JVP Development Is Betting $37M Of Its Own Money That Frisco Is Ready For Spec Office

Dallas-Fort Worth is unlike most other markets in the country. Visitors can experience a live cattle drive at the Fort Worth Stockyards, tour the Dallas Cowboys' world headquarters and even see honest-to-goodness speculative office construction.

With new office construction at historic lows across the country and elevated interest rates and construction costs curtailing speculative construction in most U.S. markets, JVP Development’s new 115K SF Class-A building at the corner of Lebanon Road and Parkwood Boulevard in Frisco isn’t the type of thing happening outside of DFW. 

Many office developers continue to rely on preleasing or construction financing before breaking ground. But JVP is betting tens of millions of its own dollars that demand for a building in a city that doesn’t fetch the region’s top-tier asking prices is strong enough to justify the spec development. Plus, the company is moving forward despite a more than 50% increase in estimated costs from just three years ago.

JVP broke ground on the four-story speculative office building in early July as part of its $3B The Mix development along the Dallas North Tollway. The company is working to lease the self-financed building but hasn’t yet signed any tenants, Head of Leasing Ed Hogan said. 

He called the office project a calculated decision because of the positive absorption rates, rent growth and strong demand that JVP has seen in the Frisco area in recent years. 

“Our goal is to build another 2M SF of office space, so starting with a four-story building at a very prominent corner seemed like a good way to really understand the demand,” Hogan said. 

Construction of the building is set to cost nearly $36.9M, according to the city of Frisco's permit for the building issued in April. Hogan didn’t disclose the rent price the company is hoping to achieve with the spec building, but he said JVP is confident it can hit the returns it needs. 

The cost listed on the permit is more than a 51% increase from the $24.4M price tag the company estimated a similar-sized building at that location would cost in a 2023 filing with the Texas Department of Licensing and Regulation. 

While Hogan said the company has confidence in the project, there are no assurances it will be able to recoup its costs. 

Speculative development usually depends on construction financing and equity for lease-up risk, but in today's high-cost, capital-constrained environment, neither is available, according to Avison Young. The biggest reason to self-finance is that capital is so expensive right now. 

“It takes a lot for projects to get dirt moving,” said Sean Boyd, Avison Young manager for U.S. office and market intelligence. “Usually that requires a tenant agreement — and a pretty large one.”

But DFW’s office market has shown a resilience few other metros can match. The region’s 3M SF pipeline is among the largest in the country, while national office construction reached a 14-year low this year. It is down 84% from 2019, according to Newmark's latest office market trends report. 

Class-A office rents in the Frisco area were $40.47 per SF during the second quarter, up 4% year-over-year but far from the $70 per SF that landlords in Preston Center and Uptown Dallas are raking in, according to Colliers’ latest DFW office report.

Stonelake Capital Partners also broke ground on a speculative office building in July. But its $69M tower will be in Uptown Dallas.

While Preston Center and Uptown will remain the metro’s office epicenter, Hogan said JVP believes DFW’s continued population growth to the north will lead companies to seek locations in cities like Frisco. 

“We're seeing a lot of interest from 150K SF and larger users, so the market is as robust as it gets,” Hogan said.

The northern suburb has emerged as a market where companies and workers want to be, Hillwood Vice President of Strategic Development Kimberly Cole said.

“The market has told us over the past 10 years that this is the new version of what office looks like,” Cole said of Frisco during Bisnow's Future of DFW Office event on July 23. 

The speculative office building is a key component in JVP’s vision for The Mix, Hogan said. In addition to the more than 2M SF of office space, the 112-acre project will feature 375K SF of restaurant and retail space anchored by Frisco’s first Whole Foods, 650 new multifamily units right next to the spec building, medical offices, townhomes and two hotels.

Whole Foods is expected to open within the next year, and JVP expects to have tenants moving into the project's housing in the third and fourth quarters of 2027. 

“People are choosing locations that are business-friendly for all the obvious reasons, and I think Frisco really stands out among those choices across the nation,” Hogan said.