Texas Real Estate Business

MAY 2016

Texas Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in Texas.

Issue link: https://texasrealestatebusiness.epubxp.com/i/674650

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Page 33 of 49

www.REBusinessOnline.com Texas Real Estate Business • May 2016 • 33 7th Street corridor. The medical district near Southside has seen an unprecedented level of in- vestor activity, with at least 12 mixed- use developments either proposed or currently under development. Even downtown is expanding its retail base with mixed-use multifamily projects such as Hunter Plaza and Pinnacle Bank Place, each boasting 9,000-15,000 square feet of retail available on the ground level. The AllianceTexas and Presidio projects in north Fort Worth have also experienced signifcant growth and vacancy absorption. While these new projects will de- liver much-needed available square footage to the Fort Worth market, they will primarily serve to meet the ris- ing demand for their individual sub- markets. We anticipate that overall market occupancy will remain high, and owners will continue to have the privilege to be selective with the ten- ant mix within their projects. Building Sales Rise The frst several months of 2016 have been eventful for the sale market, and we expect attention from out-of- state investors, owner-user purchases and redevelopment plays to continue. Stabilized assets with creditworthy anchor tenants are becoming more difcult for investors to fnd in core and primary markets. In order to se- cure more favorable returns, attention has turned to more tertiary assets such as this one. As long as the oil and gas market, stock market and political environ- ment remain uncertain, real estate will continue to attract investors look- ing for stable returns. The greater Fort Worth market will continue to receive attention from out-of-market inves- tors seeking less compressed cap rates. In January, Texas Bank Financial acquired the 50,026-square-foot ofce building at 4521 S. Hulen St. in Fort Worth in an owner-user acquisition. The bank plans to occupy over 18,000 square feet, with the Fed providing assurance that interest rates will stay down and afordable fnancing for owner-user purchases will remain available. We have seen consistent demand from ofce users looking to quit pay- ing rent and become their own land- lords. However, slim supply of avail- able inventory and increased buyer demand have driven asking sale prices more than 3.5 percent higher than the previous fve-year average, from $134 to $151 according to CoStar Group. We expect to see owner-user sale pric- ing continue to rise slightly over the remainder of 2016, as demand stays strong and new construction pricing remains a steep premium. Redevelopment and reuse will con- tinue to be a driving force in areas near downtown. Majestic Realty's partnership with Hickman Invest- ments is making real progress toward a complete renovation and rejuvena- tion of the historic Stockyards, which will include over 300,000 square feet of retail and restaurant space, nearly 500,000 square feet of ofce space and a boutique hotel. South Fort Worth has become a hot redevelopment area, driven by TIF- funded improvements and astound- ing investor activity, with land prices that have climbed to unprecedented levels. We are now seeing asking pric- es above $30 per square foot, with cer- tain tracts reaching as high as $50 per square foot. Often overshadowed by its neigh- bor to the east, Fort Worth is now booming with as much retail and of- fce opportunity as Dallas. Continued cap rate compression with investor- attractive market stability makes it a safe bet as a hotbed of activity in the near future. High occupancy and ag- gressive tenant activity in retail lend credence to the idea that this trend will continue. Granite is constructing a 160,000-square-foot offce building at Southlake Town Square, the frst major addition to that submarket since Cedar Ridge Offce Park.

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