The TI Effect: Developers see increasing prices as speculation on TI impact grows
As construction of the first phase of Texas Instruments' new production plant approaches, economic developers across the region are already starting to see the impacts of the nearly $30 billion investment in North Texas. With further investment and interest expected to follow, developers are already beginning to see a spike in the real estate prices in what has been called the TI effect.
In November, Texas Instruments announced that Sherman had been selected as the site for a new, four-phase production plant that would see the tech manufacturer shift production in new products and phase out the current facility. The first phase of the project is expected to bring in about $6.5 billion in investment and create about 800 jobs.
"I guess that everybody now has heard the term the TI effect, which is land that seems to be much higher (priced) or landowners in their mind think land is worth much more since the TI announcement," Sherman Economic Development Corp. President Kent Sharp said.
Since the announcement, some developers have already made moves to take advantage of the growth, including a 54-acre mixed-use development that would sit just across from the facility along U.S. Highway 75. However, property owners are also trying to take advantage of the market and have been increasing the asking price for land.
More: The TI effect: 54-acre development wants space in South Sherman
"Generally speaking... what I think people mean when they say the TI effect is just a general feeling of wellbeing about Sherman and Grayson County and the prosperity that is heading out way now and the expectations and implications of that the TI announcement," Sharp said Wednesday. "I also think it has the effect of making people think assets have more value, be it land, businesses and houses, all in anticipation of a booming economy."
This can be felt in the larger tracts of land, where Sharp said he has heard stories of prices spiking to nearly double what they were previously in speculation of growth. For his part, Sharp said he has regularly received calls from developers interested in a variety of types of development ranging from multifamily and single-family residential to commercial and industrial uses. Sharp noted that many developers feel they are getting into the market too late.
"Six months ago, they were buying land at one price, and now when they are coming in and looking at land it has gone up, in some cases to nearly double the price," he said.
However, he said it may be too early to tell what the actual price is for these parcels of land and what is just wishful thinking. That will come as properties are sold rather than just listed, Sharp said. While some land likely has increased in value since it the announcement, some parcels, including those without utility access, could see a drop from current highs.
"If buyers are willing to pay those prices, then sure, it is valued correctly," Sharp said. "If buyers are not willing to pay those prices then it is obviously overvalued and the sellers will have to adjust their prices."
Denison Development Alliance President Tony Kaai said he has also seen the increase in land prices, but this is not a recent development. The market value for many parcels has been increasing over the past five years as development has moved north from the Metroplex.
"Then word about TI got out and speculators are pretty good and they gamble," Kaai said. "As soon as that TI thing was floating around all over the place, ... that was just like gasoline on a blazing fire up here."
While prices may stabilize to some degree, Kaai said the current market could likely be the new normal moving forward. As new residents move to the area from Dallas and from across the country, these will be a high demand, he said.
"I don't see this calming down; there is no reason for this to calm down," he said.
This article originally appeared on Herald Democrat: The TI effect: Developers see increasing prices as speculation on TI impact grows
