A Continental Crossroads

Whether by plane, train, or automobile, transportation is a driving force in DFW's booming commercial real estate market.



 

BY PETER SIMEK AND CHRISTINE PEREZ

When John Neely Bryan built his log cabin and trading post on the banks of the Trinity River, it was remarkably well-located at the nexus point of an ancient network of Native American trails. Throughout its history, Dallas has taken advantage of its position at the center of a continental crossroads. The railroad came in the 1880s, followed by the interstates in the 1950s. Transit helped Dallas become a financial center for the cotton and oil businesses. And today, the region’s robust roadways, railway infrastructure, and airports provide easy access to all points around the country—and the globe.

These things have helped make Dallas-Fort Worth a top-tier logistics hub, says Tom Pearson and Chris Teesdale, executive vice presidents at Colliers International and leaders in the firm’s supply chain real estate advisors group. “Every company that has anything to do with distribution is trying to find ways to take costs out of their supply chain,” Teesdale says. “The DFW area is considered a safe harbor, providing the logistics for achieving this. Specifically, traffic congestion is generally nominal in getting product in or out of the region. Also DFW is not prone to severe weather conditions, as recently experienced in the North and Northeast.”

As manufacturing continues to expand in Mexico, the DFW area becomes even more strategic, as truckers can get product here within their regulated service times, Teesdale adds. “Since nearly 65 percent of the logistics cost of goods is in transportation, the more efficient a location is to get to helps in cutting costs from the supply chain,” he says. “Again, Dallas-Fort Worth rates very high with corporate supply chain managers in this regard.”

DFW’s stature as a top logistics market is evidenced by the number of major distribution facilities that have located here—and continue to migrate from other states, Pearson says. “So much depends on the nature of the particular company’s supply chain—its customer base, the nature of the product, point of origin, the market area it will serve, etc.,” he says. “North Texas is blessed to be located in the center of the country with an excellent freeway infrastructure, state-of-the-art intermodal rail facilities, and one of the largest airports in the country. These are just a few of the many benefits our region offers.”

Dallas-Fort Worth International Airport ranks third globally in terms of operations and ninth in terms of passengers, according to noted economist Ray Perryman, who recently studied the airport’s economic impact on the region. Nearly 30 passenger airlines operate out of the airport, providing service to more than 200 destinations. “Many firms locate and expand throughout the region and the state because of the domestic and global accessibility provided by DFW Airport,” Perryman wrote in his report. “It is difficult to imagine just how different Texas would look without this vital and catalytic infrastructure.”

Just as important for North Texas companies is ensuring employees have an easy time of getting to the office. With 90 miles of track, the Dallas Area Rapid Transit Authority is the largest light-rail operator in the country. It also operates buses and the city’s high-occupancy vehicle lanes. The region is served by six interstates, seven other U.S. highways, and numerous state highways. Even with its spectacular population growth, DFW gets high marks for major improvement projects that help keep traffic jams to a minimum. They include the $2.6 billion LBJ Express, which opened three months ahead of schedule last September. The largest public-private partnership in the state of Texas, it improved more than 13 miles of LBJ Freeway between U.S. 75 and Luna Road. Other major construction initiatives are underway on Interstates 30, 35E and 35W, and State Highways 114 and 183.

Transportation plays a major role in shaping how the region grows. For decades, the region’s ample supply of land allowed investors to take advantage of a ready supply of cheap dirt beyond the northern fringes of the city sprawl. In many ways, this continues to be the pattern of growth. Booming along new or expanded transportation corridors such as State Highway 121 in Collin County or the Alliance Intermodal Transit Center in Tarrant County demonstrate the economic power unleashed by the extension and expansion of roadway systems into undeveloped areas.

However, there is also a new demographic trend that is driving real estate investment back toward the center of the city. The last decade has seen explosive growth in the value of real estate in Dallas’ Uptown neighborhood as dense, urban living becomes more attractive to younger generations and new empty-nesters. Non-vehicular transit, like the Katy Trail and the McKinney Avenue streetcar, has played a big role in supporting Uptown’s success. And one of the major catalysts of recent growth downtown has not been the development of a road, but the covering up of one with Klyde Warren Park. An engineering marvel, the five-acre park was built atop Woodall Rodgers Freeway in downtown Dallas.

Understanding how the various modes of transportation affect DFW’s real estate economy is vital to anticipating the direction of growth in the region. Here’s a look at several initiatives and trends currently underway.

 

Transit-Oriented Developments

From the beginning, the DART light rail system was imagined not merely as a way to move people, but as a catalyst for development. When it opened in 1997, Mockingbird Station was a national model for transit-oriented developments, or TODs. After that, came The Shops at Park Lane and a TOD in downtown Plano. Lately, the idea of investing along a DART line has begun to percolate, with new projects in Victory, the Cedars, and the West Village. Among the region’s biggest new TOD is CityLine, a 186-acre development anchored by a 2 million-square-foot corporate campus for State Farm. The burst of new projects indicate that Dallas’ real estate market is ready to leverage the public transit infrastructure that laid the way for a more urban Dallas decades ago.

 

South Dallas Industrial Boom

The emergence of the Southern Sector of Dallas is huge for the region, as it offers thousands of acres of undeveloped land for future development, says Colliers’ Pearson.  “With the convergence of three major interstates (I-20, I-45 and I-35 and the upcoming Loop 9) plus the Union Pacific Intermodal right in the heart of the sector, Southern Dallas is our future and our Inland Empire,” he says. “The Intermodal will increasingly become a magnet for new industrial development as more companies utilize intermodal rail.”

 

The Urbanization of the ’Burbs

In his annual state of the city address this past February, Plano Mayor Harry LaRosiliere told his constituents that to succeed in the future, the city will have to adapt. “In the ’80s, we were a bedroom community, and in the ’90s, we were known as a big suburb,” LaRosiliere said. “Today we are our own city, and we compete on a global stage for businesses, and individuals or families looking for a home.”

The mayor wasn’t just blustering. Plano, has become a regional leader in the rethinking of suburban communities. Legacy Town Center and the redevelopment of Plano’s historic downtown have created urban zones in suburbia. Legacy West, a 240-acre development anchored by a 2 million-square-foot headquarters for Toyota Motor North America and a massive mixed-use component called Legacy West Village, will soon be home to tens of thousands of residents and employees, 

A comprehensive plan approved by the city in 2015 lays out a roadmap for continuing the trend by opening new transit corridors and intersections for mixed-use developments and multifamily housing. And Plano is not alone. Addison Circle and Cypress Waters (north of DFW International Airport) also offer models for urbanization of suburban communities. In Frisco, a similar trend is emerging along the city’s touted “$5 billion mile,” with new urban-suburban projects like The Star, which is anchored by a new headquarters for the Dallas Cowboys. As population in the region swells, the next 30 years of real estate development may begin to generate a regional network of large and smaller urban clusters connected by highways and public transit, along with bike and pedestrian corridors. 

 

Emergence of E-Commerce

As e-commerce continues to proliferate, there will be an increased focus on getting products to customers within 24 hours—or same day delivery. As a result, expect to see more partnering on transportation and final-mile delivery methods, says Teesdale of Colliers. “Proximity to intermodal terminals and major FedEx and UPS facilities will be equally critical,” he says. “DFW has been blessed with two Tier 1 Class A Intermodal Terminals (Union Pacific in southern Dallas County and BNSF at Alliance on the northwest side of the region), as well as two of the largest FedEx Ground facilities west of the Mississippi—not to mention FedEx’s major air facility at Alliance.” 

 

Bullet Train

For years, Dallas struggled to turn major investments in its convention center and the site of the former Reunion Arena in southwestern downtown into a bustling urban area. That dream may finally be made possible with the development of the high-speed “bullet” train.

With construction set to start as soon as early 2017 (and an estimated completion date of 2021), the $10 to $12 billion bullet train project promises to whisk passengers between Houston in Dallas in 90 minutes. While developer Texas Central Partners has run into some opposition from properties owners all along the proposed route, in Dallas and Houston the discussion has focused mainly on where to locate the terminal stations. Houston plans to locate the station on the outskirts of town near the intersection of U.S. Highway 290 and Interstate 610. Dallas, on the other hand, hopes that a downtown terminal could link the high speed rail to the DART network and kick-start real estate development that bridges Interstate 30.

 

Tentative plans place the terminal on one of two sites in the Cedars, adjacent to Matthews Southwest’s new apartment and entertainment developments. That location could not only stimulate new development downtown, it also might provide a catalyst for pushing even more real estate investment to the south.