Experts explain West Lubbock real estate boom

Updated: May. 2, 2017 at 9:13 PM CDT
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A new shopping center is under construction at Milwaukee Avenue and 68th (source: KCBD video)
A new shopping center is under construction at Milwaukee Avenue and 68th (source: KCBD video)

LUBBOCK, TX (KCBD) - Exciting things are happening as the City of Lubbock continues to grow, especially on the south and west sides of town.

If you drive down Milwaukee Avenue, you're bound to see "Coming Soon" signs nearly anywhere you look.

But as the new strip centers are built, when will the new tenants move in?

We spoke with Lubbock real estate experts about the time lag that goes into these development projects.

The sounds of construction have become as common as the cars zooming by on Milwaukee Avenue. There's no denying, West Lubbock has become a new Hub in the Hub City.

The City of Lubbock says in the last two years, 59 permits have been taken out for new construction activity solely along Milwaukee Avenue.

Chief Building Official Steve O'Neal says that number includes permits for new buildings, new shell buildings, new tenant finish-outs and new white-box finish outs.

So what makes this area so appealing to developers?

For Mike Henthorn, a partner in the Esplanade Shopping Center near 43rd and Milwaukee and owner of Henthorn Commercial Development, he and his team put their trust in a demographics study when they bought the land nearly ten years ago.

"We pay a lot of attention to demographic studies, and the demographic studies had shown over the last twenty years that there was a really vibrant migration toward the Frenship school district. We felt like this was the place we wanted to be," Henthorn said.

Turns out, they were right.

Henthorn says one study from the City of Lubbock Traffic Department estimated that 54,000 cars will drive by the center on an average weekend day.

"We try to arm ourselves with as much information as we possibly can because these are expensive projects and it's kind of make or break if you make a wrong decision," Henthorn said.

So, the shovel hits the ground and the buildings start popping up.

But where are the tenants?

Well, it's not that easy.

Jared Harrell is an assistant professor of practice for several real estate courses at Texas Tech University.

His classes have closely studied the commercial real estate boom in West Lubbock, including why the projects take some time to fill up.

"It's not a production line where you can turn on the machine or the widget producer and turn it off, so there's a significant time lag there…I think maybe some of our notions of how quickly stores get filled are built on the idea that they're pre-leased - meaning that construction is finished on day one, and day two, tenant moves in. And that's great, and that's great whenever that happens. However, not all real estate development projects are like that. They're not all pre-leased. Some of them are built speculatively, meaning I will build it, and then they will come and begin paying rent," Harrell said.

Harrell says the combination of Lubbock's strong economy, Texas Tech, agriculture and the health industry has led to more speculative building.

"The strength of that market gives these developers certainty that it's ok to take the pre-leasing risk off the table, because there is a strong market, and they're confident that the tenants will come. Not only are they confident, they are confident enough to actually put their money into it. They recognize there's a risk there, but also they've seen the characteristics of Lubbock and just the growth and the potential here and so they're willing to make that bet," Harrell said.

Henthorn says that's where the patience comes in.

"If you don't have it, don't do it - because what you think will take two years will take ten. And again, what you conceive of as the original theme of the project may turn out to be totally different halfway through it. So, you've got to be not only patient, but flexible," Henthorn said.

But he says that's also the fun part, and watching an idea grow and evolve from a plot of land to a 107,000-square foot family entertainment center makes it all worthwhile in the end.

"Standing in cotton up to your knees one day, and then coming out and seeing the building up and people actually living here is one of the most gratifying feelings you could possibly imagine, because of all the pieces that go with it," Henthorn said. "I can't describe it, it's something kind of beyond belief."

Henthorn says the Esplanade, which you might know as the shopping center with Altitude Trampoline Park, is about 90 percent filled now.

He says some of the new tenants will be moving in this summer, including two restaurants with outdoor patios, Rain West and Twister Spigot, along with a family game center similar to a Dave and Buster's layout.

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