The Biggest Dallas Real Estate Stories of 2014

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.

Forget the malls and big boxes. DFW’s retail market is now being driven by grocery stores. More than 40 grocery stores have opened this year or are in the works—and others are likely to be announced.

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.

If you haven’t seen KDC’s new State Farm-anchored campus in Richardson, hop in your car sometime and head toward the intersection of State Highway 190 and North Central Expressway. As you get closer, you’ll see the 186-acre development off to the east, sparkling in the distance like the Emerald City.

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.”

9. Dallas Farmer’s Market Goes Private.

There had been rumblings about a private takeover of the Farmers Market for decades. Last year, the talk became reality when DF Market Holdings, led by Brian Bergersen of Spectrum Properties, acquired the complex from the City of Dallas—and kicked off a $65 million transformation (supported, in part, by an expanded Tax Increment Finance district).

The Shed reopened Labor Day weekend and now operates seven days a week. The former administration building was acquired by the North Texas Food Bank, which will move its headquarters there this spring. But it’s the velocity of the leases for The Market (formerly Shed 2) that really stands out.

“We are 90 percent leased before even starting construction,” says Jack Gosnell of UCR Urban, who’s overseeing marketing of the space, along with colleague Sasha Levine. “I think it has caught everyone’s imagination. People are hearing about it and wanting to be part of something new.”

The Market will house about 30 restaurants and shops in all. The latest tenants to sign on include Rex’s Seafood and Market, Stocks & Bondy, Palmieri Cafe, a Firebird Restaurant Group eatery, and Mudhen, a concept from Shannon Wynne, the restaurateur behind Meddlesome Moth, Flying Fish, and Lark on the Park.

Up next: More retail, parking, green space, and a 240-unit apartment complex. When the renovation is complete, the Dallas Farmers Market will become the “fourth leg on the table,” says Gosnell, joining the Arts District, West End/Victory Park, and the South Side/Cedars area. “It’s going to make another vibrant corner of downtown Dallas, all of which will be activated by the infill of residential in the middle,” he says.
 

10. AllianceTexas’ $50B Impact.

Mike Berry was a bit skeptical when he was approached in the late 1980s by his former Vanderbilt University frat brother, Ross Perot Jr., about developing Alliance Airport in North Fort Worth. After all, that part of the North Texas region was still largely undeveloped, and no one had ever built an industrial airport before. But Perot was persuasive, and Berry eventually left his post at Ray Hunt’s Woodbine Development Corp. to join Perot at the fledgling Hillwood.

Alliance Airport broke ground in December 1989. Twenty-five years later, it has evolved into AllianceTexas, an 18,000-acre development that sprawls from Fort Worth into Haslet, Roanoke, and Westlake. Through 2013, it has generated a local economic impact of $50.6 billion.

“It’s far bigger than what we thought it would be, and far more complex,” Perot says.

That’s an understatement. Under the leadership of Perot and Berry, who serves as president of Hillwood Properties, AllianceTexas has become one of the most successful developments in the world. Along with numerous residential communities, the project holds 37 million square feet of commercial space occupied by about 400 companies—including biggies like Amazon, Mercedes-Benz, FedEx, and Deloitte.

And Perot and Berry aren’t done yet. Only about half of AllianceTexas has been developed so far, and expansions are underway on the office, industrial, retail, and residential fronts. “That’s what’s fun about being a developer,” Perot says. “You get to build cities.”
 

11. Redevelopment in the Core.

There was a time when real estate investors wouldn’t take calls from the 214 area code. Now, those same buyers and lenders have moved Dallas up toward the top of their prospecting lists. Most notable are the bets that both outside and local investors are placing on the urban core, where multimillion-dollar redevelopment projects are setting the stage for a major transformation.

Activity is focused on the city’s center—the area between Pacific Avenue and Main, Commerce, and Elm streets. A number of factors are at play: a growing downtown residential base, the popularity of new destinations like Klyde Warren Park and the Perot Museum, the proven success of Headington Cos.’ redevelopment of The Joule hotel and its ongoing retail work along Main Street, bargain sales prices for vacant or troubled office buildings, investor eagerness to deploy capital, and the highly sought-after millennial workforce, which prefers an urban live-work-play environment.

Major renovations are in the works at, among other buildings, 1401 Elm, 1600 Pacific, 1700 Pacific, 211 N. Ervay, Bank of America Plaza, KPMG Centre, One Dallas Center, One Main Place, the Statler Hilton, and Thanksgiving Tower.

Many would not be happening without city support, says John Crawford, president and CEO of Downtown Dallas Inc. “The city is putting in a lot of money to support the revitalization of downtown—$50 million to 1401 Elm, $44 million into the Statler Hotel project, and $12.5 million for 1600 Pacific. This isn’t chump change. But at the end of the day, it’s going to grow the tax base.”
 

12. Trinity Groves Takes Off.

Boy, do Stuart Fitts, Butch McGregor, and Phil Romano look like geniuses now. Back in the mid-2000s, the partners in West Dallas Investments quietly began buying up cheap land on the western banks of the Trinity River. By the time the Margaret Hunt Hill Bridge was funded and construction began, other investors tried to get in on the action, but they were too late.

Thanks to West Dallas Investments, the bridge to nowhere now goes somewhere: Trinity Groves. Its eateries and restaurant incubator have lured thousands over the river to West Dallas—likely a virgin journey for many.

The success of Trinity Groves has also attracted new partners: industry icons Robert Shaw and Roger Staubach. The two former Dallas Cowboys players are teaming with the Trinity Groves owners to develop 1,000 new apartments. Construction will get underway in March of 2015, with the first units ready for occupancy in early 2016.

Shaw, who’s known for pioneering urban-style projects in Uptown and the suburbs, says he is “extraordinarily optimistic” about the endeavor in Trinity Groves.

“It’s going to be transformative,” he says. “Not just in the physical existence of a new midrise building, but adding people—people who are out walking their dogs and moving about in the morning and late at night. That is the magic, when all of the pieces are in place. That’s when something comes to life.”
 

13. 7-Eleven’s Headquarters Move.

In March, D Real Estate Daily broke the news that 7-Eleven Inc. planned to move its headquarters to the suburbs. The deal came out of nowhere. After all, the convenience store operator had been based in Dallas since the late 1920s and still had plenty of term left on its lease at One Arts Plaza. But 7-Eleven was outgrowing that space. It also yearned to be closer to its suburban workforce.

Landlord Lucy Billingsley came up with a solution: she’d build the company its own building at Cypress Waters. It would be another boost for her 1,000-acre project surrounding North Lake, which had already won headquarters for Nationstar Mortgage, Meritage Homes, and Cheddar’s Casual Café. And it would free up a big chunk of space at One Arts—whose value had significantly increased since 7-Eleven inked its lease in 2005. It also would give Billingsley a chance to replace 7-Eleven with a tenant that would be a better complement to law firm Thompson & Knight, which occupies about 180,000 square feet in the Arts District property.

And that’s exactly how it played out. In November, EnLink Midstream Partners leased the bulk of 7-Eleven’s One Arts space. It will move from Uptown and take occupancy after 7-Eleven moves out in 2016. So everybody’s happy: 7-Eleven, Thompson & Knight, EnLink, and, most of all, Billingsley. That’s how she rolls.
 

14. Pier 1 Gets Its Tower (and its Mojo) Back.

The Great Recession led to the death of a number of big national retail chains, and make no mistake, Fort Worth-based Pier 1 Imports was on the brink. At one point, the company posted 17 consecutive quarters of declining same-store sales. In 2008, it sold its prized Fort Worth headquarters to Chesapeake Energy for $104 million. Pier 1 freed up 10 floors of the 20-story building for Chesapeake, which rebranded the office tower as its own.

By 2014, though, fortunes had changed. Chesapeake had drastically reduced its Barnett Shale operations and Pier 1 had rebounded in a big way. The company wanted to stay in its existing building, says Todd Burnette, managing director of JLL in Fort Worth. But it wanted a new landlord—an institutional-grade firm that owned and operated other buildings.

A white knight arrived in the form of Houston-based Hines. “They’re the gold standard,” Burnette says. “They’re known around the country and around the world and know how a Class A asset should be run.”

It took an agonizing nine months, but the sale of the 409,997-square-foot tower on the banks of the Trinity River finally closed in August. Pier 1 negotiated an expanded lease with its new landlord—and got its naming rights back. “Within a couple of years, Pier 1 will occupy the entire building,” Burnette says. “The company is set for growth now and for future expansion down the road.”
 

15. Dallas Gets an Honest-to-God Real Estate Institute.

Dallas has a long and storied real estate history. It’s also one of the most dynamic markets in the country. But one thing was missing: a world-class real estate intitute. In the spring of 2013, Southern Methodist University’s Cox School of Business announced plans to create just that. Joseph Cahoon took over as director of SMU’s Robert and Margaret Folsom Institute for Real Estate this past January. The former managing director of the University of Texas’ Real Estate Investment and Finance Center also has extensive industry experience.

“I saw low-hanging fruit,” Cahoon says. “A university on a huge upward trajectory academically, sitting in the middle of the real estate universe, with an alumni base that’s as deep in the industry as any school you could think of.”

Cahoon wants the institute to be an asset not just for SMU, but for the region and the nation. Initially, he’s focusing on creating national networks for alumni and leveraging the abundant expertise in DFW by bringing leaders into the classroom and getting students out into the real world.

When Cahoon put together the institute’s board, he was impressed that nearly 70 local leaders stepped up to participate.

“We are in the first inning of invigorating this program, but it has gone so much faster and better than I would have ever imagined,” he says. “There has been a lot of pent-up demand.”