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93%
The decline in inflation-adjusted, per-capita department store spending since 1995. In that same period, online retail spending grew 885%. The mall isn't dying because people stopped shopping — it's dying because they stopped shopping there. (More below.)
In This Issue:
1. Profile: John Sughrue — He doesn't invest in buildings. He invests in places people want to be.
2. Deal: Merit Drive Office Tower — A New Orleans firm bets on the part of Dallas office everyone else is running from.
3. Trend: Flight to Efficiency — On a 105-degree afternoon, your building's energy bill is a leasing decision.
4. Data: Abilene's Data Center Shock — One project. 13.3% rent spike. Lowest vacancy in Texas.
5. Analysis: Does the Mall Still Have It All? — The numbers say no — but what comes next might be worth more.
🏛️ PROFILE: The Man Who Made 1807 Ross Ave. the Center of Dallas Culture
If you've been to the Dallas Art Fair, you've been inside John Sughrue's world.
Sughrue is the founder of the Fashion Industry Gallery — better known as FIG — and CEO of Brook Partners Inc. For more than 23 years, FIG has occupied 75,000 square feet at 1807 Ross Ave. in the Arts District, serving as the premier wholesale venue for women's apparel and accessories in the region. The space hosts five major trade shows a year and has been home to the Dallas Art Fair for nearly two decades — an event that brings thousands of designers, collectors, galleries, and buyers from across the country to downtown Dallas every year.
Last week, Sughrue extended that lease through 2033. He told the Dallas Morning News that FIG has expanded four times during its tenure at the building, and he'd take more space if it became available. "Downtown has been very good to the Fashion Industry Gallery," he said. "Our designers and buyers love the location."
But Sughrue isn't just a tenant. He's a sophisticated real estate investor operating at the intersection of property, fashion, and culture — a rare combination in a market that tends to separate those worlds.
His other venture tells you a lot about how he thinks: Sughrue is the owner and partner of the “Marburger Farm Antique Show” in Round Top, Texas — one of the most iconic destination events in the state. Twice a year, designers, collectors, and antique enthusiasts descend on Round Top for what Sughrue calls "a true celebration of life in Texas and all things Texan." D Magazine and Modern Luxury have both profiled the show, and Sughrue has been clear about his vision: preserve the heritage brand while making it more accessible to buyers, exhibitors, and enthusiasts.
"When I'm there, I feel like I'm experiencing a sense of being in a place where there is something celebratory happening — it's about community," Sughrue told Modern Luxury. "Everybody is going through that opening morning with such a great sense of excitement and discovery."
What's interesting from a CRE perspective is the pattern. Sughrue doesn't just invest in real estate — he invests in places that draw people. FIG brings the fashion industry to downtown Dallas. Marburger brings tens of thousands to a tiny Texas town twice a year. The real estate follows the audience, not the other way around.
Mike Wallace, president of investment management at Hunt Realty Investments (FIG's landlord), put it simply: the long-term partnership with Sughrue and Brook Partners "has brought real benefits to downtown Dallas and the growing fashion and arts communities here."
The takeaway: In a market where everyone talks about cap rates and vacancy, Sughrue is a reminder that some of the smartest real estate plays are cultural ones. If you can make a building the place people “want” to be, the economics follow. Downtown Dallas — which Sughrue calls "the center of the creative communities in North Texas" — is proof.
🏢 DEAL: New Orleans Investor Snaps Up 19-Story North Dallas Office Tower
A New Orleans real estate investment firm just made a bet on the part of the Dallas office market most people are running from.
Lahasky Investment Group acquired the 19-story, 366,549-square-foot office tower at 12221 Merit Drive from Silver Star Properties REIT. The 1980s-vintage tower is roughly 60% leased, last valued at $40 million on the tax rolls, and the sale price was undisclosed — though "discounted" is a safe assumption.
Silver Star had been trying to unload this building for years. The REIT pivoted to self-storage as office fell out of favor post-pandemic, and this was the legacy asset they couldn't move. Lahasky's plan: upgrade the building and lease up the vacancy. Chuck Sellers of Forge Commercial is expected to handle leasing.
This deal is part of a growing pattern along the North Central Expressway corridor. Bradford Companies recently picked up 4144 N. Central Expressway. Real Capital grabbed Walnut Hill Glenn in a short sale from the lender. Provident Realty bought another Dallas office tower with renovations already underway.
The playbook is the same every time: buy 1980s-era office at a steep discount, invest in upgrades, and compete for tenants who can't afford (or don't need) trophy Class A space. It's a contrarian bet — but the math works when you're buying at $100/sq ft or less on buildings that cost $200+ to build new.
CoStar's Bill Kitchens put the challenge in perspective: "Buildings from the 1980s account for 42% of vacant space, a legacy of past overbuilding that continues to weigh on overall vacancy." The bifurcation between Class A and everything else is real. But at the right price, "everything else" starts to look interesting.
The bigger picture: Texas A&M's Real Estate Research Center reported this month that 53 million square feet of unused office space has accumulated statewide over the past five years. But here's the nuance most people miss: DFW's share of the surplus is proportional to its market size (37% of inventory, 37% of surplus). Austin is the outlier — 12% of inventory but 28% of the surplus, thanks to its tech-fueled construction boom.
The disconnect between jobs and space demand is striking. DFW added 167,200 office-using jobs over the past five years — a 15% increase over the prior five years. But absorption fell 76%. The space absorbed per new office worker has been cut in half. More people are working. They're just using less space per person — and more of them are working from home part of the week.
Still, Texas is landing a quarter of all major HQ relocations nationally. Demand isn't dead. It's selective. The investors buying discounted office right now are betting that selective demand, at distressed pricing, is enough.
We'll see.
⚡ TREND: The Flight to Efficiency — Why Sustainability Just Became a Leasing Advantage
On a 105-degree summer afternoon in Dallas, the true cost of a building is no longer measured solely in square footage or skyline views. It's measured in kilowatt-hours, water demand, and operational resilience.
D Magazine's Meghna Tare laid out the case this month: North Texas commercial real estate is undergoing a "flight to efficiency." In the deregulated Texas energy market — where electricity prices can spike dramatically during peak demand — high-performance building design has shifted from a corporate talking point to a core driver of value.
The business case is straightforward:
- Energy-efficient buildings lease faster
- They retain tenants longer
- They command stronger investor confidence
- They carry lower operating costs (modern HVAC, efficient lighting, high-performance building envelopes)
Many companies relocating to Dallas now require buildings to meet strict energy performance benchmarks, emissions reporting standards, and wellness requirements as part of their leasing decisions. Properties that fall short are increasingly viewed as obsolete — not just old, but uncompetitive.
The technology layer is evolving fast. Developers are deploying AI-driven energy optimization tools that model and manage building performance in real time — predicting demand and automatically adjusting mechanical systems at a level static systems can't match. Cool roofs and high-performance reflective materials are reducing solar heat gain. On-site battery storage and backup power infrastructure keep buildings operational when the grid is strained. Smart water systems catch leaks and equipment failures before they become costly.
The flagship example: UTA West, the planned expansion of The University of Texas at Arlington, is designed as a "living laboratory" for district-scale sustainability. The development targets LEED Gold certification with a 70% reduction in Energy Use Intensity. It features mass timber construction to lower embodied carbon, composite steel with recycled materials, and plans to manage 100% of stormwater on-site via bioswales and rain gardens.
What this means for owners and tenants: If you own a Class B or C office building built in the 1980s, your competition isn't just newer buildings with better amenities — it's newer buildings with dramatically lower operating costs. The gap between efficient and inefficient buildings will widen as energy costs rise and tenant requirements tighten.
For tenants: ask your broker about the building's Energy Star score and operating expense history. In a NNN lease, the building's efficiency directly affects your bottom line.
🔌 DATA: A Data Center in Abilene Just Broke the Local Housing Market
Here's a story that has nothing to do with Dallas — and everything to do with where Texas commercial real estate is heading.
Abilene, Texas. Population roughly 125,000. Not a city that makes national real estate headlines. Until Lancium, in partnership with AI infrastructure provider Crusoe, started building the first phase of the Lancium Clean Campus — a massive data center that will deliver 1.2 gigawatts of power capacity. It's the first site for the Stargate AI initiative, backed by Oracle, OpenAI, and SoftBank.
The impact on the local market has been staggering:
- Rents jumped 13.3% year-over-year — the highest increase on record for Abilene, far outpacing the statewide 4.2% average
- Average asking rent hit $1,150/month** — up $140 from the start of the year
- Vacancy dropped to 4.1%** — the lowest of any market in Texas
- Apartments built since 2010 are 99% occupied
- Zero new apartment completions in 2025**, with nothing breaking ground since early 2023
- Total occupied units jumped by 360 in a single year** — the third-highest annual gain on record
The construction workforce — electricians, skilled trades, project crews — flooded into a market that wasn't built for them. And with virtually no new supply in the pipeline, there's limited relief coming in 2026 or 2027.
The affordability impact is real: Abilene's rent-to-income ratio for a three-star apartment climbed over the past year, while major Texas markets like DFW actually saw rent burden decline during the same period. A mid-size Texas city is now less affordable than Dallas for the typical renter. Let that sink in.
Why CRE people should care: Data centers are becoming the new economic anchors for small and mid-size Texas cities, the same way manufacturing plants were a generation ago. The difference is speed. A single data center project can reshape a local housing market in 12 months.
For commercial operators and investors, the question is: which markets are next? Data centers need three things — cheap power, available land, and fiber connectivity. Several Texas cities outside the major metros check all three boxes.
The risk: When the construction phase ends (expected mid-2026), what happens? The permanent workforce for a data center is a fraction of the construction crew. If transient workers leave, the rent growth could reverse. Owners who bought or built at peak may face a correction. CoStar's forecast points to "more normalized growth" once the project completes.
It's worth watching closely.
🏬 ANALYSIS: Does the Mall Still Have It All?
The Texas Real Estate Research Center at Texas A&M published a deep dive this month on the state of Texas malls. The short version: the mall isn't dead, but it's not what it used to be — and what comes next might look nothing like what came before.
The numbers tell the story:
- In 1995, annual inflation-adjusted per-capita spending at department stores was nearly $1,600
- By 2024, that number had fallen to $116 — a 93% decrease
- Over the same period, warehouse store spending grew 344% and online retail spending grew 885%
- Department stores — the traditional mall anchors — have been in structural decline for 25 years
Texas was an early mall adopter. Big Town opened in Mesquite in 1959, and within a generation, every Texas metro had an indoor mall and the major metros had dozens. But overbuilding, shifting consumer habits, and the rise of e-commerce hollowed many of them out. The term "dead mall" entered the vocabulary for a reason.
But here's what's interesting: most Texas malls are still standing. And they're being reimagined.
CNBC reported that as of early 2022, at least 192 U.S. malls planned to add housing to their footprint, and at least 33 had already built apartments since the pandemic. The trend is accelerating. Developers are knocking down dead department stores and replacing them with apartment buildings, mixed-use spaces, restaurants, and experiential retail.
"The mall is becoming cool again," said Jacob Knudsen of Macerich. "Being able to live by it, work by it, play by it — we're definitely seeing this as a trend."
The logic is simple: there's too much retail in the U.S. — roughly four times more per capita than any other nation. Meanwhile, there's a nationwide housing deficit of 4.5 million homes. Malls sit on large, well-located parcels with existing infrastructure. The conversion math works.
Amazon distribution centers, pickleball courts, and even an NHL training facility have all replaced big-box stores at American malls. But housing is the fastest-growing conversion use.
The DFW angle: Several DFW malls have already been through this cycle or are in the middle of it. The question for owners of struggling retail centers across the metroplex: is your highest and best use still retail, or is it time to think about what that parking lot could become?
The takeaway: The mall as a pure retail play is dying. The mall as a location — large, accessible, infrastructure-ready — is being reborn. The owners who figure out the transition fastest will create significant value. The ones who hold on to the old model will watch their assets decay.
📊 MACRO: Texas Economic Outlook — What It Means for CRE
The Texas Real Estate Research Center's latest economic outlook report paints a picture of an economy that's slowing but not breaking. Here's what matters for commercial real estate:
The Fed: The Federal Reserve cut its key short-term rate by 25 basis points in December to a range of 3.5% to 3.75%. But the 10-year Treasury yield — the benchmark that actually drives commercial real estate financing — increased 14 basis points to 4.16%. Translation: short-term borrowing got slightly cheaper, but long-term capital costs remain elevated. If you're financing a commercial acquisition or development, rates are better than 2023 but still well above the 4% era that fueled the last building boom.
Jobs: The U.S. economy added just 50,000 jobs in December, but unemployment dipped slightly to 4.4%. Business sentiment surveys from the NFIB and Federal Reserve Banks of Atlanta and Dallas all show improving hiring expectations in the coming months. The labor market is soft but not collapsing.
Sales growth outlook: The Atlanta Fed's expected sales revenue growth survey surged in December — the largest increase since June 2022. When inflation was surging in 2022, that was a warning sign. Now, with inflation trending downward, it reads as genuine economic confidence. No signs of a looming downturn in the data.
What this means for DFW CRE:
- Office: Interest rates are still keeping spec development handcuffed, which is actually good news for the existing supply glut. Less new construction means the market can absorb surplus faster. As one veteran developer put it: "When it's 4%, you're gonna build like hell. When it's 7%, you're not gonna build at all."
- Industrial: Small-bay industrial (under 50,000 sq ft) remains tight. The larger bulk distribution market has elevated vacancy, but limited new starts should help that correct over the next 12-18 months.
- Retail: Consumer spending is resilient, but the shift away from department stores and toward online, warehouse clubs, and experiential retail continues. Neighborhood-serving retail in growing suburbs remains the strongest segment.
- Multifamily: Texas is still absorbing the massive wave of apartment deliveries from the 2022-2023 construction boom. Rent growth has moderated in major metros but remains strong in smaller markets driven by specific demand catalysts (see: Abilene).
Bottom line: The Texas economy is in a holding pattern — growing, but with less momentum than 2023-2024. For CRE, that means: opportunities exist at distressed pricing, new development stays constrained, and the operators who can execute on repositioning and leasing will outperform those waiting for the market to come to them.
📚 What We're Reading
Quick links worth your time this week:
- Does the Mall Still Have It All? (https://trerc.tamu.edu/article/does-the-mall-still-have-it-all/) — Texas A&M's full deep dive on mall performance and redevelopment across the state
- More Americans Are Living in Malls (https://www.cnbc.com/2024/12/05/why-developers-are-building-housing-at-shopping-malls.html) — CNBC on the nationwide trend of converting dead retail into housing
- It's Time to Unpack Dallas' Flight to Efficiency (https://www.dmagazine.com/commercial-real-estate/2026/03/its-time-to-unpack-dallas-flight-to-efficiency/) — D Magazine's Meghna Tare on why sustainability is reshaping DFW leasing
- Texas Economic Outlook — January 2026 (https://trerc.tamu.edu/reports/texas-economic-outlook-january-2026/)** — Full report from the Texas Real Estate Research Center
- Texas Commercial Real Estate — Winter 2026 (https://trerc.tamu.edu/article/commercial-winter-2026/)** — TAMU's statewide office market analysis with the 53M sq ft surplus data
🧭 What I'm Watching
I've had my eye on the 380 corridor through McKinney and Prosper. Three conversations in the last two weeks — all different people, all asking about the same stretch. When that starts happening, something's moving. More on that soon.
It takes a big man to cry, but it takes a bigger man to laugh at that man.
— Deep Thoughts by Jack Handy
📬 Next Week
A dive into a Dallas Icon: Jesse Pruitt — 50 years in DFW commercial real estate, 30 million square feet built, and the cold call that started it all. You don't want to miss this one.
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