Real Estate Forum - January 2013

NEWS FRONT
Specialty Grocers Will Lead the Charge in 2013

HOUSTON, TX—The retail story in the region during 2012 can be best summed up with two words: grocery stores. Experts note that overall, the retail sector was on a strong trend upward, but it was the grocery stores, specifically, the specialty grocers, that led the charge.

“It was crazy this year,” comments Shawn
Ackerman, executive vice president with
Henry S. Miller. The region has seen
Trader Joe’s, Sprouts and Fresh Market
either entering or expanding in the mar-
ket and even “old timer” Whole Foods is
making a push for expansion. “It’s amaz-
ing that Randall’s”—a Texas chain—“has
been struggling, yet you have the super
high-end grocers coming into town,”
Ackerman notes. “It’s a good sign that
times are getting better. At least, people
are eating better.”
Lance Gilliam, managing partner with
UCRMoodyRambin, believes that high-end
grocers, and other grocers, such as the
Krogers and the HEBs, for that matter, are
finding Houston appealing because of resi-
dential growth. That, in turn, is succeeding
because of jobs. “If you want to work in
Houston, you can find work,” Gilliam notes.
“It may not be your dream job, but you can
find work.”
In addition to high-end grocers, other
retailers have started taking space as well.
Transwestern’s Nick Hernandez, managing
director of the retail services group, points
out that more tenants have leased than in
previous years. Ackerman also says that the
discounters also continue to do well, with
new tenants coming into the region.

There has, however, been a lack of new construction in the market, other than grocery-anchored projects—and even those grocery centers going north have been few and far between. Hernandez says this has led to a dearth of class A space in some markets, which has, in turn, pushed rents. Gilliam doesn’t expect to see a whole lot of retail construction in 2013, either. “The capital is just now coming back to the market and ultimately, every project is driven by retail sales.” The retail sales are coming back, he explains, but there is uncertainty among retailers as to how long that will last.

If that confidence continues, however,
construction on new projects could be
under way—but again, much of that likely
won’t come to fruition until 2014. Still,
the experts are optimistic about what’s
going on. “A lot of projects are coming
on the drawing board for later deliver-
ies,” Hernandez says. “They’re putting
together anchors, or have put them
together.”
In the more immediate future, Ackerman
predicts that the retail battle will be between
the upscale grocers that flocked into the
area in 2012. Depending on which retailer
(or retailers) gain position, this could
change the retail landscape as 2013
progresses.—Amy Wolff Sorter

Amenities Trump Infrastructure Snags

Under most any set of circumstances, a successful leasing program at an iconic class A office complex in the heart of Dallas is to be expected. However, when the property is in the exact middle of what is arguably the most comprehensive and complex roadway construction project in history, both tenants and prospects are likely to consider alternatives.

Lincoln Centre, a 1.6-million-square-foot office complex situated at the southeast
corner of LBJ Freeway (Interstate 635) and the Dallas North Tollway, has long been a
highly visible landmark at the intersection of these two major thor-
oughfares. It is comprised of four glass towers, including three office
buildings ( 15, 18 and 19 stories) and an 18-story hotel.
Meanwhile, alongside the Lincoln
Centre is the LBJ Express, a $2.7-
billion, 17-mile, much-needed road-
way redevelopment project that began in 2011. Construction
involves a combination of four main lanes, three continuous front-
age roads in each direction, along with three toll lanes in each direc-
tion. Upon completion in 2016, the area will enjoy significantly
enhanced mobility and almost double the roadway capacity.

But in the interim, the road is torn up, with traffic patterns snarled. Despite this, and perhaps surprisingly, occupancy at Lincoln Centre within the past 12 months has actually increased from 80% to more than 90%. Recent new leases include Northwestern Mutual ( 50,000 sf), Pegasus Solutions ( 48,000 square feet), Markit Group ( 46,000 square feet), and Century Golf Partners/Arnold Palmer Golf Management ( 22,000 square feet).

The Cushman & Wakefield of Texas Inc. leasing team for Lincoln Centre—including senior managing directors Mark Dickenson, Meredith Durham and myself—attribute the success to two compelling factors: on-site amenities and accessibility.

Among the many amenities allowing tenants to get out of the office yet remain on property are the state-of-the-art fitness center, a new 9,000-square foot café, two full-service banks, a salon, and a business center, including meeting rooms. Another popular campus attraction is the four-acre lake complete with fountains, sculptures and walking paths. The four-star Hilton Dallas Lincoln Centre, directly next door to the office component, provides many conveniences, from multiple restaurants to a spacious lobby and gift shop.

These amenities are important, especially as driving to get food or to take care of banking business is a challenge. Tenants don’t have to leave the premises—and brave the construction—during their lunch hours.

When it comes to accessibility, the availability of unequalled access to the Dallas North Tollway, the main route for many professionals who live in the important communities like the Park Cities to the south as well as Plano and Frisco to the north, cannot be understated.

Leasing success at Lincoln Centre has proven that, despite challenges presented by external factors, like a major highway reconstruction, strong amenities and accessibility can be game changers.

By Matthew A. Schendle

Matthew A. Schendle is leasing director, Central Region, at Cushman & Wakefield of Texas Inc. He may be contacted at matt.schendle@cushwake.com. The views expressed here are the author’s own.