Elon Musk Needs A DFW Real Estate Play. He Just Doesn’t Know It Yet

SpaceX and Tesla leader Elon Musk is making headlines in Texas again with his hyperloop-focused tunnel construction company, The Boring Co., reportedly nabbing commercial space around Austin not far from where Musk is already setting up a Tesla gigafactory.

The real estate move adds to Musk’s growing Lone Star State footprint, which already includes SpaceX sites in McGregor and South Texas and a Tesla gigafactory in the Austin area. 

While it appears Austin is the winner in Musk’s most recent Texas commercial real estate search, Dallas-Fort Worth CRE still could benefit from the tech guru’s growing presence in the state. 

Fort Worth Mayor Betsy Price is putting feelers out to grab Musk’s attention, and it appears Musk has eyed DFW critically. In a recent interview about his move to Austin, the tech CEO indicated DFW was on his shortlist, according to ESRP Senior Vice President of Data and Analytics Evan Stair

Musk ultimately chose Austin because his top talent wanted to live there, Stair added. But that doesn’t mean Musk is unaware of or ignoring the logistics and talent pool accessible a few hours away in DFW.

DFW outstrips Austin in tech talent and logistics infrastructure, according to Stair. The North Texas region has 49,985 software engineers compared to Austin’s 22,101, according to ESRP data. DFW also has twice as many mechanical engineers — 6,192, compared to 2,190 in Austin. The talent spread between the two cities is similar when it comes to electrical engineers. 

Musk’s top-line employees may want Austin as their home base, but Stair says DFW may factor in eventually as the best logistics, transport and talent hub nearby. 

“They want to be in an environment that they like and that has this creative buzz going around, and Dallas might benefit from the fact that you actually have to have infrastructure and all of the other supply components, and we have a good chunk of that,” Stair said. “If you look at the airport infrastructure, Austin doesn’t have it. So I would imagine a lot of the product and raw materials will probably move through Dallas and will be stored in Dallas.”

That could lead to ancillary development as companies serving Musk-related enterprises look for strategically located real estate, shipping and storage assets across Texas. 

Fort Worth Alliance Airport is one DFW amenity that could pull Elon Musk and others to North Texas.

“There may be opportunities for suppliers to move here as well, an indirect impact from companies that are supplying the various enterprises,” CoStar Group Director of Market Analytics Paul Hendershot told Bisnow. 

Obvious landing spots for suppliers catering to auto, avionics and AI-focused companies like SpaceX, The Boring Co. and Tesla are situated throughout DFW. The Metroplex has a larger international airport than Austin and greater cargo transport capacity when compared to Central Texas, Hendershot noted. 

North Texas also is home to the AllianceTexas Mobility Innovation Zone, a Hillwood creation that incorporates the infrastructure of AllianceTexas to cater to high-tech firms testing everything from elevating vehicles to autonomous trucks. Musk may even look to AllianceTexas and other DFW industrial hubs for his own future expansions in the state, Hendershot noted.

Frisco Station is an example of DFW’s tech-focused industrial base. Developed by Hillwood, The Rudman Partnership and VanTrust Real Estate, the 242-acre mixed-use development is already the testing site for Uber Air‘s flying vehicles. The rise of industrial prices in Frisco shows just what high-tech innovations like Uber‘s flying taxi concept can do to industrial prices. 

In the first quarter of 2017, industrial prices in Frisco came in at roughly $75 per SF. Three years later, after Frisco Station and its innovation hub came to fruition, industrial prices in Frisco are up to $108 per SF, Hendershot said. 

This growth in the western part of the Metroplex and AllianceTexas could still attract Musk himself, firms tangentially related to Musk or other innovators of a similar caliber who follow him to Texas. 

“When you look at a place like Alliance, Bell Helicopter already has a strong presence there, and you have connectivity provided by the airport for the transport of high-value-add parts and goods,” Hendershot said. “So I think I would say the possibility for him to put a facility, an additional manufacturing facility or something related to one of his many enterprises in the Dallas-Fort Worth area, it definitely lends itself to that happening.” 

The reality of Tesla and The Boring Co. planting roots near Interstate 35 in Austin is enough of a CRE boon to get South Dallas developers like Russell Glen CEO Terrence Maiden dreaming of the possibilities for their land-rich communities.

“For the last several years, southern Dallas has experienced impressive regional industrial growth,” Maiden told Bisnow. “With the proximity of southern Dallas to Austin along Interstate 35, hopefully the region can continue to successfully attract more companies that could support Tesla.”

Even without The Boring Co’s new lease in the Austin area, Tesla’s presence had developers dreaming of ways to connect South Dallas to Austin’s tech boom, Maiden noted. 

“Tesla coming to Austin should eventually create several thousand job opportunities both in the central Texas region and could potentially stretch to Dallas,” he added. “Given the number of technical high schools and colleges in southern Dallas, the area would offer a great pipeline of young, talented people for Tesla to recruit.  Additionally, I am sure there will be many area companies competing for Tesla’s business within the region.” 

BISNOW. By Kerri Panchuk (2020, December 22). Elon Musk Needs A DFW Real Estate Play. He Just Doesn’t Know It Yet [News post]. Retrieved from https://www.bisnow.com/dallas-ft-worth/news/commercial-real-estate/elon-musk-needs-a-dfw-real-estate-play-he-just-doesnt-know-it-yet-107146

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21 on 2021: Commercial Real Estate Experts on What Next Year Holds for DFW

Top real estate minds tell us what’s in store for CRE in 2021—and why Dallas-Fort Worth is a place for the future.

When COVID-19 hit Dallas-Fort Worth in March, it turned the commercial real estate industry inside out. But what’s in store for next year? Which pandemic-related changes are here for the long haul? And is there any good news out there?

While real estate related to offices, hospitality, and many forms of retail suffered when people stayed at home, those dealing with e-commerce, general industrial, and new home building saw a completely opposite picture. The demand for those spaces remained strong and in some cases skyrocketed.

As Kaizen Development CEO Derrick Evers puts it, “The winners in uncertain times are those that can adapt the quickest.”

To help DFW CRE professionals navigate the challenges in their path, we asked 21 experts representing a wide range of sectors and asset classes to look at their data (and perhaps their crystal ball) and offer their best guess on how to make the most of 2021.

Meet the 21:

OFFICE: Brad Selner, JLL
Yes, the Office Market Has a Future. It’ll Just Look a Lot Different, Says JLL’s Brad Selner

HIGH TECH: Susan Arledge, ESRP
High-Tech Companies, Low Office Demand: It’s Time to Mitigate Risk and Repurpose Spaces

Tech Is Shaping a New Normal in Office Space—and Flexibility Is Key for Tenants

INDUSTRIAL: Bill Burton, Hillwood
Autonomous Activity Is Coming. And DFW Is Well Suited to Benefit From It

DATA CENTERS: Anthony Bolner, Stream
Working From Home Drives Data Center Demand Through the Roof

LOGISTICS: Allen Gump, Colliers
DFW Has Always Been a Major Trucking Hub. Now It’s Taking Logistics to Undreamed-Of Levels

E-COMMERCE: Reid Goetz, Hillwood
As COVID Has Raged, E-Commerce Has Boomed—Driving the Need for Logistics Real Estate

RETAIL: Alan Shor, The Retail Connection
The Hardest Hit: How Retail and Restaurants are Retooling for an Ever-Changed Future

REDEVELOPMENT: Tamela Thornton, E Smith Communities
We’ll See New Retail Concepts Taking Advantage of Vacancies in the Market

MULTIFAMILY: Tom Bakewell, Streetlights Residential
Multifamily Has Faced Multi-Challenges in 2020, But DFW is Emerging with Renewed Strength

SENIOR LIVING: Anand Patel and Narayan Patel, Journey Capital
With Visits on Hold, Senior Living Locks Down. But Investors Are Still Striving to Unlock Opportunities

HOSPITALITY: Jeffrey Binford, CBRE
Too Much Room at the Inn: As Hotels Struggle with COVID, Some May Transform Completely

VALUATIONS: Chris Gomes, Marcus & Millichap
As Hotels Struggle with COVID, Marcus & Millichap is Finding Investor Opportunities

HEALTHCARE: Lance Hardenburg, Caddis Healthcare Real Estate
Healthcare Real Estate Caught a Huge Case of COVID. But Its Future Prognosis Is Positive

LIFE SCIENCES: John Huff, Transwestern
‘Knowledge Clusters’ Are About to Fuel DFW Life Sciences Growth

MIXED USE: Fred Perpall, The Beck Group
Finding the ‘Mix That Works’: Designing Mixed-Use Communities Where People Want To Gather

AEC: Darren James, KAI Enterprises
Transforming Communities for the Better

CAPITAL MARKETS: Maureen Kelly Cooper
Real Estate as Liquidity, Reimagined Offices, and Demand for Industrial Product

LAND: Robert Grunnah, Younger Partners
This Land Is Your Land, for the Right Price—And More Than Expected Are Buying

URBAN/SUBURBAN DEVELOPMENT: Derrick Evers, Kaizen Development Partners
In Uncertain Times, Winners Are ‘Those That Can Adapt the Quickest’

Dallas Innovates. By Quincy Preston and Sandra Engelland (2020, November 9). 21 on 2021: Commercial Real Estate Experts on What Next Year Holds for DFW [News post]. Retrieved from https://dallasinnovates.com/creoutlook2021/

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Hillwood’s Mike Berry: ‘North Texas Has a Lot Working in Our Favor’

Overall, industrial leasing activity and renewals have remained “very healthy,” he says. The firm’s multifamily communities have also maintained essentially pre-pandemic rent collections. But, he cautions: “This is an unprecedented period. We’re watching for a lag effect but anticipate it will be mitigated by potential relocation activity.”

Berry discusses the impact of the COVID-19 pandemic on corporate relocations in Dallas-Fort Worth, as well as long-term changes and new opportunities in the commercial real estate market in our Q&A. There are reasons for optimism, he says.

Where was the relocation market heading prior to March of this year?

The pandemic accelerated many market trends that were already underway, especially in the industrial sector and particularly in e-commerce, which has proven to be the backbone of our U.S. supply chain. Obviously, this acceleration has hit the retail sector the hardest, which was already hurting. As it relates to relocation and reshoring, before COVID-19, major brands like Stanley Black & Decker were starting to reshore a portion of their manufacturing operations from overseas due to higher tariff costs. We’ll see more of this in the near future as companies reshore more operations to minimize potential supply chain disruptions. And, certainly, we’ll see this occurring in the manufacturing of goods important to national security and public health.

How has the pandemic impacted logistics and supply chain sectors in the region? Are you seeing some businesses switching from international to domestic sources as a focus for production?

Disruptions to the nation’s essential supply chains during the pandemic are causing a lot of companies to consider reshoring, and even relocating their domestic manufacturing and distribution to more central geographic locations. They are looking at Texas, and North Texas in particular, because of our business-friendly environment, highly skilled workforce, and our multimodal transportation options. The region also stands apart in its ability to offer space for corporate offices and manufacturing or distribution facilities in close proximity, which makes it easier for companies to quickly troubleshoot and address any issues.

What new challenges and opportunities are you seeing in the current market?

Hillwood sees some great opportunities in the single-family housing market. There is still a lot of demand for housing in North Texas as companies continue relocating to the region, and we expect demand to further increase as fallout from the pandemic leads more families to choose suburban homes with more space over urban density. The low-interest rates make this an ideal time to refinance or to buy a home, especially for first-time homebuyers who are not trying to sell a home.

Are there reasons for optimism in the balance of 2020 and looking to 2021?

There are certainly reasons to be optimistic as we approach the next 12 to 18 months. Historically, the North Texas commercial real estate market has experienced relatively fast recoveries, and although this downturn comes with unique challenges, North Texas has a lot working in our favor. Our central geographic location, transportation options, workforce, and business-friendly environment continue attracting new business opportunities. North Texas also offers affordable housing options and plenty of suburban communities that will allow families to have more space in the era of social distancing. From an office market perspective, we’re unique in that we have available land to build campus-style facilities, like the Charles Schwab headquarters. These types of facilities provide a horizontal footprint and can be customized to accommodate greater space between employees, outdoor work areas, and the latest in automation and clean building technologies.

How is Hillwood adapting as you seek prospective tenants in this season of uncertainty?

These are unprecedented times, and the speed at which everything changed has resulted in our team utilizing technology like never before. I’ve been very impressed with how people have adapted so quickly to doing business through Zoom, WebEx, Microsoft Teams, or other videoconferencing platforms. While it’s not the same as meeting a prospect or customer in person, we’ve leveraged technology that’s been around for quite a while, and finally figured out how to use it in our day-to-day business lives. We’re still building new relationships and reinforcing established ones, but we’re also being very efficient with our time, since travel between offices has become limited. I’m looking forward to the day when we can return to normal, but we’ll take some of this period’s best practices and incorporate them into how we do business going forward.

Do you see any long-term changes in your business and the needs of your customers prompted by the pandemic?

Technology and space designs that support employee safety and remote working are long-term changes we’re seeing across each of our business units. Particularly in the office sector, where touchless technology, such as automatic doors, touchless locks, motion sensor lights, temperature controls, and even voice-activated technology are becoming standard features. Layouts that have been popular during the past 20 years, centered-around collaborative workspaces, are giving way to more traditional ones (with partitions). However, the new spaces are designed to make the transition to the employee’s home office more seamless. Work stations in manufacturing and industrial spaces are seeing greater separation between employees, with robotic systems being incorporated. In the residential sector, we’re seeing more demand for suburban housing with an additional room being designed specifically to serve as a home office space.

What sectors are more pandemic proof? Where do you anticipate growth?

Sectors that cater to our nation’s essential services are the most pandemic proof, including food processing and manufacturing, medical equipment manufacturing, and distribution and logistics services. Our increased reliance on e-commerce during the pandemic creates a growth opportunity as companies expand to serve online customers more efficiently. Data centers are another pandemic-proof sector where there is a growth opportunity as we demand more bandwidth and storage for remote working and online learning. To sum everything up, improvements in technology and broadband connectivity have never been more essential.

A version of this story first published in the Summer 2020 edition of the Dallas-Fort Worth Real Estate Review.

Sandra Engelland contributed to this report.

Dallas Innovates. By Quincy Preston (2020, October 13). Hillwood’s Mike Berry: ‘North Texas Has a Lot Working in Our Favor’ [News post]. Retrieved from https://dallasinnovates.com/mike-berry-president-hillwood-north-texas-has-a-lot-working-in-our-favor/

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DFW Industrial Market Today Is More Competitive With Infill Sites Harder To Find

The Dallas-Fort Worth industrial market is known for being red-hot and flush with enough land to accommodate ongoing spec and build-to-suit development, but at least one of those factors is gradually declining. Commercial real estate experts say DFW’s industrial sector remains highly competitive with growing e-commerce demand forcing businesses to nab warehouse space to compete in the last-mile delivery space. But quality land deals, particularly infill sites, are much harder to come by with everyone on the hunt.

“Everybody is looking for value-add industrial. The question is does it really exist?” LanCarte Commercial founder Sarah LanCarte said while speaking on Bisnow’s DFW Industrial Deep Dive webinar. There are still some quality infill sites primed for redevelopment for smaller-sized deals, LanCarte said. But those deals usually require a high level of creativity and repurposing. She has seen a former Toys R Us location turned into a smaller regional distribution center, and there’s plenty of potential for former large-box mall retail sites to be repurposed into last-mile industrial space, she added. But there are lingering questions about how many adaptive reuse industrial assets will easily convert and pencil out, LanCarte noted. “Are there going to be value-add opportunities turning smaller retailers into flex space? Some are believers, and some are not.”

Peinado Construction Chief Revenue Officer Robert Shelton said he is seeing more redevelopment work associated with infill spaces as the industrial sector remains on overdrive. A mixture of more competition for assets, declining land site availability and harder to develop reuse projects are creating a competitive landscape on the investor and developer side.  “We have been spoiled because we had it easier, and now it’s a little bit harder to find competitive sites,” Transwestern regional partner Denton Walker said. “It comes down to who can execute and no question, it is very competitive.” Adding to that competitive equation is the issue of dealing with cities on entitlements, a process that requires infill industrial developers to be much more aggressive and patient today, Walker said.  Land sites may be declining, but industrial specialists still see an abundance of development activity in the Great Southwest, the South DFW Airport area, South Dallas, parts of McKinney, North Fort Worth and parts of Denton County.  Overall, e-commerce is keeping the market heated even as the coronavirus has cooled other real estate sectors. “You can’t overstate the impact e-commerce has had on the industrial market these past five years and what that impact will be in the next 10 to 20 years,” Black Creek Group Senior Vice President Mace McClatchy said. “We have been very blessed in the industrial sector.”

Biznow. By Kerri Panchuk (2020, September 24). Coronavirus Pandemic Lifts Drones Higher In The Construction Chain Of Command [News post]. Retrieved from https://www.bisnow.com/dallas-ft-worth/news/commercial-real-estate/coronavirus-pandemic-lifts-drones-higher-in-the-construction-space-105676

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Coronavirus Pandemic Lifts Drones Higher In The Construction Chain Of Command

Construction drones are at times expensive, difficult to operate and hard to maneuver without solid training, but the coronavirus has within a matter of months transformed these unmanned aerial vehicles from emerging tech tools to front-line workers on U.S. construction sites. “Six months of coronavirus is going to result in, say, three years of innovation in the construction industry,” Associated General Contractors of America President of Public Affairs Brian Turmail said. 

There are 1.68 million drones registered in the U.S., 487,000 of which are for commercial use, and 190,488 certified drone pilots, according to Federal Aviation Administration data.  Texas Drone Co. President Jared Janacek said his drone firm’s construction jobs have increased 200% year-over-year. But it isn’t just the coronavirus that’s pushing drone service requests higher. “From our standpoint, we have seen steady increases in drone adoption in construction for quite some time,” Janacek said. The FAA granted exemptions in 2016 for companies in new industries, including construction, to use drones. That was hailed as a game-changer for multiple industries, and Goldman Sachs Research estimated at the time that the civil government and commercial drone market together would create a $100B opportunity between 2016 and 2020. It estimated $13B of that would come from commercial and civil use. Those predictions ended up being far too optimistic — drones are a $22.5B industry in 2020, according to DroneII.com — and CRE experts told Bisnow last year the technology hadn’t yet revolutionized commercial real estate. There was a period of initial skepticism that resulted from cost concerns and fears over FAA regulations, Sundt Construction engineers said.  Though drones themselves are relatively inexpensive, often less than $2K apiece, the ancillary equipment and cost of training and paying an employee to fly one can end up upward of $22K, according to a 2018 analysis by the Certified Training Institute.  The cost of not operating drones correctly is where the largest financial risk lies. Failure to follow FAA regulatory rules governing the vehicles can result in fines or penalties ranging from $27K to $250K depending on the severity of the breach, according to the FAA. Still, drone usage at construction sites has grown steadily over the past few years, and today, drones are deployed on construction sites to document work already in progress from the safety of remote locations and can handle an assortment of other tactical and observational tasks that previously required on-site, in-person visits.  Drones have the ability to assist in the creation of topographical maps, while handling inspections, measurements and thermal studies to document leaks in a project’s facade. “There are a ton of uses [for drones], none of which are new since the coronavirus [outbreak], but many of which are being accelerated because the virus has forced more people to work from home as opposed to from an office or a job site,” Turmail said. Sundt Construction virtual construction technician Dean Miller said his firm already uses drones consistently on various job sites. “We use them for project updates that we can send to our owners and our team just to show how far along we have gotten,” Miller said.

When a property is large enough and has enough interior space for maneuverability, construction firms fly drones directly into a project’s interior to document the status of their work. They then share the imagery with construction principals and stakeholders who are working remotely. Construction firm McCarthy did just that when building out the 450K SF Museum of Fine Arts in Houston during the pandemic. The project has active players stationed all over the world, with some as far away as Germany, McCarthy Senior VDC/BIM Engineer Nathan Atkins said. “With all of these travel restrictions in place, we really could not get them to the job site,” Atkins said. “And our typical process for closing down the job site is you will have the design team walking the job site [with their] punch lists and making sure they can put their stamp of approval on it before handing it off to the owner.” Instead of having principals walking the Houston project, drone technology took a more active role by visually taking key players through the museum to keep the construction processes moving during the close-out of the project.  Engineers with Sundt Construction also have witnessed a heavier reliance on drones and other high-tech tools during the pandemic. The group said interior drone tours are still limited to wide-open spaces like gyms, but the firm did manage to distribute internal images of a project during the pandemic with the help of drones combined with a handheld, 360-degree camera.  “We have a technology client, and they cannot come to the state where we are building their project due to COVID restrictions, and they are at what we call the punch list phase where they need to be walking our facility,” Senior Virtual Construction Engineer Eric Cylwik said.  Using a combination of a drone and a 360-degree camera, Sundt was able to keep remote stakeholders apprised of the project’s entire progress without having them visit the site.   Discussion in the construction industry of an increase in drone usage to keep projects on schedule after the pandemic prompted AGC of America to include a specific question about drone operations in an upcoming construction industry survey.  “What we are asking about is how are firms using technology to address the fact that they have large portions of the workforce working from home,” Turmail said. The survey also is asking about what devices firms used during the pandemic to keep projects moving. The benefit of the virus is it serves as an example of what these flying devices are truly capable of during times of market turmoil and rapid change.  “Traditionally the construction industry is hesitant, but as soon as you show the power of the data they can get through [drones and technology], they are on board pretty quickly,” Sundt Senior Virtual Construction Engineer Mark Epstein said.

Biznow. By Kerri Panchuk (2020, August 25). Coronavirus Pandemic Lifts Drones Higher In The Construction Chain Of Command [News post]. Retrieved from https://www.bisnow.com/dallas-ft-worth/news/commercial-real-estate/coronavirus-pandemic-lifts-drones-higher-in-the-construction-space-105676

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Near Southside has a new hotel checking in

Hotel Revel exterior courtesy photo

No surprise to Fort Worth residents and visitors that the Near Southside is a unique place.

Now it’s got another unique feature to offer: Hotel Revel.

Fort Worth developer Trey Neville has announced the official opening of the new Hotel Revel, a strikingly modern boutique hotel located in the heart of the Near Southside district at the center of the city’s creative hub.

“We completed the first phase, which has Soul Sweat and Wabi House, Super Chix and all those guys, and we knew we were going to build another building there along 8th,” said Neville. “We worked with Bart Shaw to come up with a really unique design built around the idea of having eight rooms on the top floor and it being more of an Airbnb on steroids type of deal.”

Hotel Revel, nestled at the corner of Hurley and 8th Avenue is situated near some of the city’s most popular restaurants, bars and cultural attractions along the popular Magnolia Avenue.

“We knew there was a void in the Fort Worth hospitality market,” said Neville. “We watched highly successful boutique hotels pop up from Nashville to Austin, each one being unique and having its own story to tell. We also wanted a place that was intimate enough where you could rent the entire hotel for a special event or evening.

“It needed to be well-designed and well thought-out. We believe we’ve created something truly unique for Funky Town.”

Hotel Revel is comprised of 12 unique rooms and three suites. Each suite is named after a popular but now defunct historical establishment in Fort Worth.

The fourth floor is a highlight of some of Fort Worth’s favorites like the Hideaway, the Bluebird and the Oui. The third floor is a homage to the Jacksboro Highway haunts that regularly featured the likes of Tina Turner, Willie Nelson and Bob Wills.

No room is the same and all feature custom fabricated furniture, a comfy bed and space that is twice the size of an average hotel room.

The new building’s striking architecture has already turned into an instant landmark in Fort Worth’s Near Southside.

Hotel Revel Bluebird wing courtesy photo

Bart Shaw, who led the design of the project for Ibanez Shaw, calls this building “a modern icon marking the gateway to Near Southside. It works at very different scales. The ombre fins present a bold image with a public art-like presence in the city, while spaces floating behind this veil allow one to be intimately, enveloped by the color.”

Prices for the rooms start about $179 a night and go up to a bit more than $300, according to Neville.

“There’s several different room types. We’ve got two rooms that have queen bunk beds. We’ve got one room that has two queens. We have several larger king rooms and then we have three suites. The suites are all oversized. Two of them are 1,200 square feet plus. All our rooms average about 400 square feet and up so we’re twice the average hotel room size,” he said.

Beyond the overnight experience, Hotel Revel guests will have access to great cocktails at Sugarman’s, a modern interpretation on the classic speakeasy. Guests can also dine at on-site restaurant Cast & Hook with fresh, locally sourced fare prepared by local Chef Stefon Rishel. Both are set to open later this year and will become an instant destination to dine and drink in Fort Worth.

For developer Neville, the project offers something that the Near Southside has been looking for as it has grown to be a unique urban village in Fort Worth.

“If you’re looking at a hotel development, It checks a lot of the boxes,” he said.

“You’re close to TCU, so you’ve got students. You’re close to the Medical District so you’ve got the medical use. There’s obviously an abundance of apartments in the area. You’ve got downtown, you’ve got jobs. Obviously the 50,000 people that work in the Medical District. You have everything. If you were doing a site selection for a hotel, that’s every single thing that you would want. Most projects,, you only get like two or three, we’ve got several,” he said.

Fort Worth Business. By Robert Francis (2020, July 26). Near Southside has a new hotel checking in [News post]. Retrieved from https://fortworthbusiness.com/featured/near-southside-has-a-new-hotel-checking-in/

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Office Space: Pandemic Redefines Commercial Real Estate Industry

Office space. Will it become a thing of the past?

As more people work from home, what does that mean for the entire commercial real estate industry?

Experts are anticipating a lot of changes that could totally redefine the industry, especially as companies get a taste for how a work-from-home structure operates.

According to Global Workplace Analytics, a research-based consulting organization specializing in telework, a recent survey shows that we will see 25-30% of the workforce working at home on a multiple-days-a-week basis by the end of 2021.

Commercial real estate expert Stephen LaMure, owner of Dominus Commercial, said how the industry reacts to the pandemic should really be broken down into three major parts: office buildings, industrial and retail.

All three are experiencing some major changes, both in good and potentially bad ways.

“Right now, it’s a little bit of a wait and see. Especially with this uptick in COVID-19 cases,” said LaMure.

He works in Dallas’ design district and believes only 20 percent have come back to their offices in his area.

He said overall, the pandemic has really caused companies to rethink whether they want to permanently work from home or alter their office space.

“Most of them said they needed to redesign their space to be able to spread out,” he said. “A big part of our business is talking to companies about their values and their purpose and what their culture is. How do you get a space and work environment that supports that or projects that?”

In the last few months, some companies like Twitter and Square have already made the call to let some employees stay at home for good.

“These companies are really going to have to take a step back,” LaMure said. “How much space do you need? How many desks do you need? Now, they’re having to take a step back and say what does this really do for us? Is it necessary? Can we all work from home and not have this cost? Or if we can’t, what does it really need to be like?”

LaMure said as far as what he’s noticing, it’s not so much downsizing office space due to more people working from home but instead, companies are needing more space so that they can meet the CDC’s social distancing guidelines.

“I don’t think it’s going to be as dramatic as some people are saying. There are people saying ‘Oh this is the end of office space as we know it. I think it’s just the opposite,” he said.

LaMure elaborated, “I’ve interviewed over 100 tenants in the last 90 days and almost all of them – other than a small percentage – are saying the same thing. We need more space. So if you have 50 team members that are in 3×2 cubicles, you have to triple your space in order to get those cubicles separated by six feet.”

He said he’s noticing many larger companies are concerned about the liability issue for their employees.

“If they’re not following the CDC guidelines and some of their team members get sick or died, then there’s a substantial liability on that company so they’re going to really have to conform to those new standards,” he said.

LaMure clarified that office spaces were already drastically changing long before COVID-19.

“Twenty-five years ago, everybody had a private office or it was a large office. There was 250 to 300 square feet per person. We all kept paper files and had a giant fax machine,” he explained. “We’ve continued to get more and more dense, with more people per square footage than we used to have. Now, we’re more at like 100 square feet per person.”

Companies are re-evaluating their own spaces to ensure that people have the ability to social distance, especially for those who are unable to work from home permanently or indefinitely.

“What I’ve seen is that companies have found that certain people on their team do really well working from home and they’re more productive and more profitable. But certain people are not at all,” he said.

As for industrial commercial real estate, LaMure that’s doing really well because of shipping and supply-demand.

“There’s a lot more shipping going on. Manufacturing is coming back to the United States from outside of the country so the industrial segment is very strong, especially for DFW being centralized,” he said.

However, the future of the brick and mortar retail sector of commercial real estate is more up in the air. Businesses are either closing down because of the pandemic’s impact on the economy or their fate is in the hands of their renter.

“The retail market is certainly suffering. When you have restaurants that can only be at X percent capacity, they might not be able to make a profit themselves,” said LaMure. “The Paycheck Protection Program helped out but it only lasts for so long.”

NBCDFW. (2020, July 2). Office Space: Pandemic Redefines Commercial Real Estate Industry [News post]. Retrieved from https://www.nbcdfw.com/news/local/office-space-pandemic-redefines-commercial-real-estate-industry/2399509/

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There May Be CRE Opportunity Post-Coronavirus, If We Can Find Out What Anything Is Worth

The commercial real estate market is in limbo, with developers waiting to see if opportunities for low-interest rate refinancing and acquisitions bubble to the surface. But, the timeline for finding these opportunities in the post-COVID-19 landscape remains murky at best, especially as valuations are difficult to pin down. 

It’s likely to stay this way until the timeline for curtailing the impact of the coronavirus becomes more apparent, giving appraisers the data needed to make true property valuations, National Valuation Consultants Senior Managing Director Chuck Dannis and Dreien Opportunity Partners CEO Sam Ware said during Bisnow’s “Weathering A Downturn” webinar Tuesday. “Appraisers are just going to have to wait,” Dannis said. “They are going to have to look for other things than just sales [as part of their valuations], which appraisers normally do. I think it’s pretty naive to think that values are not changing as we speak.” A guidepost for what the COVID-19 downturn might look like is the 2008-2009 recession. But, there is one major difference between that economic meltdown and the COVID-19 crisis, Dannis said. While the ’08-’09 recession was caused by investors marking down assets and pushing up cap rates to deal with increased market risk, the coronavirus downturn is the result of market uncertainty over a disease that will end at some point. 

“What I think we are going to see this time is just a sudden and precipitous, unprecedented drop in net income in a lot of the property types — hospitality, student housing, senior housing and the restaurant business,” Dannis said. “This time I think we are going to have income shock … and so if, we don’t even change the rates, property values are going to come down.” Ware agreed that while on the surface cash flow and income disruptions devalue properties, the temporal nature of the COVID-19 crisis and the underpinnings of the economy make it difficult to predict a property’s value several months from now.  If an appraiser hypothetically completed a $200M valuation in December, the historic metrics for deciding value would likely show the same property’s value down by June because of the market disruption, Ware said. But with this downturn more of an economic delay than a financial disruption, Ware doesn’t believe true market value is lost, particularly when demand and supply were strong right before the crisis.  “I use the word pause because to me the word pause is a positive adjective. It’s a pause,” Ware said of the economy.  If there is one hidden boon in all of this madness, Ware, who specializes in office redevelopment, predicts developers may soon find opportunities to acquire assets at reasonable prices and to benefit from declining construction.  “I do see a pause in new construction for office buildings from this point forward,” Ware said. “I think existing becomes much more valuable, which I, of course, like the empties. I don’t like new construction.”

BizNow. (2020, April 7). There May Be CRE Opportunity Post-Coronavirus, If We Can Find Out What Anything Is Worth [Blog post]. Retrieved from https://www.bisnow.com/dallas-ft-worth/news/commercial-real-estate/the-new-world-order-of-cre-according-to-sam-ware-and-chuck-dannis-103803

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Real estate agents adapt to coronavirus with virtual tours, other creative ways to do business

Real estate companies are struggling to adapt to a new business environment with reduced person-to-person contact.

Most brokers and agents are working from home, and many are conducting business remotely.

Residential agents are giving virtual tours of properties and directing clients to online listings.

“We will be conducting virtual tours of Hall Arts Residences via Facetime and other comparable technologies,” Briggs Freeman’s Kyle Richards, who is marketing the new downtown condo tower, said in an email.

Tod Franklin of DFW City Homes said agents are looking for ways to protect buyers and sellers from coronavirus.

“I have many buyers and sellers that just can’t pause because they have immediate housing needs,” Franklin said. “Also many that don’t want to miss the low interest-rate opportunity.”

Even so, almost half of residential agents say that buyer interest has decreased due to the coronavirus outbreak, the National Association of Realtors reported.

“The decline in confidence related to the direction of the economy coupled with the unprecedented measures taken to combat the spread of COVID-19, including major social distancing efforts nationwide, are naturally bringing an abundance of caution among buyers and sellers,” Realtors chief economist Lawrence Yun said in a statement.

Commercial agents are adapting, too.

More than half of the Realtors associations’ commercial members have seen a decline in leasing clients.

And Yardi Systems’ reports that traffic to the firm’s apartment finding website dropped by a quarter in the last week.

“Our professionals, working hand-in-hand with our clients, are finding ways to manage through these difficult days by modifying meeting protocols, touring properties with smaller groups and finding ways to keep moving forward,” Brett White, executive chairman and CEO of Cushman & Wakefield, said in a letter to clients.

“At the same time, we are adhering to important public health restrictions and recommendations. “In some jurisdictions, we know that business-as-usual simply isn’t possible and that managing through this disruption is a daily undertaking.”

Dallas Morning News. (2020, March 23). Real estate agents adapt to coronavirus with virtual tours, other creative ways to do business [News post]. Retrieved from https://www.dallasnews.com/business/real-estate/2020/03/23/property-agents-adapt-to-business-with-coronavirus/

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Dallas developer plans 2,000-plus homes for $950M master-planned community in Midlothian

A Dallas-based real estate developer has acquired 966 acres of land in Midlothian for a $950 million master-planned residential community with thousands of homes.

Hanover Property Co. on Monday announced the acquisition of the land at the northeast corner of Highway 287 and Walnut Grove Road, about 30 minutes south of downtown Dallas. 

Plans for the property include 2,000 single-family homes priced from the $300,000s,160 townhomes, 26 acres of commercial and 42 acres of industrial development. Pre-development is underway, and the first homes will be available by early 2022, the company said.

The development’s name and builders for the first phase, which will consist of 350 homes, will be announced later this year.

Ben Luedtke, executive vice president of Hanover, said the company has been working with the city of Midlothian for the last year on planning the development.

“The city is a great partner, and the result is the first true master-planned community of this size in Midlothian,” Luedtke said in a prepared statement. ”There is substantial tree coverage, gentle rolling hills, and a 50-acre lake. We will thoughtfully enhance the natural beauty that is already in place.”

Hanover is developing multiple master-planned communities in North Texas, including Somerset (487 acres, 1,105 lots) and M3 Ranch (720 acres, 1,571 lots) in Mansfield; and Berkshire (358 acres, 641 lots) and Wellington (610 acres, 1,680 lots) in north Fort Worth. The company is also the developer of the Mira Lagos community in Grand Prairie.

Midlothian has been one of the most dynamic growth areas of the southern DFW new home market, with 511 housing starts last year, Ted Wilson of market research firm Residential Strategies said.

“As land and development costs have risen, it has become increasingly challenging for developers to produce lots that can translate into the $275,000 to $400,000 home price — the historical ‘sweet spot’ for Midlothian new home construction,” Wilson said in a statement.

JLL Capital Markets Managing Directors Michael Swaldi and Larry McCorkle and Director Nick Hayden marketed the property on behalf of the seller, ECOM Real Estate. JLL International Director Paul Whitman represented Hanover. 

The project team also includes MESA as the landscape architect and land planner and LJA Engineering.

Midlothian will also be the site of a massive data center that Google is building. The company is putting $600 million in the Ellis County facility and is creating construction and ongoing jobs at the site.

Dallas Business Journal. (2020, February 4). Dallas developer plans 2,000-plus homes for $950M master-planned community in Midlothian [Blog post]. Retrieved from https://www.bizjournals.com/dallas/news/2020/02/04/hanover-property-co-midlothian.html

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Hanover Midlothian Master Planned Community
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