Dallas/Fort Worth has the best outlook of any U.S. real estate market, according to Emerging Trends in Real Estate® 2019, published jointly by ULI and PwC. However, the region is near the bottom of the pack among similar-sized metro areas for walkable urban development.
“You have been the winner, number 1, or number 2 in every economic competition, . . . but you are lagging in this,” said Christopher Leinberger, a ULI trustee and coauthor with Tracy Hadden Loh of The WalkUP Wake-Up Call: Dallas–Fort Worth, an analysis of what they term “walkable urban places,” or walkUPs. Both Leinberger and Loh work at the Center for Real Estate and Urban Analysis at George Washington University in Washington, D.C.
The two released their report in January during a joint luncheon in Dallas sponsored by the Real Estate Council (TREC) and ULI North Texas.
Leinberger compared Dallas/Fort Worth to Atlanta and Washington, D.C., which are similar in population and had similar characteristics in the 1950s and 1960s when they all exploded with suburban growth. All three have since seen the pendulum swing back to walkable urban development, though Washington and Atlanta are far ahead of Dallas’s progress.
“While metro DFW is a laggard to metro Atlanta and Washington, it is certainly heading in the same direction,” Leinberger said.
The share of walkable urban development in net absorption in Dallas/Fort Worth from 2010 to 2015 was just 17 percent. In Atlanta, it was in nearly 50 percent, and in Washington, it was 91 percent. “The entire D.C. real estate community has shifted to walkable urban production over the last 20 years,” he said.
In Dallas/Fort Worth, urban walkability gained attention in the mid-1990s with two prominent walkable, multiblock developments—Uptown Dallas and Fort Worth’s Sundance Square. Since then, dozens of similar developments have appeared on the landscape.
“If metro DFW follows the lead of comparable metros, such as metropolitan Atlanta and Washington, D.C., [walkUPs] will become the dominant form of a new real estate development in the early and mid-21st century,” the executive summary of the WalkUP report reads.
Among the report’s key findings are the following:
- Dallas/Fort Worth has 38 established walkUPs that combined account for only 0.1 percent of the total land in the metro area. It has 17 emerging walkUPs totaling 0.02 percent of the region’s land area and 22 potential walkUPs.
- The 38 established walkUPs generate 12 percent of metropolitan gross regional product.
- Sixty percent of the established walkUPs are concentrated in Dallas and Fort Worth, but over 70 percent of the emerging and potential walkUPs are in the suburbs.
- Average rent income in the established walkUPs was 37 percent higher than the regional average on a vacancy-adjusted, rent-per-square-foot basis.
- In the current real estate cycle, 26 percent of the multifamily housing was developed in established or emerging walkUPs.
- Adjacent for-sale housing within a half-mile of a walkUP sells for a 71 percent premium per square foot over the average house in Dallas/Fort Worth.
Among the 30 largest U.S. metro areas, Dallas/Fort Worth has the eighth-highest gross domestic product, due in part to its low housing costs. However, stark divisions between rich and poor exist, speakers noted.
“If we don’t make these mixed income, if we don’t make these mixed race, we are in trouble as an industry, we are in trouble as a metro economy, we are in trouble as a society,” Leinberger said. “Walkable urban by its very nature is socially equitable because people are driving less, they are taking more transit, and the lower-income households [living in a walkable community] spend less on transportation and have more accessibility.”
The report ranks the metro area’s established walkUPs for their economic and social-equity performance.
Only Preston Center in Dallas received a platinum economic rating. A platinum rating assumes the walkUP has achieved critical mass and exhibits no need for special incentives to build new projects in the development. They are categorized as institutional-asset places that attract investment from low-risk pension funds, insurance companies, and real estate investment trusts (REITs). Preston Center had a vacancy-adjusted rent of $28.19 per square foot ($303.43/sq m) per year, compared with an average $16.68 per square foot ($179.54/sq m) for the region’s drivable suburbs—a 69 percent premium.
Seventeen walkUPs received a gold rating, which also assumes critical mass has been achieved and no need for economic incentives. Gold-rated walkUPs have a vacancy-adjusted rent of $25.17 per square foot ($270.93/sq m) per year. Dallas/Fort Worth’s gold walkUPs included a variety of downtown and suburban projects, such as Legacy Town Center in Plano, Southlake Town Square, Grapevine’s Main Street, and the downtowns of Dallas and Fort Worth.
A dozen WalkUPs received the lowest rating, copper, including several outlying cities such as downtown Waxahachie and downtown Weatherford. Though copper represents the riskiest ranking for investment, these developments also present the most upside. They are not at critical mass, and tax incentives, subsidies, or some other writedown of costs may be needed for development to occur. They have a vacancy-adjusted rent of $16.43 per square foot ($176.85/sq m) per year, or a negative 2 percent rent premium.
Social Equity Rankings
The only Dallas/Fort Worth walkUP to get a platinum rating for social equity was East Jefferson. Four got a gold rating—Baylor University Medical Center, Magnolia/Fairmount, Bishop Arts District/Davis, and Lower Greenville. Loh cited East Jefferson for walkability, housing affordability, transit access, and a mix of rental and for-sale housing.
As these areas continue to develop, however, there is concern that modest- or low-income households may be displaced, as has happened in similar walkUPs across the country.
Most of Dallas/Fort Worth’s walkUPs were ranked silver for social equity. Southlake Town Square and Preston Center, highly ranked for economics, were at the copper level for social equity because of high housing costs, lack of transit, and scarcity of rental housing.
“This is not what we normally see in a region,” Loh said. The goal in walkUPs is to “do well while doing good”—achieving a highly ranked performance for both economics and social equity, she said.
“We are used to seeing a more even distribution [among the categories]. There’s definitely room for improvement,” Loh said. “Dallas/Fort Worth, as a region, has some work to do in terms of improving existing walkable urban places to make them more inclusive and creating new walkable urban places that can succeed on both axes of our indexes.”
The report makes a number of recommendations, including removal of zoning barriers that inhibit walkUP development, creation of a strategic plan for regionally significant walkable projects, development of social equity strategies that include affordable workforce housing in walkUPs (which may require zoning codes to change), and continued investment in transportation alternatives, including rail, bus, bicycling, and walking.