.png)
Retail Intel
Retail Intel
Ep 44: Segovia Partners
Welcome back to Retail Intel with your host, Brian Sheehan! In this episode, we're joined by Bretley Roche and Jim Jamerson from Segovia Partners, a goal-oriented, dedicated and solutions-based retail brokerage firm that leverages relationships to obtain results.
Welcome to Retail Intel, the podcast where we dive deep into the dynamic world of commercial real estate. I'm your host, brian Sheehan, and I'm thrilled to be your guide on this journey through the bustling streets of retail, the aisles of shopping centers and the world of property investment. With me today I have Brett Lee Roche and Jim Jamerson with Segovia Partners. Brett Lee is vice president and Jim is executive vice president. Both are located in Dallas. Brett Lee has been focused on tenant representation and landlord representation since January 2020. And Jim has been focused on tenant and landlord rep work, as well as new development, for the past 35 years. How have you both been Doing great, brian.
Bretley Roche:Doing well. Brian, how are you?
Brian Sheehan:Well, welcome. Thank you for taking the time. I know we had tried to schedule this around ICSC Red River in Dallas and that was part of the reason to try to jump on with you a couple experts located in DFW. Before we jump into what's happening in Dallas, tell me a little bit about yourself and how you both got into commercial real estate, if you don't mind.
Bretley Roche:Sure, well, I can start. I am originally from California, born and raised. All my family is still out there. I moved to Texas when I was about 18 years old to go to Baylor University. When I graduated I really didn't know what I wanted to do and I ended up moving to Dallas and getting a job with Granite Properties, which are office developers based here in Dallas, although they do work in five or six different states. I was there for about five years and I was on the property management side of things during that time and while it was a wonderful experience and a great company, as those years progressed it started to become very clear to me that my personality and my goals were more geared towards sales, not to mention brokerage, and retail.
Bretley Roche:Real estate has been in my family. My dad had his own retail firm in California, in the Central Valley, for many years. It was called Pacific Commercial Realty Advisors. He ended up opening multiple offices in different states, so it's always been something that has been in my mind and in my blood, so to speak. So he was able to connect me to someone who knew Jennifer Frank, who was one of the principals here at Segovia Partners, and I ended up joining with them right before COVID about five years ago.
Bretley Roche:At the time there was only four brokers, of which Jim was one, and we have since then grown in size. Jim has been a mentor to me since day one and we formed a really unique partnership. From early on, he spent a lot of time training me and he helped me to get into new development, which was a whole nother world for me at the time. He also introduced me to the restaurant world, which is very fascinating and dynamic and one that I've grown to love, and he taught me the ropes, and I've been shadowing him and we've now become great partners and we focus primarily on new development, tenant representation and, within the tenant world, we focus primarily on restaurants and entertainment. It's been very exciting, very fun and very busy.
Brian Sheehan:Gosh, that's a great niche for Dallas. Jim, how about you? How'd you get into commercial real estate great niche for Dallas.
Jim Jamerson:Jim, how about you? How'd you get into commercial real estate? Well, so I got married in Denver, colorado, many years ago and I was working for a real estate law firm as a paralegal. And I had a friend his name is Keith Duesenberg and his family. His grandfather invented the famous Duesenberg car back in the 1930s and he introduced me to the Coldwell Banker Commercial, which is now CBRE manager in Denver, and they needed someone in the retail department. So I started working there and then, after a couple of years, my wife is from Dallas and we kept coming down here in the wintertime. I love the mild winters, got tired of the snow up there, love the people down here and love the Tex-Mex, and so we packed everything up in the U-Haul and drove down here after a beautiful day of golf. It was really kind of bizarre. I was like why am I leaving beautiful Colorado? People thought I was crazy. But I think people when they think of Colorado they think of Vail or a resort and they don't think of.
Jim Jamerson:You know what it's like to work in the city? Yeah, so I came down here to the CBRE office. You know we had a lot of big accents West Texas accents and I was like when everybody would hang up, they'd say thank you. I'm like when everybody would hang up they'd say thank you. I'm like what does you mean? Thank you, what? So I had to get used to the accents here and then I went on to work for CBRE for many years and I went on to work for Chain Links UCR.
Jim Jamerson:That's where I got into working on some big power center developments as well as working, starting to work with restaurants. I did like 35 Panda Express deals, muya Burger, IHOP, people like that and then I went to work for after the financial crisis, I went to work for John Evans Company and John Evans is very well known a broker for doing a lot of restaurant deals, so he helped teach me more about restaurants and I did a bunch of deals with Dairy Queen, schlatsky's and people like that. So he passed away in 2019 and I knew Jennifer Frank in Segovia and I decided it was a good fit. And then I met Brett Lee soon after and she's been incredible to work with. I think she's one of the best young brokers in the market, just based on her production and what she can accomplish, so I really feel blessed to work with her on a lot of projects here.
Jim Jamerson:So Segovia is also part of the SightSource network. There's 47 brokers around the country that we network with, and so we're more of a boutique firm that handles a lot of big national retail and restaurant brands and strong locals, as well as the shopping center leasing and development deals. So we have a really good niche in the market. We just have very strong, productive brokers who really know their stuff. So it's been great to work here.
Brian Sheehan:It sounds like it, and you mentioned Tex-Mex. Yes, I have to ask. There's a restaurant that we were lucky enough to have a meal at while we were there, called the Mexican.
Jim Jamerson:Have you been Bredly has? I was going to mention that, but I have not had a chance to go over there yet.
Bretley Roche:It's funny we were just talking about this last night, brian about the Mexican. I've been probably a year ago and it was delicious, really incredible experience. I think it was 15,000 square feet foot space.
Brian Sheehan:Yes, did you have a chance to eat there when you were in town? We did Highly recommend it to anyone listening. If you're ever in Dallas to check it out, it's quite the experience. Well, tell me about kind of the tone and mood of the retail market in DFW. I mean I was there recently for ICSC. It really won just impressed with the size and activity at that event. Just incredible amount of deal making and volume activity happening in Dallas. And while I was there I had a chance to drive around to see a number of our different properties, look in a few different markets and there's construction everywhere. It seems like you could drive in any direction and see thousands of apartments and new homes and new retail centers being developed. So for folks that are there, experts like yourself, what's the tone and mood there?
Bretley Roche:Yeah, so aggressive, full steam ahead. Everyone is very, very active. From the tenants perspective, which I'll touch on first, the tenants never really slowed down when we came out of COVID. Obviously everyone was recovering, really slowed down when we came out of COVID. Obviously everyone was recovering, but it picked up with just tremendous activity right from the get-go. And the tenants are the ones that are seemingly impacted the most. I mean, their rents have continued to climb and climb, with inflation and land costs getting higher and higher. The cost of even their own restaurant equipment has gone up and somehow they have just continued to expand and pay those higher rents.
Bretley Roche:And a large part of that is just Texas and the geographical benefit of being here, among other things we like to call the triangle shape, that is, dallas to Austin, to Houston, to San Antonio. The Texas triangle is what we call it, and it's experiencing historic growth numbers. The population within that triangle in 2020 was 21 million. Some other statistics about the Texas Triangle that are just kind of staggering it has a GDP of 2.4 trillion, which ranks it as the ninth largest economy among the nations of the world, ahead of Canada, south Korea, russia and Australia, which is pretty fascinating. The Metroplex is estimated. That triangle is estimated to grow to almost 34 million people in the next 77 years. But based on the population trends, we're seeing that America's three biggest metros in 70 years are going to be DFW, houston, austin replacing New York Los Angeles and Chicago.
Brian Sheehan:Wow.
Bretley Roche:So the state added about 660,000 new jobs in 2023. We don't have any state income tax, but the point is Texas is booming. People are moving here from all over and restaurateurs and other retailers from all over the country are coming here bringing their businesses here. So the job growth is climbing, the demand is climbing, so it's keeping the market really, really strong. And with that I'll turn it over to Jim.
Jim Jamerson:Yeah, if I could add some things to that. So DFW is the fourth largest city in the United States with 7.9 million people. It could soon surpass Chicago for third place. Dallas has grown wealthier, with 92 million millionaires and 18 billionaires, ranking it the 18th wealthiest city in the world. Several Fortune 500 companies, like AT&T, american Airlines, are headquartered in Dallas.
Jim Jamerson:Dfw is number one in population growth, with 150 to 170 migration population coming in a DFW with an 8.6% growth rate. It's also number one in job growth, with 134,000 new jobs created last year and 19 corporate headquarters relocated to Dallas last year alone, and many from California. So the current trends which is interesting, if you take the current migration trends and you extrapolate out to 75 years and the turn of the century, the year 2100, which I don't think I'll be around to see that but Dallas-Fort Worth will be the largest city in the country with 33 million residents, houston will be number two with 31 million and Austin number three with 30 million. So there's a developer described DFW right now as like Southern California in the 70s and 80s. It's just, it's about to explode and there's just, there's no barriers to growth. We can grow in all different directions and so we're just starting to see phenomenal growth here. That's incredible.
Brian Sheehan:I mean you mentioned some of the reasons behind that growth. Are there any other things that stand out in your mind of what's really concentrating so much growth and development activity in DFW and that Texas Triangle?
Jim Jamerson:Yeah, I think we just have a lot of pro-growth policies. I mean there's no corporate income tax, there's no state income tax, very low franchise taxes. The property taxes are a little higher. You do have a fairly high sales tax but it's a very affordable cost of living. But it's very affordable cost of living and affordable housing compared to the East Coast and West Coast, so it's just a very pro-business. A lot of incentives given to corporate headquarters to relocate to Texas, so it's just fairly nice weather, although three months of the year it's pretty hot. So there's a lot of reasons and a very just a really strong, dynamic economy, very diversified in Dallas, fort Worth, transportation, hospitality and real estate. There's just major industries that are growing exponentially here right now.
Brian Sheehan:You mentioned aggressive a couple of times and I'm thinking about on my recent visit in the market when you tour, it's just so impressive how many different retailers are there. It seems like the retail capital is of the US and, with the accounts that I talk to constantly, if you ask them where they're growing, where they're planning to grow, almost all of them mention DFW, who are some of the most aggressive retailers you're seeing in the DFW market.
Jim Jamerson:Yeah, I think I'll get started. I was going to talk about the groceries stores and the big box concepts. Things have really slowed down in recent years on the grocery store segment expanding, but now it's just on fire and that's partly due to the fact that grocers are flush with cash I mean coming out of COVID like, for example, kroger made over $2 billion in profit in 2022. And as well as inflation, I think grocery stores love inflation because they have better margins for them. So right now I'll just give you some information on what I know. So Target, the broker for Target, told me they're working on 15 deals in Texas and they just opened their prototype up in Prosper. Costco is opened in Aubrey, texas. It's under construction in Salina and working more deals.
Jim Jamerson:After being very slow to grow, walmart has been kind of on hold for years. They're starting to put land under contract for their superstore and they plan to build out 150 new store openings. Heb out of San Antonio. They land banked about 25 grocery sites over many years and now they're on fire, opening several stores a year. Their stores are averaging well. Their first store opened doing about 6 million a week and now they're averaging about 4 million.
Jim Jamerson:I think there'll be some cannibalization when they open more, but it's still pretty phenomenal how well HEB is doing so. They're going crazy. Tom Thumb is opening four new stores this year and getting ready to sign up three more deals and they're working on many more deals in the pipeline and they have been very slow to very, not that very active. And then, in addition, lowe's and Home Depot are doing deals again. Lowe's in particular is very aggressive and in fact there's a brand new large format grocery store that I can't announce yet. They have not announced publicly, but they're lining up eight new deals in the marketplace before they make an announcement. So I mean that alone is pretty incredible. Never seen it like that in this market, never seen that much activity from the grocer.
Brian Sheehan:The fact that you've got all that activity with those established publicly traded companies, in addition to having new entrants into the market who are going to open close to double digit stores, it's just incredible.
Bretley Roche:Yeah, and I'll chime in a little bit there. So obviously Jim did a great job describing all the grocers and they obviously drive all the retail around it. Wherever they plant their flag, the four corners and miles surrounding them, you know, begin to get grabbed up, gobbled up, develop. Tenants are rushing there. We see a lot of fast casual restaurants expanding right now. There's a lot of coffee concepts. White Rhino Coffee is a local group. I think they've done eight to 10 deals. They typically do end cap drive-thru but they have gone in some downtown uptown locations.
Bretley Roche:Another coffee company, dunn Brothers Coffee, is doing end cap drive-thrus. Black Rock Coffee is expanding aggressively. The Caddy Roll Company is an Indian fusion shawarma type concept out of London. They're very well known in New York City. They are starting to expand here. Take inline space. They're looking for downtown locations, franchise model. There's also your traditional users that we're seeing aggressively expanding right now McDonald's Salad Go users that we're seeing aggressively expanding right now McDonald's Salad Go Water Burger, which has a new prototype. They're doing some end cap drive-thrus which is new for them. Costa Vida, freddy's, popeye's, bojangles, portillo's all those users, just to name a few, are all looking for pad deals, freestanding buildings to buy and they're looking at many, many more, looking all over the market, many of them trying to be close to these grocers as well.
Brian Sheehan:That's incredible. Are there any new concepts?
Jim Jamerson:Yeah, let's just talk about some of the restaurants, the fine dining, because you talked about the Mexican. But there's a New York Times article last summer that came out and they call Dallas the new Dubai for the restaurant scene. It used to be Dallas is all about Tex-Mex and barbecue. Well, there's some fabulous restaurants that are just opened or that have signed deals in Dallas. I'll just go through some of them. I think we're starting to see restaurants that were only in places like Las Vegas and Miami coming into Dallas. That's due to the growth and the wealth in Dallas.
Jim Jamerson:Major food group out of New York has a famous restaurant called Carbone that opened in the design district. There are only five in the world. They're in Vegas, hong Kong, miami and Doha, so that was pretty spectacular when they came in. Just a couple of years ago, brettley and I are working with a local brunch concept called 360 Brunch House and it's a really cool breakfast place with a vibe of a dinner place and sometimes they turn it into a nightclub with a DJ on the weekends, but it's only open for breakfast and lunch. But they have like very expensive $30 cocktails, a very extensive cocktail menu and expensive, very elevated brunch items like Eggs Benedict with caviar, and we've done four deals with them and they're looking to expand beyond VFW. And then you mentioned the Mexican. So they have a $250 margarita called Pancho Vila and actually they have a tequila sommelier. So I don't know if you had that, brian, if you had to step up and pay that for your margarita.
Brian Sheehan:I did not have either of those.
Jim Jamerson:But Komodo out of Miami. They're an Asian sushi concept. They opened in Deep Ellum about 18 months ago. That's a 25,000 square foot restaurant and founded Miami. Then STK Steakhouse is owned by one group out of Denver, colorado. They opened in Uptown recently and they're creating a new term for dining. It's called Vibe Dining. So that's where later in the evening the lights kind of turn low, a DJ turns up the music and a younger crowd turns it into a more of a party. So this is becoming popular in more places in Dallas and Houston. So it's a new little buzzword. And then there's some new deals that have been signed.
Jim Jamerson:The Catch is under construction in Uptown. They operate in Las Vegas in the Aria Hotel. They're in New York City, la and Aspen and a lot of celebrities are seen in the Vegas catch. Same with Delilah. Delilah is from Las Vegas. They signed a deal in the design district. It's a very fancy supper club, 1950s decor with live music. Again, you'll see a lot of celebrities there. They're in the wind in Las Vegas.
Jim Jamerson:There's a famous Canadian restaurant that's just opened in Dallas called Joey's, and they opened in North Park Mall just recently and they're only in California and Seattle but they've come to Dallas Monarch is part of the Maple Hospitality out of Chicago and they have a stunning view of the 45th floor of a downtown skyscraper. Many people order a whole king crab that serves eight people and costs $1,000. So that's the kind of money that's being thrown around at these restaurants. And then, lastly, in my neighborhood in the Knox District, there's a new Mr Charles restaurant that opened up. That's a really cool, swanky restaurant. With the Knox District they're pouring billions of dollars in new development. They're building a new mixed-use project with 100,000 square feet of new retail and restaurants going in there. It's right next to Highland Park and a great area. Anyway, I could go on, but it's pretty amazing. This is just in the last three or four years these restaurants have come in or signed up, so it's really changing the whole restaurant scene in Dallas-Fort Worth.
Brian Sheehan:Well, it's a great time to go out to eat in Dallas. You mentioned so many exciting concepts that are expanding in the market. You talked about the Knox District. What are the fastest growing markets in Dallas?
Bretley Roche:Before we jump to that, would you mind if I touch on entertainment a little bit? I'll be brief.
Brian Sheehan:Yeah, please do.
Bretley Roche:The entertainment segment is a very new, fast-growing market here in DFW, as I think it is really across the country. I recently attended the Entertainment Evolution Experience Convention it was in Los Angeles a couple of weeks ago and got to interact and meet with a ton of new entertainment concepts, and a lot of them are either already here in Dallas or they're on their way, and so I thought it would be interesting to just touch on a couple of those. So there's a new concept called Bat Box out of Monterey, mexico, which is an immersive. It is a baseball experience but it's a simulation. It is a baseball experience but it's a simulation. F1 Arcade, which is F1 driving through a simulation. Both of those have recently signed deals here in North Dallas and they're planning to expand on a national level. Toka Social is a new soccer concept that is like Topgolf but for soccer, and it is coming out of London. They've opened their first store in London. It's a lot of celebrities frequently go there. They garner 25,000 guests per month when they first opened, and they're looking at Dallas as their first ever US location, which is pretty incredible when you think of all the cities they could choose from.
Bretley Roche:There's also a lot of other concepts. I want to touch on. High Five Entertainment out of Austin recently signed a deal and Allen beat the bomb, which is a team-building experience. They have locations in Houston and they're headed to DFW next looking at sites Andretti's, go-kart's, ground Control, trampoline is doing a couple of deals here as well as in Oklahoma City. Boulder Adventure is expanding and then also separately but also in the entertainment realm, is pickleball, which is I think it is the fastest growing sport, or it was recently, and there's they're expanding very aggressively here in Texas and across the country.
Bretley Roche:We represent the Pickler, which is a group out of Utah, salt Lake City. They've signed almost 300 franchisees nationally in the last six months and there's more coming. We have signed a couple of deals with them here and it was eye-opening because they, like other entertainment users, are kind of new to landlords. Landlords don't understand these users for their big boxes and they question will these users be around in five years? Is this just a fad? And so there is an education component when you're working with entertainment and recreational users like this that we're seeing more and more of because the landscape is changing and big boxes are transitioning from typical apparel to more of entertainment and recreation and landlords really need to be educated on the users and make sure they can be there. But as it becomes more and more common for these types of groups to do deals, it's getting a little bit easier.
Bretley Roche:Chicken and Pickle is an entertainment pickleball concept that opened at Grand Prairie in 2021. It has a lot of food and beverage, whereas the Pickler is strictly a pickleball club. They've combined pickleball and shuffleboard and drinking and food and it has just done tremendously well. It's got a lot of publicity. That's come its way. One of the reasons so many of these concepts are interested in coming to DFW is because the cities are very welcoming and they typically are open to offering incentives to many users in different ways to get a concept like that for their municipalities. So it's a welcoming environment in most of the cities.
Brian Sheehan:It's so exciting to hear about all these new. So exciting to hear about all these new really interesting entertainment concepts and it's fascinating if you go back to you know Topgolf was sort of an originator in this use category and now either people that were associated with Topgolf have spun off and kind of doing their own thing, but to hear that you know BatBox is a Mexican baseball simulator concept is great. I think about a lot of the golf focused simulator driven concepts that are growing rapidly. We see a lot of deal activity with them. But this is this is a great rundown of all these incredible concepts across different use categories. Obviously entertainment fun, but the differentiation that's happening in that space is really interesting.
Bretley Roche:Yeah, it's pretty incredible. It's a fun time to be in brokerage, I think anywhere in the country, but especially here in Texas.
Jim Jamerson:Yeah, so Brettley and I are working with the city of Wiley to do a big entertainment project and it's going to be a public-private partnership. So, as she mentioned, some of these concepts require significant dollars to help them and they look for the cities. So we're designing a plan on 100 acres of parkland in the city and the city is going to help fund some of these entertainment users. So we're kind of just getting started and I think that's very important to mention as to why Dallas is on their hit list for a lot of these concepts. That's incredible.
Brian Sheehan:So maybe we can transition just thinking about the different markets that are growing there. You mentioned Wiley. We talked about the Knox District. What are some of the fastest growing markets in DFW and what's behind the growth in those places?
Jim Jamerson:Yeah, I guess I would say up in the north. So right now Frisco is on fire. It's filling in. There's a major sports, lots of major sports facilities in Frisco. There's a Cowboys star facility with a big development around it. There are professional soccer fields and now the PGA has just relocated their headquarters from Florida and built two championship golf courses and a 500-room Omni Hotel attached to it and it's surrounded by 2,500 acres of land called the Fields Development and they're going to have homes, commercial and a new Fields West Lifestyle Center that'll have great restaurants and apparel groups like Tommy Bahama. It'd be similar to the Legacy West in Plano. So if you keep going north of Frisco, prosper and Salina are the next major suburban markets that are exploding. So if you look at Prosper, it has over 39,000 people and at Buildout it'll be about 72,000. And it's getting there very quickly. And just north of Prosper, salina, which has the same land size as Frisco or a little bit more land than Frisco, and they are the fastest growing city in Texas right now. If you look at the numbers real quick, in 2022, they have 41,000 people and by 2027, it's supposed to double to 84,000. Costco approved a deal in Salina when they only had 26,000 population just due to the explosive growth that they saw coming.
Jim Jamerson:There's been a lot of land flipping in Salina. There's some big investors who have been buying land and flipping it after rezoning. There's lots of large equity partners coming in giving them millions of dollars, big REITs and private funds. For example, there's a 30-acre tract in Salina zone multifamily with some prime pads and two and a half years ago it sold for $6 a foot. Then it flipped to $10 a foot and then last year it sold for $15 a foot within like 18 months. So you know, the prices have gone up so fast, so quickly, that it's hard to do that kind of land flipping. Now the prices are kind of beyond what they should be at some of these intersections, but that's pretty amazing growth.
Brian Sheehan:Jim, on that Salina site were there any improvements that were happening? Were they getting through entitlements yes, or is that just speculation?
Jim Jamerson:Yeah, so it got entitled for multifamily in that process. I don't know which buyer put on the entitlements, but I think that's why it kept going up in value was because it was entitled. Incredible, yeah. So then also some other markets the Melissa Anna Sherman market up along I-75 are seeing major growth spurts. Anna has 3,000 apartments in the pipeline and they plan to double their population in five years from 25,000 to 50,000 people. And then Mansfield is a really hot market, south part of Dallas, very to 50,000 people. And then Mansfield is a really hot market, the south part of Dallas, very high incomes, 80,000 population quickly going to about 120,000. So those are some of the hottest markets we've seen the suburban markets and McKinney, of course. Mckinney has always been a hot market and it's getting built out, though. Do you have anything to add to that, Brett?
Bretley Roche:No, I think you covered it very well. There's a lot of growing markets, but I think, as Jim said, we're seeing most of it kind of in that north due, north, northeast, if you're looking at the DFW map as a whole, which you foresee a point in time when South Dallas those close in suburbs start to take off and experience the same kind of growth.
Jim Jamerson:Yes, definitely. There's all kinds of redevelopment occurring in South Dallas around Redbird Mall and there's growth in Lancaster. So, yes, midlothian, the south of Mansfield is growing Oxyhatchee, so yes, it's going to just continue to grow and fill in in all directions.
Brian Sheehan:That's incredible. What are some of the biggest challenges doing business in DFW? I mean, it sounds like a very business-friendly climate, environment generally, and while I was there, I met with some folks from the city of Anna Anna and we were talking about, as you mentioned, how many units are planned for that market and they talked about the challenge of providing the infrastructure needed in a timely fashion to support all that development. But what are you guys finding are some of the bigger challenges doing business down there?
Bretley Roche:Yeah, well, I think you're correct. It is a great market to do business. There really isn't a lot of negatives. I think that we're very, very fortunate to be here from a business perspective.
Bretley Roche:But the challenges like in many parts of the country right now, at least on the tenant side would be just a very tight markets, lack of inventory. You know, if you're representing a tenant basically anywhere in the metro, especially in a desirable area where your tenants are probably going to want to be, it's just incredibly competitive and it's very much still a landlord's market because of the 97% lease space. There's just no availability. So I've had some not so funny stories of multiple occasions where we've had leases at the finish line partially executed by tenant. Checks have been sent and landlord changes their mind the last minute because they get a better offer and they just tear up the lease and they have kind of all the power right now to do that because they know that there is another tenant waiting behind your tenant to take the space who can probably pay more. So that's a challenge. I don't think it's necessarily unique to Dallas, but it is something we encounter.
Jim Jamerson:Yeah.
Bretley Roche:And Jim, do you have anything else you would add?
Jim Jamerson:Yeah. So I think some of the developers are working their way around the high interest rates and the high construction costs by either we have a developer client who has his own construction company he can build shopping centers for cheaper than most and then the multifamily guys. They're either going for HUD loans where they can just put down 15% and get lower rates. We have one group that's partnering with a huge REIT. It's multifamily equity partner and they fund the land and construction out of cash and then they'll put financing on it later, which is really ideal in this environment. So we're still seeing people figuring it out and getting stuff built.
Jim Jamerson:There's just been a slowdown of new construction and now I think, with all these grocery store deals being done, I think we're going to see supply increase on retail space and things will stabilize, especially with some of the rents as well, because we've seen 20 to 30% increases in rents 20 to 30% year over year, I would say in the last two years Incredible. We're still seeing a lot of developers coming in from California and other places. We're seeing concepts coming in from California. There's a whiskey bar concept in San Francisco that I met with in 2019. They said the cost of wages have gotten so high that it's like seven times the labor costs in Dallas for restaurants than it is in San Francisco at the time, and then minimum wage in California was just raised to $20 an hour.
Brian Sheehan:Labor costs in California are seven times what they would be in Dallas.
Jim Jamerson:Correct, correct, yes, wow. And minimum wage has just gone up to $20 an hour in California. So the lower volume of fast food users like KFC are going to end up closing like 10 locations in Southern California because of it. So that's why people say why don't we come to Texas?
Brian Sheehan:We have cheaper rents, less regulation, more affordable labor costs Anything else we should know about the restaurant scene in Dallas.
Bretley Roche:Yeah, I mean I think we've covered a lot of it. I would say there isn't a lot to do in Dallas from an outdoors perspective, and this is coming from someone who grew up in California and so I think that people in Dallas they go eat and they drink and they shop and so it's just a great environment for those types of users and the restaurants do very well for the most part because of it. Now it's competitive because there's so many of the same concepts here, so you have to be one of the best to do well over a long period. But across the board, generally speaking, restaurants are going to do well. Good concepts are going to thrive here.
Brian Sheehan:Yeah, that makes sense. Well, Bradley and Jim, it was great speaking with you today. Thank you for helping to educate me and our audience on the exciting things that are happening in the DFW commercial real estate market. It really is an incredible time to be involved in commercial real estate in and around Dallas.
Bretley Roche:Thank you so much for having us, Brian.
Jim Jamerson:Thank you.
Brian Sheehan:Whether you're an aspiring real estate mogul, a seasoned pro or simply curious about the places where we shop, dine and work, this podcast is your all-access pass to the world of commercial real estate. You can connect with me on LinkedIn If you're interested in being a part of Retail Intel. Send us a message to nationalaccounts at phillipsedisoncom. If you want to hear more about new and exciting expanding brands, keep tuning in to Retail Intel. Don't forget to subscribe, follow, like and repost. Talk to you next time.