High Uptown Property Prices Pushing Dallas Development
to New Urban Neighborhoods
Is there life after Uptown for real estate developers? For the last decade, the district north of downtown has been the hottest development market in Dallas. But with prime land prices soaring past $200 per square foot and fewer empty lots to build on, commercial property companies are looking at nearby neighborhoods.
West Dallas, the Design District, the Farmers Market, South Side and near East Dallas are now at the top of apartment builders’ shopping lists. “It is getting very difficult to justify dirt cost in Uptown, if you can even find a site,” said Ryan Miller of apartment builder Wood Partners. “With higher dirt prices, escalating construction costs and concern for rents capping out, it makes Uptown more and more risky. ”We have been targeting alternative submarkets that are just as close to jobs and nightlife with dirt at a lower basis, which means we can keep our rents in check,” Miller said.
Wood Partners has rental communities under construction at the Farmers Market, in West Dallas and in the Medical District on Maple Avenue. Most of these are neighborhoods that developers wouldn’t have crossed the street to look at a decade ago. “We’ve done an incredible job in Dallas of pushing successful development into unproven areas,” said Greg Willett, vice president of Carrollton-based apartment consultant MPF Research. “We’ve done it with the Knox-Henderson area and the Design District. “And I’m optimistic about the development that’s going to these other areas,” including West Dallas and the Farmers Market area, Willett said. With average apartment rents for new units now running $1,800 a month in Uptown and downtown, Willett said it’s important for developers to offer locations with slightly lower prices. “If there is any concern about how much we are building, it’s how expensive it is and if we are going to run out of people who can afford the rents,” he said.
In the suburbs, retail and restaurants usually follow new rooftops. But in booming West Dallas and north Oak Cliff neighborhoods, new housing is following successful restaurants and shops that have made residents comfortable with the areas. “Sometimes the customer doesn’t know they want to be there because the product hasn’t been there before — you have to give them the product,” said Dallas developer Michael Ablon, who’s played an important role in turning the Design District into a popular restaurant and apartment address.
Ablon said many potential renters are being priced out of Uptown. “They only product you can build in Uptown is the upper echelon — you can only do apartments at the premium price point,” he said. But low land costs alone can’t be the basis for new urban neighborhoods, Ablon said. “In some of these other areas, I have a hard time knowing who really wants to be there,” he said. Longtime Dallas real estate broker Newt Walker said Uptown is still ground zero for urban development in Dallas. “If you build it in Uptown, they will come,” said Walker. “A lot of developers are crossing the Trinity River, but it’s still somewhat uncharted waters. “The question is, what’s the depth of the market there?”
Apartment builders are betting that proximity to the central business district and postcard skyline views will bring young, professional apartment renters to nearby neighborhoods. “People are excited again by the inner city and want a more urban lifestyle,” said Doug Chesnut, one of the founders of Dallas-based development firm StreetLights Residential. “We are running out of land — affordable or unaffordable — in Uptown, so we must continue to expand our geographic footprint.”
StreetLights, which has built an Uptown apartment tower and has a second under construction, has contracted to purchase a former industrial site on Singleton Boulevard in West Dallas where it plans hundreds of new apartments and homes. “The Calatrava bridge and Trinity Groves opened a new gateway to the west, just as other gateways are opening to new areas east and south of the central business district,” Chesnut said. “People are moving to North Texas, whether we like it or not, and we need to provide housing and amenities for those people.”
- Dallas Morning News, September 19, 2014
