Q & A with a Real Estate Developer

Trends in real estate development evolve with the economy, changing local markets and consumer preferences. So, what’s happening now? Read on for answers to some commonly asked questions regarding development in the Dallas-Fort Worth Metroplex.DFW has been a hot market for some time. Is that still the case?
Absolutely. As long as jobs continue to grow then almost all segments of the market will continue to grow. There is some concern that it’s about to top out as far as costs and rents go, so due diligence is more important than ever.

How so?

Because in a hot market, the smallest of details can mean the difference between what’s affordable for a business and what’s not. The hotter the market, the more due diligence you need in order to make sure you understand a particular submarket.

Can you give an example?

A classic example is the parking code. A health club in one city may require one parking space per 200 square feet while in another city the code requires one per 100 square feet. In this case, you need double the amount of land, which can make all the difference when it comes to land price. Of course, this impacts affordability, rents, etc.

In terms of development, where is retail headed?

The publication Chain Store Age has been hinting at the apocalypse of retail stores. And that is true for a segment of retail such as some of the big box stores. However, restaurant and service businesses are on the rise. And because of Amazon’s purchase of Whole Foods, grocery stores are going to have to reinvent themselves. All of this is very interesting when you consider the reports on retail’s demise.

Despite grim reports, is there any sector of the market doing well?

One type of retail that is thriving is neighborhood centers. These are somewhat insulated from economic recession because people will always need haircuts, a tailor, donut shops, pizza delivery and other types of services that cannot be duplicated on the Internet.

What’s moving into the larger vacated spaces that used to house some of those big box stores?

Once again we’re seeing a type of service move in. Health clubs and entertainment centers like Jump Street require significant square footage. In some cases, a large vacancy of 20,000 square feet or more is reimagined into a new kind of neighborhood entertainment center that offers a variety of activities for the whole family.

What kind of inventive changes are happening in the grocery business?

Cost increases and greater competition require groceries to have more population density in their markets, so smaller markets become more challenging. But some stores are being reformatted and downsized in order to deliver their product smarter and gain more efficiencies.

Also, older grocery stores are closing, but other smaller grocery concepts are moving in right behind them. And convenience stores are constantly filling the void in outlying markets that grocery stores cannot afford anymore. In fact, convenience stores are often the small anchor in a neighborhood service center.

The information contained in this article is general in nature and should not be construed as financial, tax or legal advice.  As with any financial or legal matter, consult your tax advisor and legal counsel.