| TEXAS SNAPSHOT, MAY 2005
LUBBOCK, TEXAS
The Lubbock, Texas, trade area generally includes the 34 surrounding counties, which have a total population of approximately 650,000. Overall, the Lubbock-area economy is a sturdy one, and the Lubbock MSA has the third lowest MSA unemployment rate in the state at 4.6 percent, according to the Texas Workforce Commission.
“ While the dollar value of new residential and commercial construction slowed just a bit in 2004 compared to the year before, developers continue building new residential subdivisions, apartment complexes and strip retail centers at a brisk pace and commercial real estate investors continue to gobble up properties,” says Wes Hallmark, senior investment advisor with Sperry Van Ness/Hallmark & Associates Inc. Over the past year, the market trend has been for outside investors, especially those along the West Coast, to invest in the market to achieve higher capitalization rates than those available in their states.
The continued construction of the new Marsha Sharp east/west freeway, which will connect U.S. Highway 62/82 with Interstate 27, will have a significant impact on the future growth of the area as far as transportation is concerned.
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Hallmark |
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In the center of Lubbock, between the central business district and Texas Tech University, the McDougal Companies are redeveloping the Overton Park area, which is reported to be the single largest private redevelopment project in the United States. The project has involved acquiring and razing several square miles of dilapidated, substandard housing areas and replacing it with new residential, multifamily, office and retail. A hospitality development is also proposed for the area. The redevelopment of the former Reese Air Force Base in the area is also underway. The property, situated on 2,000 acres, has been converted into a research and education center, now called Reese Technology Center. Over the next 5 years, 350,000 existing square feet will be replaced with 300,000 to 500,000 square feet of new R&D space catering to aircraft design, aviation and avionics research.
New residential subdivisions on the south, southwest, west and northwest sides of Lubbock outside Loop 289 have spurred rapid growth in retail development in those areas. Several new medical facilities and medical offices have recently gone up along Loop 289 on the northwest side of town attracting new growth to that area. Other commercial developments are rising along 82nd Street on the southwest side of town.
Active multifamily developers include McDougal Companies, Ambling Companies, Fairfield, Grapat and Donnerstein. In the retail sector, Graco Real Estate Development, Gulf Coast Commercial, and locals Craig Wallace, Minnix Commercial and Teinert Commercial have been active in strip center development.
A Kohl’s department store and Academy Sports are new to the Lubbock area, and Wal-Mart is planning its third Supercenter to be located near Fourth Street and Avenue Q on the new east/west freeway and backing up to the Overton Park redevelopment.
The Home Depot will demolish the former Montgomery Wards property and build its second location in Lubbock at 50th Street and Boston Avenue in the city’s south central part of town.
Retail space vacancy has remained somewhat stable over the past year, with the small increase in the overall vacancy rate to around 11 percent being attributed to new strip center space coming on line to serve newly developed residential areas. NNN rents for established centers range between $8 and $12 per square foot, with the newer and more upscale centers commanding between $13 and $17 per square foot.
Vacancy rates for the multifamily sector have increased for the second year in a row and now hover around 11 percent. According to Hallmark, there are concerns that multifamily is nearing the over-built region of this real estate cycle. Nearly 4,000 apartment or duplex units are reported to be either under construction or have been finished within the past 2 years, pushing rental rates lower and vacancy rates higher.
Office vacancies have remained steady over the past year and hover around 15 percent, with southwest Lubbock showing the highest occupancy rates. Class A, full-service office rents for existing buildings are running $14 to $17 per square foot, with newly constructed office property pushing $20 per square foot. Over the past several years, the majority of new office construction has been predominately owner-occupied space as owners locked in low interest rate loans, according to Hallmark.
Industrial and warehouse space continues to be in abundance in most size ranges, with occupancy levels and rental rates having remained fairly steady over the past year. “Long-term prospects for industrial and warehouse space are optimistic as Lubbock continues to be the hub of transportation for west Texas and eastern New Mexico,” says Hallmark. Also, Lubbock is located on the newly designated Port to Plains Route, which will connect Mexico to Canada with a divided highway and transportation and shipping route.
“Continued growth and new development is anticipated city-wide, but primarily along 82nd Street in southwest Lubbock, between Loop 289 and Upland Avenue in northwest Lubbock, and around the new east/west freeway, Texas Tech and the Overton Park redevelopment area,” notes Hallmark.
The city has also announced plans to extend the north/south Milwaukee Avenue to a six-lane major thoroughfare that will span the entire length of the city outside and to the west of Loop 289. The anticipated project will spur more development for Lubbock.
Lubbock continues to grow as a noted medical and health care center — it is the largest medical area between Houston, Dallas, Denver and Phoenix. Texas Tech University is also generating a positive influence on the area through its increasing enrollment, coming at a time when other universities around the state are limiting their enrollment and growth.
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