by Christine Perez
In this edition of 1-on-1, Office Tenant Rep Craig Wilson sits down for an in-depth conversation with retail Capital Markets pro Chris Harden. They talk about the future of downtown Dallas, changes in office tenant demands, the evolution of the retail sector, and the entrepreneurial businesses they both ran while still in college.
An Executive Managing Director within Cushman & Wakefield’s Tenant Representation Practice Group, Craig Wilson also is a member of the firm’s Legal Sector Advisory Group. Since getting into commercial real estate in 2002, he has completed more than $2 billion in transactions for some of the world’s largest and most prestigious companies. Wilson is actively involved in community organizations, including the Salesmanship Club and First Tee, and earned a Bachelor of Arts in Economics from Southern Methodist University.
Chris Harden is a Director within Cushman & Wakefield’s Capital Markets Group. He is a retail and mixed-use market investments advisor, focusing on disposition strategies for clients in Dallas-Fort Worth and throughout Texas. Since joining the firm in 2012, his team has completed more than $1 billion in real estate transactions. Prior to joining Cushman & Wakefield, he led retail acquisitions and development for Trademark Property Co. Harden serves on the Urban Land Institute’s Transit-Oriented Development Product Council and Young Leaders Social Committee and is involved in other industry and community organizations. He attended Texas Tech University, where he earned a Master’s in Architecture and a MBA.
CRAIG WILSON: I guess we should start at the beginning. Where are you from, Chris? What’s your story?
CHRIS HARDEN: I was born in Galveston and have one brother. I grew up in the HEB area and went to Euless Trinity High School. I began college at the University of Texas at Arlington, then after a year transferred to Texas Tech, where I got a master’s degree in architecture and a MBA, in six years. I was very involved with my fraternity, Sigma Chi, and also started my own business while I was in school.
WILSON: What kind of business?
HARDEN: It was a marketing business. I was doing promotions and event planning and throwing concerts for my fraternity, as fundraisers, and that led to promoting bars and clubs and bands. Then I got into promotional products, like hats and mugs and T-shirts. That led to an entertainment card called the Hub Club, which gave discounts at different restaurants and places around town. I was making good money, but after about two or three years of doing that, I decided I needed to get a real job, and joined Hodges Architecture in Dallas, led by Charles Hodges. The firm did development work, too, and that’s where I got into retail. So, I got my architecture license and some development experience, working with Charles for about three years, and then was recruited by Trademark Property Co. in Fort Worth.
WILSON: Terry Montesi and Tommy Miller.
HARDEN: Exactly. It’s a fantastic company. I joined in March of 2007, and the company was starting a land fund. We were looking for 100- to 1,000-acre tracts of land in the path of growth, all throughout the country. The goal was to get ahead of land-price escalations and take our time to masterplan projects. My first year, we bought 824 acres of land in northwest Houston and a 1.2 million-square-foot mall in Corpus Christi. We closed on the mall and the land in July of 2008, right before the financial meltdown. Fortunately, I had a background in development and architecture, and I was able to lead a $50 million renovation of the mall. It was an exceptional learning experience.
WILSON: All during the 2008-2009 timeframe.
HARDEN: I believe it was the only regional mall under construction at the time, in the entire country. Certainly, the only project of its size. So, while things were slow everywhere else, I was busier than I’d ever been. It was a great learning experience and a real blessing to be in that company at that time, working on that project. After we came out of it, I decided I wanted to move closer to family in Plano. I also wanted to get more transactional experience and volume under my belt. I was introduced by a mutual friend to Tom Salanty, who was at Cushman & Wakefield at the time. I had never been on the intermediary side of the business, but he liked that I had regional mall development experience, as he sold regional malls. At the time, we were selling B malls and non-core assets for the retail REITs, as they were trying to upgrade their portfolios for Wall Street. It was a great time to get into the business.
I try to leverage my development and architecture background to work with investors and developers on infill land sites, mixed-use projects, and the repositioning of assets. It has helped me sell properties where the upside isn’t visible; there’s often hidden value that we’re able to unlock.
WILSON: So, what’s the biggest difference between the principal side and the service side?
HARDEN: On the principal side, there’s one perspective, for the most part. It’s what the company wants to do and where it wants to go, and capital is used to buy properties that align with that vision. On the third-party side, you see the visions of different investors and the directions they want to go with their capital. So, when I take on a disposition assignment, my job is to match a vision for the property with principals who share that vision. I liken it to taking the blinders off. You can see the entire market and landscape for what it is. There’s a buyer for every property. It comes down to price, most of the time. But it’s fascinating to see all the different investment platforms that are out there.
WILSON: So, how are things in the retail world, with all of the changes that are taking place with Amazon and online shopping? It seems to me that successful retail is now more about experience than being product- or merchandise-oriented.
HARDEN: Right. Retail has constantly evolved throughout the years. I look at it as going back to the fundamentals of retail. People, fundamentally, want to touch, see, smell, experience what they’re buying. Online shopping makes it more convenient, but it can’t ever replicate that experience you get by fully engaging the senses. What online retailing has done is expose the weaker retailers. Walmart, in my opinion, is a premiere example of a retailer that has leveraged technology and created a balanced platform. A lot of retailers were late to the game. It’s kind of like Polaroid or Kodak; they didn’t embrace technological changes fast enough.
HARDEN: And that’s going to continue to happen. People like to get out of their homes and have those shopping experiences. Online retail balances out the market. Amazon has 44 percent of the e-commerce market. I don’t believe they will maintain that. Walmart just announced its online sales are up 50 percent, and they’ve been investing billions on e-commerce sites and online grocery and same-day delivery programs. The challenge with online retail versus physical retail, is it’s very hard to get noticed on a screen. It’s not about location in your market. The well-capitalized companies that pay to be seen on that screen are the ones that will get the online exposure and sales.
WILSON: It freaks me out whenever I do a Google search for something, then ads for what I searched for start popping up on other sites.
HARDEN: I’ve got an Apple watch. Siri is always listening, to everything I say.
WILSON: It sounds awful.
HARDEN: The most powerful companies in the world are Apple, Facebook, Amazon, Google—they all have information about our lives. You think about identity theft; Facebook has already done that. They have deep information on all of our identities.
WILSON: So, how is e-commerce affecting real estate, from a retailer perspective? What do investors feel confident in buying?
HARDEN: A credit tenant used to mean something, with five or 10 years remaining on a lease. It’s still important, but investors are now looking at systemic risk, company-wide risk. Good real estate will always find a use; but when it comes to retail, the game has dramatically changed. Retail has always followed rooftops, and now it’s following people to more urban locations and it’s also following employment centers. That’s why you’re seeing more mixed-use. If I’m looking out 20 years from now, I’m looking for opportunities where I can bring those uses together. Retail is a street-level activator. It activates the ground levels of offices and residential properties. There’s still a need for suburban retail, but if there’s low density and slow growth and the only way to get to a store is to drive, I’d be cautious of it.
WILSON: From an office user perspective, the demand for being in a mixed-use environment has become much more prevalent in the past six or seven years.
HARDEN: Why is that?
WILSON: There’s a war for talent. Companies are starting to realize that they can use their office spaces as a tool to attract and retain employees. It used to be the typical office building would have a deli and fitness center. That’s not what people are looking for anymore. They want to be in a mixed-use environment where employees can walk to multiple dining and retail alternatives, have a drink after work. It‘s just like the building we’re in, McKinney & Olive. To hear what you’re saying from a retailer’s perspective is interesting, as it coincides with what we’re hearing from an office perspective.
HARDEN: So, I have two questions. First, will users pay a premium to be part of a mixed-use environment? And second, from a developer perspective, do I need to provide those amenities if I’m already in an amenity-rich area like Uptown?
WILSON: Yes, generally speaking, most office tenants will pay a premium to be in a mixed-use environment. If you look at Legacy, the buildings that are in and around the shops have had much better leasing velocity than the value-office buildings just down the road. That is a testament to the fact that companies are willing to pay a premium, especially in Dallas-Fort Worth, where real estate is significantly less expensive than what companies are paying in New York or Los Angeles or San Francisco. For a company to pay $4 or $5 more per square foot, it may be worth it to them if they think it will put them in a better position to recruit.
WILSON: And from a developer perspective, yes, they still need to have those amenities in their buildings. Companies will still want to check those boxes. If you don’t have that fitness center or conference center, it puts you at a disadvantage.
HARDEN: The State Farm deal you and Randy Cooper did at City Line—that seemed to really change things in this market, in terms of creating that amenity-rich, mixed-use corporate environment. I’m also wondering, what role transit played in the company’s decision?
WILSON: There were two drivers that ended up putting State Farm at the CityLine location in Richardson. The site has easy access to multiple price points of housing. You can go out to Sachse and Wylie via State Highway 190 and find new, moderately-priced single-family homes. You can have executives who live in the Park Cities and Preston Hollow area, or the Plano-Allen area. And you also have access to multifamily housing, for entry-level employees and recent college graduates. The other big driver was DART. State Farm looked at it from a long-term perspective. You just never know what gas prices are going to do and what traffic is going to do. They wanted a location where they knew with confidence that employees could easily get to the office. Being right on the DART stop was very important.
HARDEN: Are you seeing more companies looking at transit-oriented developments?
WILSON: Some companies are focused on that, for sure. There’s definitely an emphasis now on general commuting. For instance, some companies are looking at Legacy and wondering if it’s going to become too congested. Can the infrastructure handle this many employees? Some are shying away from that area or at least watching it very closely to see the impact and whether all of the employees of Toyota, JPMorgan, Liberty Mutual, and others can be absorbed. With regard to transit-oriented projects, DART ridership continues to increase on an annual basis. It just needs more infrastructure. There’s really only the red line and orange line that are hitting major employee centers. If they can get funding for the Cotton Belt line, which basically runs along S.H. 190 and S.H. 161, that would be huge, because it would provide an east-west thoroughfare.
HARDEN: DART is one of our clients. We’re helping them with their transit-oriented development initiatives, including a RFP at Mockingbird Station. So, I’m tracking a lot of what DART is doing in trying to spur development around the train stations. I think there is demand there. People want to live there. You go to Chicago or New York, and many people don’t even have cars. We’ll get there, eventually.
WILSON: I lived in San Francisco for a couple of years, and having a car was a nightmare. There would be days when it would take an hour just to find a parking place.
HARDEN: No fun at all. … Changing subjects, I was in Las Colinas recently, and there’s so much residential development going on. I’ve always thought of it as a city of the future. It seems to have all of the pieces. Are office tenants looking at Las Colinas as a real option? If they’re comparing Legacy to Las Colinas, why would they go to Legacy over Las Colinas?
WILSON: Yes, companies are looking at Las Colinas. I lump Las Colinas and Freeport together. Look at Freeport and the success Cypress Waters has had with Brinker International and 7-Eleven and a number of other big companies. And then more toward the Urban Center of Las Colinas, The Music Factory has been a big hit, Water Street is nearing completion, and Pioneer Natural Resources is doing a big mixed-use project. Historically, Las Colinas has been more of a Corporate America location, due to its proximity to the airport. It has been a great site for regional offices, where executives can easily get in and out. Legacy has been more homegrown businesses, a place for companies that are truly based in Dallas. I think it’s shifting a little bit, and it’s because Las Colinas is adding that multifamily and mixed-use product and many more amenities.
HARDEN: Another question for you: If you were trying to get Amazon to come to Dallas, where would the best spot for them be?
WILSON: That’s a loaded question. I don’t want to make any enemies.
HARDEN: Well, taking a different approach, what would be best for the city?
WILSON: I think it would be best for the city if it ended up being downtown. Amazon will need the infrastructure of downtown and the accessibility. It would be a lynchpin of what Dallas has achieved so far, in terms of the city’s revitalization downtown. It feels like it’s so close, but not quite there yet. Something like Amazon would take it to the next level and really enhance it.
HARDEN: When you think about other cities, Chicago, for example, has a river that runs through it. How much better would Dallas be positioned if we embraced the Trinity River and had a great riverscape?
WILSON: We’ve been talking about it since I moved here in 1996. If it is done well and done right, it would have a massive impact. I’d be interested in your perspective, too. I would envision most of the development that would occur as a result of that would be more residential and retail, versus predominately office. What are your thoughts?
HARDEN: I look at downtown Fort Worth, and what J.D. Granger has done with the Trinity River Vision Authority. Have you been to the Woodshed, Tim Love’s restaurant?
WILSON: I have not.
HARDEN: He put it right on the river. We haven’t embraced the Trinity River in Dallas, at all. We talked about experiential retail and going back to the past. People are drawn to water and drawn to nature. If there’s one knock on Dallas, it’s that it has almost turned its back on nature. We’re a concrete jungle, in a way. We’re starting to fill it in with some parks, but we’ve got this incredible natural amenity, the Trinity River, that we’re not embracing.
From a retail perspective, that experiential environment is going to get even more important. We were talking about TODs, transit-oriented development. Now it also means trail-oriented development. Look at the Katy Trail Ice House. It generates some of the top alcohol sales in the state. Look at Joe T. Garcia’s in Fort Worth. The common denominator is they embrace nature. If retailers want to succeed going forward, if real estate developers want to succeed, they need to do a better job of that.
WILSON: I agree. The need for green space is pivotal, even from an office user’s perspective. We were fortunate to represent Sidley, the law firm that’s now here in McKinney & Olive. Early on in discussions with Crescent, a big selling point was the outdoor plaza. Crescent set aside more than an acre of prime real estate, and it was a great decision. Doing something meaningful with the Trinity River would be a game-changer. I think you can look at Klyde Warren Park as a good example of what can be achieved, with the right type of space and programming.
HARDEN: And look what it did for real estate values, too. The highest-priced land sale that I’m aware of is Park District, because the site is located directly along the park. I always try to look at the common denominator of the most successful real estate projects. Lately, it’s all about incorporating nature. Klyde Warren created a heart and a connection, and everything is now radiating out from that.
WILSON: What about downtown Dallas? Main Street and Ross Avenue are doing well, but it seems like a north-south connector needs to be activated.
HARDEN: You’re exactly on point. There has to be a core or a spine, with ground-level retail. The problem is there are a lot of competing interests down there. I also think we sometimes make transportation too difficult. Put a bus in, it’s fine. Put a trolley on wheels, it’s fine. You don’t need to go underground—just move people. Look at Denver’s streetcar system. It’s a great example of something that works.
HARDEN: What are office users thinking about downtown Dallas right now?
WILSON: There are two segments. The Arts District and Ross Avenue corridor buildings continue to do well. There’s a lot of capital being invested into redevelopment at Fountain Place and Trammell Crow Center, with the new city-block development they’re doing. Further into the core, some companiesare a little reluctant to go that deep. For most of them, the commute is north. So, the further into downtown you go, the harder it is to get in and out. That’s why you see a big lease rate difference between Ross Avenue and Main Street. Parking continues to be a big driver. People still love their cars here. Buildings that can’t accommodate suburban parking ratios are at a disadvantage, and that’s what’s happening with a lot of downtown buildings right now. We keep designing for cars, but we also hear that cars are going away.
HARDEN: I agree with you. We do design for cars. One of the first things I learned in architecture school was to design for people. If we can get back to that, it will be less relevant what happens to cars. If we design for people, and create places where they want to be, they will find a way to get there. Look at the number of people who live downtown versus the number of people who work downtown; there’s a huge disparity. Some people think we’re overbuilding multifamily. Maybe for top-of-market rents, but not for mixed-income housing.
You said earlier one of the reasons State Farm went to Richardson was for access to mixed-income housing. If you’re only building for executives and not thinking about their employees, if workers can’t get into town because traffic is bad and there’s no transit, that’s a problem. The City of Dallas is working on its affordable housing policy. They should call it a mixed-income housing policy, in my opinion. What you want to do is get multiple income levels to live in these areas, to reduce traffic congestion. Look at Chicago. It’s less relevant there when the car is going to go away. But to us in Dallas, it’s very relevant, because we’re still designing around cars. If we design around people, it won’t matter as much.
WILSON: It’s interesting. There are some companies in this area that are really dense. We talked to them about parking ratios. And, it’s like you just mentioned, they said, “If people want to work here, they’ll find a way to get here.” And that has worked.
HARDEN: Are they close to transit?
WILSON: Yes. They’re on the streetcar line, and close to multifamily. It supports your point about designing for the people. The rest will take care of itself.
HARDEN: And those people who are walking support the ground-level retail. I lived in downtown Fort Worth when I worked at Trademark. It was the first time in my life I could walk to work. It was two or three blocks. My wife and I dropped down to one car, and it was one of the best experiences of my life. It’s amazing; your level of stress goes way down when you walk. I think we have a huge pent-up demand for walkable housing. I don’t think we’ve even come close to meeting the true demand.
WILSON: At the company where my wife works, she has employees who live downtown and they don’t have cars.
HARDEN: She’s at Corgan, in the West End?
HARDEN: So, we haven’t talked about your background yet.
WILSON: I grew up in the Chicago area, a small town called Lake Forest. I ended up coming down to Dallas to go to SMU. I started out at the University of Richmond in Virginia; I went there on a golf scholarship. And then I realized I wasn’t that good of a golfer.
HARDEN: But you got a scholarship.
WILSON: Yes, but …
HARDEN: What made you pick SMU?
WILSON: My sister had gone there and my best friend from high school was there. I graduated in 1999 with a degree in economics, and thought I was going to be an analyst at an investment bank or something like that. After working at an insurance company and staring at spreadsheets for about six months, I realized I wasn’t an analyst. I knew I wanted to live in Dallas; I loved it. But I also knew I was young and single and I should go experience other markets. So, I packed up my car and moved to San Francisco and got a job in corporate sales at DHL. After a while I was promoted, somehow, from San Francisco to Albuquerque.
HARDEN: Same pay but lower cost of living, right?
WILSON: They gave me a small, 1 percent, ceremonial raise. That was my bonus.
HARDEN: That’s great.
WILSON: It was a good experience, I learned how to cold call, make presentations, and take rejection, which is critical in our business. I wanted to get into something a little more entrepreneurial though, and, to use an overused term, an “eat what you kill” opportunity. I started looking around and had a lot of friends in the real estate business in Dallas. I ended up going to work at Studley, and had a really great mentor there, Greg Biggs, who hired me. He taught me the ropes. Greg and I joined Cushman & Wakefield in 2006, and that’s where I met Randy. We all had an opportunity to go to Cassidy Turley, in 2011, and it was a great experience. It was a national company but still small and growing rapidly. We knew it was being built to get sold at some point in time, and that happened a little faster than we probably anticipated. So, it’s kind of like old home week, coming back here.
HARDEN: That’s great.
WILSON: It’s funny. You mentioned you had a business in college; I had one as well. A fraternity brother and I made Grandpa Jack’s Salsa. We were SAEs and he is one of those born entrepreneurs. He’d go home to visit his family in Memphis and he’d always bring back this salsa that his mom taught him how to make. It was great stuff, and he asked me if I wanted to get into a business venture with him to produce it.
HARDEN: Where did you make it?
WILSON: We had a deal with a restaurant; they let us say that they were our commercial kitchen. In exchange for that, we had to fix up some things for them. But we made most of it in the fraternity house, which was not a commercial-grade kitchen. We were in a few stores, and actually became one of three finalists to do a deal with the Home Shopping Network. We could churn out like 120 bottles a night. They asked if we could do 5,000 cases and we said, “Sure!”
We ended up not getting picked. I talked to my business partner, and said, “If we’re going to do this, we need to quit school and do it right, or shelve it and just finish college.” We decided to finish school. He went on to start a series of car dealerships that just sold for a fortune.
HARDEN: Do you ever have ideas to bring Grandpa Jack’s back?
WILSON: I still have the recipe. And I have some of the old labels. I also recently found our own business plan book, which is hysterical. Not very thorough.
HARDEN: Did you meet your wife at SMU?
WILSON: No, we met at a Stars game.
WILSON: I like to say it like that. We actually met in a suite at a Stars game. But it sounds better if I don’t add that part; it sounds like I have some game.
HARDEN: That’s great.
WILSON: Her name is Lindsay and she’s a managing principal at Corgan. We just celebrated our 10-year anniversary and have a son, Jack, who’s 7 and a second-grader. He’s kind of a handful, but a fun handful.
HARDEN: Do you think he’ll play golf, like his dad?
WILSON: He might pick it up someday. Now, he just likes to hang out with his buddies.
HARDEN: You’re involved in the Salesmanship Club, and First Tee?
WILSON: Yes. I got involved with First Tee in 2004 or 2005. When I first joined, I think our budget was about $100,000 or $150,000, and now we’re up to almost $2 million on an annual basis.
HARDEN: Wow. So, what does the organization do?
WILSON: Basically, it uses golf to teach nine core values. It’s a great organization. … So, how did you meet your wife?
HARDEN: We initially met in college. Her name is Alexa, we’ve been married for 12 years. We have three kids, two girls and a boy in the middle.
WILSON: So, you’re playing zone defense.
HARDEN: For sure.
WILSON: How old are they?
HARDEN: Our oldest is 9, and our son is 8, and our youngest daughter is 6. So, first, second, and fourth grade. Alexa and I got married on New Year’s Eve. We first dated in Lubbock, but broke up during college. Nine years later, we serendipitously ran into each other in Dallas. She was working for Ralph Lauren. I was having lunch at the Galleria and walked through Macy’s on the way there. She was there and said my name and I turned around. We were married nine months later.
WILSON: That’s awesome. Serendipity.