Whitestone REIT has acquired the Eldorado Plaza and BLVD Place in separate transactions, two class-A retail centers located in affluent and fast-growing communities in Dallas and Houston, respectively.
The sales price was $204.6 million.
Eldorado Plaza is located in McKinney, Texas, on the north end of the Dallas “Platinum Corridor,” which is known for its mix of national companies and regional branch offices including Coca-Cola, Wells Fargo, Pizza Hut, Hilton Hotels, NexBank, iHeart Communications and Mary Kay Cosmetics.
The class-A lifestyle center contains 221,577 square feet of leasable space, with the option to purchase an additional 1.86 acres of developable land that will give Whitestone the ability to build an estimated 24,000 square feet of additional leasable space, based on current plans. As of April 15, 2017, Eldorado Plaza was 97 percent leased. Eldorado Plaza will be Whitestone’s seventh property in its Dallas division.
BLVD Place is located in Uptown Houston, one of the largest business districts in the United States, ranking 15th nationally, and comparable in size to the CBD’s of Pittsburgh and Denver.
The class-A lifestyle center includes 216,944 square feet of leasable space and included in the purchase of BLVD Place is approximately 1.43 acres of developable land that will give Whitestone the ability to build an estimated 137,000 square feet of additional leasable space, based on current plans.
As of April 15, 2017, BLVD Place was 99 percent leased. BLVD Place will be Whitestone’s 28th property in its Houston region. The company currently intends to develop a six-story, 137,000-square-foot mixed-use building (the “BLVD Phase II-B development”) on the developable land at BLVD Place, for an estimated $45 million incremental development cost. The BLVD Phase II-B development is expected to include 46,000 square feet of retail space on the first two floors and 91,000 square feet of office space on the top four floors.
Occupancy in the Dallas/Fort Worth retail market hits a new all-time high, reaching 94.4 percent during the first quarter 2017, according to CBRE.
Market expansion carries on as area retailers are attracted to, and benefit from, DFW economic fundamentals. Major developments in Frisco continue to build out, Denton’s Rayzor Ranch mixed-use project moves forward with a 2018 opening, and Irving looks forward to the completion of Music Factory and Water Street later this year.
And absorption and completions have stabilized. Although absorption and completions are off their multi-year highs, this is expected to change dramatically as multiple DFW major construction projects are set to deliver in the next 12-18 months.
Big box net absorption increased this quarter as higher valued locations were taken off market by various home goods and discount retailers. As national retailers such as JCPenney, Macy’s, and Sears continue to announce closures, CBRE expects that class A availability will increase slightly, while remaining spaces will be split up to reduce footprint.
The Houston’s retail market ended 2016 on a positive note and in 2017 it will be one the healthiest commercial real estate sector, according to Colliers International.
According to our data provider, CoStar Property, Houston ranks fourth nationally in construction activity. Approximately 74.6 percent of the retail space under construction at the close of fourth quarter is pre-leased. Despite the 1.3 million square feet of new inventory delivered in fourth quarter 2016, Houston’s average retail vacancy rate remains low at 5.8 percent, only 10 basis points higher than the 5.7 percent recorded in the previous quarter. Although Houston lost about 80,000 high income jobs between 2014 and 2016, retail market indicators show no signs of a struggling economy.
According to our data provider, CoStar Property, Houston ranks fourth nationally in construction activity. Approximately 74.6 percent of the retail space under construction at the close of fourth quarter is pre-leased. Despite the 1.3M SF of new inventory delivered in fourth quarter, Houston’s average retail vacancy rate remains low at 5.8 percent, only 10 basis points higher than the 5.7 percent recorded in the previous quarter.
Houston’s retail leasing activity, which includes renewals, decreased over the quarter from 1.4 million square feet in third quarter 2016 to 1.1M SF. 2016 year-end leasing activity was actually more than the previous year, with 6.2 million square feet compared to 5.7 million square feet in 2015.
Houston absorbed 182,000 square feet in during the first quarter, the softest gain in six quarters, according to CBRE. Despite announcements of retail bankruptcies dominating headlines and lower net absorption in Q1 2017, retail demand remains healthy and big box vacancies were quickly backfilled by Dick’s Sporting Goods, Total Wine, and discount/off-price retailers. Future shadow risks include bankrupt Gander Mountain, as well as troubled Payless ShoeSource and Radio Shack, all of which will give back space this year. Locally, however, growing demographics continue to translate into retail demand; from 2010 to 2016, Houston added approximately 2,600 people per week supporting expanding retail.