The Texas Tea: A Week Of Growing Pains
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For every winner, there must be a loser, an adage that played out in a Texas commercial real estate week that saw a compelling mix of success and pain.
First, I got data to support my opinion that Houston is one of, if not the, best food cities in the nation, enjoying nearly a 10% increase in diners since the onset of the pandemic, even as other foodie cities like New York struggle. The city has attracted keen interest from restaurateurs, especially those from out of the country, creating an extremely competitive environment for prime restaurant retail space, one that has even sparked bidding wars. But the news isn't all good. While the state of play is great for landlords, it is tough out there for tenant reps.
Bisnow Dallas Reporter Olivia Lueckemeyer found a similar mix of success begetting hardship in the DFW market. As the industrial sector has boomed, appraised values haven’t kept up. Now the city’s appraisal district is increasing values by more than 20% across the board and by far more for industrial, an asset class fading into a new normal.
In yet another good-news, bad-news situation, 99 Cents Only Stores is planning to liquidate and close all of its locations. But in Houston’s tight retail market, brokers say the hit to big-box retail is creating opportunities for higher-class tenants to take over.
Across Texas, Nate Paul-related entities filed for bankruptcy, a rancher proved his property damage case to the U.S. Supreme Court, and a library in a beloved building reopened to the community.
It was a tough week — or a great one, depending on how you look at it. We hope you enjoy this curated collection of coverage. As always, comments and tips are welcome. Please feel free to contact any of us at the email addresses below.
— Maddy McCarty, Bisnow Houston Reporter
What's The Big Deal?
Running counter to what those in the business politely call “rightsizing,” Dallas-based Ryan Cos. confirmed it would double its footprint at International Plaza III in North Dallas. The commercial real estate firm will move to the ninth floor of the 354K SF building as it seeks to accommodate internal growth. The company plans a $1M-plus internal build-out at its new digs as it continues work on Ryan Tower, a 400K SF Class-A office building in Plano’s $3B Legacy West development. Elsewhere in the market, tenants are scaling back and looking for about 30% less space, according to CBRE.
The Best Of Bisnow
- Red-Hot Restaurant Market: As high construction costs and insurance rates curtail new retail development, international restaurateurs are flocking to Texas, particularly Houston. This has made quality restaurant space highly sought-after in the city, putting food and beverage landlords in a unique position to be choosy. It is a much different environment than they faced four years ago, at the beginning of the pandemic.
- Sticker Shock: Property tax consultants in the Dallas area are preparing for a busier-than-normal protest and litigation season after the release of preliminary values showed double-digit increases across the board. Industrial owners were the hardest hit, with properties estimated to be worth at least 50% more today than they were a year prior.
- Departing Discounts: More than a dozen 99 Cents Only Stores are about to become available in Houston, and brokers say this creates a good opportunity for retail landlords. It’s a tight retail market, so these big-box locations will likely have a lot of demand. With some good tenant options and a few upgrades, landlords could come out of the brand’s bankruptcy well ahead.
- Boom Times: Grayson County is on the verge of prosperity as Texas Instruments and GlobiTech spend billions to bring semiconductor chip plants to the city of Sherman. Land speculation is heating up among investors who want to cash in on the gold rush, prompting economic development leaders in the area to brace for a spike in demand.
- Moving On Up: SFMG Wealth Advisors will double the size of its offices when it moves into its new headquarters in Plano later this year. The building, developed by Cawley Partners, is one of several luxury office properties about to debut along the Platinum Corridor, along with Ryan Tower in Legacy West and Southstone Yards in Frisco.
Best Of The Rest
- DFW Takes Off: Despite losing the No. 2 spot to Dubai amid a resurgence of international traffic, DFW International Airport is still among the busiest on the globe. The facility recorded more than 81 million passengers in 2023, according to The Dallas Morning News, making it the third-most-frequented airport in the world and the second-busiest in the U.S. after Hartsfield-Jackson Atlanta International Airport. Passenger visits are expected to go up again in 2024, pushing the airport a step closer to its goal of serving 100 million customers by 2030.
- World-Class Trouble: Two more entities tied to embattled Austin developer Nate Paul’s World Class Holdings have filed for Chapter 11 bankruptcy, this time involving properties in prime areas near the Rainey Street Historic District and East Austin, the Austin Business Journal reports. Since an FBI raid of World Class offices in 2019, the developer with close links to Texas Attorney General Ken Paxton has lost a slew of properties to bankruptcies, foreclosures and lawsuits, and Paul himself faces federal felony charges.
- Supreme Victory: In a case being billed as a win for Texas landowners of all stripes, the Supreme Court ruled unanimously Tuesday that a rancher whose 900-acre property was flooded due to nearby interstate construction can seek compensation from the state for damaging his property. A lower court had ruled that the takings clause in the Constitution prevented him from seeking damages incurred as a result of the public project, but the high court said landowners have the right to claim what’s known as inverse condemnation and seek relief through state courts, Progressive Farmer reported.
- Well-Loved Library: Many Montrose residents and longtime Houstonians were unpleasantly surprised when the Eleanor K. Freed Montrose Library suddenly closed last month. Houston Mayor John Whitmire called out a lack of understanding from “past leadership” as he reopened the library, while another location is being built in Montrose Collective, Houston Public Media reports. Whitmire said once that shift happens, he wants to find another use for the highly prized building.
Quote Of The Week
“Everybody’s scrambling for good space. For us, as a landlord, it’s great. For them it’s like, ‘Oh, man.’”
NewQuest Properties co-founder and Managing Partner Jay Sears on a new, highly competitive dynamic in Houston’s burgeoning restaurant scene that has landlords in the catbird seat.
Straight From The Source
Get the hottest tea live and in person at these upcoming Bisnow events:
April 24: Houston Architectural Insights & Design Innovation Summit
April 30: Austin Bisnow Multifamily Annual Conference
May 1: Future of Downtown and South Dallas
May 7: Houston State of the Market
May 22: Transformations in Central Texas Healthcare Real Estate
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So how's the Tea? As we brew up next week's edition, send us your feedback, including what kind of content you'd find valuable in this newsletter. And don't forget, we love news tips.
Katharine Carlon, Central U.S. Editor: katharine.carlon@bisnow.com
Olivia Lueckemeyer, Dallas-Fort Worth Reporter: olivia.lueckemeyer@bisnow.com
Maddy McCarty, Houston Reporter: maddy.mccarty@bisnow.com
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