With Sex Shops Gone, Kennedale Gears for Development
KENNEDALE, TX—This town of 7,000-plus has
some great things going for it, not the least
of which is that it combines small-town
charm with an ideal location just southeast
of Fort Worth. “If you go back into the
neighborhoods, this is a lovely community
with a lot of great houses that have higher
values than nearby Mansfield and South
Arlington,” notes Jack Thompson, whose
Fort Worth-based company Orasi is providing economic development consulting services to Kennedale.
But in the past, Kennedale has had trou-
ble attracting developers, with the reason
boiling down to three words: sexually ori-
ented businesses. “This had an enormous
impact on development and interest,” says
Bob Hart, Kennedale Economic
Development Corp.’s executive director.
“When we talked to some industries about
relocating here, every one of them told me
to call them back when the sexually ori-
ented businesses at the north end of town
The good news for Kennedale’s future
is that, thanks to an agreement, these
establishments shut down on Feb. 29 and
went elsewhere. The former site of four
sex shops at Interstate 20 and West
Kennedale Parkway is now being platted
for a convenience store/gas station.
Meanwhile, the economic development
council acquired nearby land, once the
site of yet another such business.
Thompson says the goal is to find a casual
sit-down restaurant for that acreage.
Kennedale never put out the welcome
mat for those SOBs, as they’re called.
Rather, their history reaches back to the
1970s, when Kennedale was annexed to
the city of Fort Worth. Cowtown, which
wanted to rid itself of the businesses, quietly pushed them to the annexed land.
Hart says that when Kennedale came out
of annexation in 1999, the move was on to
clean up the businesses.
Even while the city was striking deals with
the SOBs, one project, Kennedale Town
Center, moved from planning stages to con-
struction launch. Located on West
Kennedale Parkway near the center of
town, the project represents a partnership
between the city and Cypress Properties of
Austin. Construction began in 2009 and,
upon build-out, the property will have
67,000 square feet over seven buildings
dedicated to mixed uses including restau-
rants, retail and medical, dental and tradi-
tional office space. In other words, notes
David Johnson, president of Cypress, “all
those services people shouldn’t have to
drive more than a mile or two to get to.”
The next step is to move the town for-
ward. Road widening and roundabout con-
struction has begun on many of its streets.
Hart says the plan is also to build neighbor-
hood villages throughout the community,
complete with retail and office uses. He says
he’d also like to bring in light industrial
firms.—Amy Wolff Sorter
Phoenix Industrial Recovers; Office Stalls
The Phoenix commercial real estate market is showing signs of recovery, with both
office and industrial experiencing positive net absorption in Q4 2011, as well as
through much of the year. What’s been helpful is the metro region’s unemployment
rate, which was reported at 7.5% in March 2012, ranking well below the national level
of 8.3%. Arizona added 27,900 jobs in February, with 18,000 of those in Metro
Phoenix. Interestingly, this is having a terrific impact on industrial, but office remains
a lagging sector and isn’t anticipated to make a comeback until both the general
economy and housing market improves.
During Q4 2011, Phoenix’s 274-million-square-foot industrial market experienced its
seventh consecutive quarter of positive absorption—a respectable 7. 7
million square feet. Logistics and distribution companies and manufacturers are opting to locate in Phoenix as a lower-cost alternative to
California’s congested Inland Empire. The
Southwest Valley, with its convenient access
to the east-west Interstate 10, is currently the
favored destination for warehouse/distribution development.
Perhaps predictably, large blocks of space—500,000 square feet
and up—for distribution users is virtually nonexistent. The Alter
Group plans to start construction on a speculative 605,700-square-
foot distribution center later this year, and several other developers are poised to
break ground on large, speculative projects.
But even with the lack of space and the growing demand, construction will continue to
be dominated by build-to-suit projects, a trend that is a result of the challenging financial
environment. Currently, build-to-suits represent 99.1% of all distribution construction.
Meanwhile, the office sector is struggling because nationally, we’ve only recovered 28%
of the 8. 8 million jobs lost, and less than two million new jobs are expected this year. Total
nonfarm employment for Arizona is about 2. 46 million as of March. The news isn’t all bad,
however—at the end of 2011, the office vacancy rate was 25.5%, a drop from 26.6% the
prior year. Some 1. 9 million square feet was absorbed in 2011 (compared to just 104,783
feet in 2010); Q4 2011 saw 517,355 feet absorbed. This has led to a tenants’ market, which
allows users to trade up from class B to class A space without paying a premium.
Though office demand typically is driven by rising employment (and Phoenix’s
employment is on the rise), the region’s office market is overbuilt. As a result, speculative construction is at a standstill and may remain that way for several years. Difficulty in
obtaining financing only aggravates the situation. The rate of job creation needs to
improve appreciably before speculative construction can resume. With that said, large
blocks of well-located office space are still very much in demand, and we expect that
several large office build-to-suits will be developed within the next 18 to 24 months.
Call-center and data operations are returning to the Phoenix market, drawn by the
well-educated labor force and affordable housing. This trend is helping to fill space that
otherwise might sit vacant. According to a recent Newmark Knight Frank survey, 50% of
corporations are expanding and building new data centers nationally.
By Kurt W. Rosene
Kurt W. Rosene is senior vice president at the Alter Group, based in Phoenix. He may be contacted at email@example.com. The views expressed here are the author’s own.
Vital Signs...Retail vacancy in Phoenix is expected to fall below 12% by the end of 2012.—Colliers International