Major development in North Texas—one of Texas’ fastest-growing regions—is driving thousands of new people to work and live in Frisco every year. However that same development is driving the cost of land higher, which in turn is driving the cost of office space and housing higher.
“We’re in this wonderful [growth market] in D-FW relative to the rest of the country, but it’s almost like Frisco is another wonderful [growth market] inside D-FW.”
—Jim Breitenfeld, Henry S. Miller Brokerage associate
“I’ve been in Frisco now for 20 years, and during that time real estate has continued to go up in cost and it hasn’t slowed Frisco down,” Frisco Economic Development Corp. President Jim Gandy said. “If you look across Frisco and go back a few years and look at where we are today, it’s part of the evolution of a growing city.”
Jim Breitenfeld, an associate with Henry S. Miller Brokerage, LLC, said the Dallas-Fort Worth market is one of the top five healthiest markets for commercial real estate in the country.
“We’re in this wonderful [growth market] in D-FW relative to the rest of the country, but it’s almost like Frisco is another wonderful [growth market] inside D-FW,” Breitenfeld said. “I don’t think there are conditions like this anywhere else in the country.”
Commercial real estate
Breitenfeld said projections about a year and a half ago for commercial real estate in Frisco indicated rents for office space would increase by 4 percent every year. He said that projection has held true.
A 2016 market report from Xceligent, a commercial real estate research company, says that of the entire Dallas-Fort Worth area, the far north Dallas market—which includes the majority of Frisco and parts of Plano—was the area in highest demand.
More than 7 million square feet of new office space was constructed in the far north Dallas market, which is the most in any Dallas-Fort Worth area, according to the report.
In 2006, the average rent per square foot of office space in Frisco was about $23; for 2015 the average cost is about $34, according to the FEDC.
“We are definitely in a boom right now and we don’t see that stopping,” said Kristin Grammar, associate vice president for TIG Real Estate Services.
Industry officials said there is not enough existing office space to meet the demand.
According to the Xceligent report, the far north Dallas market has an 8 percent vacancy rate for Class C office space, which includes office condos, and a 9.3 percent vacancy rate for Class A office space, which is premiere office space.
The vacancy rate for the entire D-FW region is 15 percent. In Frisco, the vacancy rate is 11.6 percent.
“There’s not a lot of vacant space, and that’s sort of a good and bad situation,” Gandy said. “It’s good because we don’t have a lot of vacant commercial space in our city [because businesses want to be here], but at the same time it’s somewhat bad because a company may be looking for a particular type of commercial space and size and we may not have it yet.”
Residential real estate
For Frisco housing, the average cost for pre-existing homes in 2006 was $255,918. The average pre-existing home price in 2016 is $381,952 according to North Texas Real Estate Information Systems.
“The demand is [in Frisco]... and as that demand increases, your prices are also going to increase as well as the underlying factor of the economics of overall price increases in general,” said Christie Cannon, lead agent at The Christie Cannon Team, a real estate agency in Frisco. “So it’s the rising cost of demand and growth and everything that’s just hit our area and caused this huge influx in pricing.”
The median cost for a home start—a newly constructed home—in 2006 was $289,016. In 2015, the median price for a home start increased to $477,599, according to a report by Residential Strategies Inc., a market research company based in Dallas.
“The land costs and development costs continue to rise, and as those areas continue to be more and more built out we’ll continue to see developers drive that cost up; it’s just the nature of growth and development,” said Kevin Cannon, broker associate at The Christie Cannon Team.
Principal at Residential Strategies Ted Wilson said prices for home starts have gone up 30 percent in the last three years in D-FW, and he does not see that trend slowing.
“In Frisco, what we have seen is the push on prices on land and lots to record highs, and we’re seeing new developments that are being pushed out there,” Wilson said. “Then you have homebuilders saying they would like to be in Frisco because it’s such a good market, but not every deal is getting pursued the same way as it was several years ago. This doesn’t mean there aren’t any deals being made, but it’s pushing the envelope right now with respect to prices.”
In 2006 there were 3,335 new homes built in Frisco. After the economic downturn of 2008, the number of home starts decreased significantly to the hundreds in 2009.
In 2010, the number of home starts began to slowly increase again. This upward trend has continued, albeit with some fluctuation. In the last quarter of 2015, there were built 2,112 new homes in Frisco.
Christie Cannon predicts homebuilders will transition into more affordable housing in other cities such as Celina, but she does not think it will happen in Frisco.
She expects the house prices in cities such as Celina to eventually increase in price as well.
“[Prices are going to have to increase] because as everything is pushing—with Dallas being the starting point—north, those prices are going to continue to rise,” she said. “So where it stops, nobody knows.”
