Dallas-Fort Worth development activity is winding down.
After several years of booming construction all over the region, commercial building starts are lower by about a third this year.
But while some developers are hitting the pause button in Plano, Richardson and other ‘burbs, Dallas’ hot Uptown market is gearing up for another round of construction. A string of big land sales in the area just north of downtown Dallas is setting the stage for the next series of high-rise projects.
Kaizen Development announced plans a few weeks ago for a 22-story, 300,000-square-foot office tower to be built near the intersection of Akard Street and Cedar Springs Road. The triangular building site is next door to the huge Union project, which will have two towers and a lower-level shopping center.
Kaizen Development reportedly paid almost $400 per square foot for the 1-acre building site, which is now occupied by an old office and a vacant church.
At the same time, we got word that two central Texas developers — Austin-based Endeavor Real Estate and San Antonio-based Kairoi Residential — have acquired prime building sites on Maple and McKinney Avenue where they’re planning high-rise buildings.
Kairoi paid almost $375 per square foot for its Maple Avenue block across from the Crescent.
The flurry of pricey land buys comes as the two biggest Uptown development deals — Trammell Crow Co.’s Park District on Klyde Warren Park and RED Development’s Union — are opening their doors.
Office towers in both projects have leased at some of the highest rates ever seen in Dallas.
And those residential towers are bringing in tenants who are willing to pay thousands of dollars a month to live large at the newest Uptown address.
The next series of buildings planned for Uptown will need even higher rents to cover the price of the dirt, construction costs and higher financing rates.
“Sometimes I don’t even understand it myself,” said veteran property broker Newt Walker, who has watched Uptown land prices move steadily higher for the last decade. “There is so much money looking for a home.
“And you have developers still willing to invest in their dream.”
The previous high-water mark for Uptown land prices was the sale of the Park District building site at Pearl Street and Woodall Rodgers Freeway.
The overall cost of that 1.5-acre tract was above $300 per square foot — although one section of the block sold for even more.
Uptown prices are now blowing past that point and are likely to keep heading higher.
“The prices are all predicated on how much density you can get on the site and how much money you can get for the rent,” Walker said.
Extending the cycle
That’s the big question: Will commercial and residential building tenants continue to pay more for the newest digs in Dallas’ hottest real estate market?
While high by historic standards, they are still a bargain compared with the cost of dirt in even some other Texas cities. In downtown Austin, for instance, prime building sites have topped $700 per square foot.
A bigger worry for developers eyeing a new Uptown deal is where we are in the real estate cycle.
“Yes, we are at the tail end of this development cycle,” said Dallas broker Mike Turner of J. Elmer Turner Realtors. “But this cycle keeps extending itself.”
That’s what the new players in the Uptown Dallas market are hoping.