large headquarters to create operational efficiency. “We were looking for a location with a business-friendly climate, a strong pool of talent, and a city that offered a great quality of life for our employees,” he says. “Based on our search, Dallas proved to be our top choice, and it has exceeded our expectations.” Active Network, which plans to employ about 1,000 in Dallas, specifically targeted downtown, Dejanovic says. “Being in the city fits best with us and the talent we want to attract.”
7. Industrial Developers Flock to Southern Dallas.
For years, brokers have heralded Southern Dallas as the next great industrial frontier. It just made sense: If you want to transport goods north, south, east, or west, there’s not a more convenient hub. The favorable tax rates don’t hurt, either. Several pioneers began developing in Southern Dallas in the mid-2000s, but then the Great Recession hit, and projects stalled.
Now, though, every developer and his brother are planting stakes and pouring concrete. At least 15 companies have projects underway, including Trammell Crow Co., Hillwood, Prologis, Holt Lunsford Commercial, Crow Holdings, Duke Realty, IDI Gazeley, and Majestic Realty.
Two have already won big; Panattoni scored a 1.4 million-square-foot-lease from Procter & Gamble, and Hillwood snagged a 1.5 million-square-foot build-to-suit for Georgia-Pacific. Of the more than 6 million square feet that’s being built—a figure that doesn’t include the P&G or GP deals—most is spec space. And developers are waiting in the wings with projects that would double that.
Industrial activity has grown “exponentially,” says Chris Teesdale of Colliers International. Brand-name tenants like L’Oreal, Quaker, BMW, and Home Depot have caused the market to take notice. “Every large industrial user in the marketplace is looking at South Dallas,” Teesdale says. “It’s on everyone’s radar.”
8. CityLine Gets Even Bigger.
Typically, massive projects like this evolve over time. But when CityLine opens in 2015, it will start with a daytime population of more than 16,000 people. Many will work for State Farm. The company initially signed on for about 1.5 million square feet; this year it took the total up to 2.1 million. Raytheon also leased 500,000 square feet. Other 2014 announcements include an Aloft hotel, a Whole Foods-anchored retail center, a 12-screen movie theater from LOOK Cinema, Jasper’s and Coal Vines restaurants, and two luxury apartment communities.
Randy Cooper and Craig Wilson of Cassidy Turley represented State Farm in its search for space. “It went from a hay operation to a mixed-use development faster than any project in DFW,” Cooper says. As opposed to a “sealed-up, fortress-like” campus, the insurer wanted something that was open, inviting, and invigorating. “They made a bold decision to completely rethink what the future worker will be, and what they needed to do to attract the best and the brightest,” Cooper says. “It would have been much easier and certainly less expensive to fall into the typical corporate campus mindset. I think many companies will follow this type of development; it’s the wave of the future.”
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