Williston, North Dakota, has the nation’s highest rents. Thanks to the fracking boom, a basic apartment in Williston costs more than something similar in New York or San Francisco. And it comes with a lot fewer amenities.
For instance, shopping. If Walmart doesn’t have it, the nearest outlet is at least two hours away. Now, a Swiss investment firm has announced plans to build a $500 million development that will include a major shopping center.
There are good reasons retail has taken so long to catch up with the town’s exploding population.
About three years ago, California real-estate developer Jeff Lunnen and his partners went to Williston to check out the fracking boom’s business prospects.
It wasn’t an easy trip. “It was hard to get accommodations," he says. "Hard to get something to eat, and trucks going in every direction.” At the time, many of the workers crowding into Williston camped out in RVs—some in the Walmart parking lot, others on the street.
All of which, to Lunnen, signaled unlimited opportunity. “We went back in two weeks, and started buying real estate,” he says, “and it’s been very good for us.”
The town’s population has more than doubled, and the RVs have been replaced by “man camps”—basically company barracks—after a city crackdown.
Lunnen has focused on industrial projects, but some developers have started to create more-permanent housing, at those sky-high rents.
Retail, says Lunnen, presents special challenges. “It’s a little like building your retail project on the moon,” he says. “There’s some logistical issues.”
For instance: Who would work in the shops? Are they supposed to live in the man-camps? How could retail stores pay competitive wages, when oilfield companies pay unskilled 19 year-olds $80,000 a year?
Traditional lenders haven’t been quick to get involved in retail development. “We are looking to avoid what I would refer to as over-capacity,” says John Giese, who oversees business banking for Wells Fargo in North Dakota. In other words, when things level off, will there be more malls than even a built-up Williston needs?
No one knows for sure how many people live and work in Williston now. A study commissioned by the city planning department puts the range between 39,000 and 44,500.
Meanwhile, like Jeff Lunnen, Wells Fargo has plenty to do in a line that’s more of a sure thing: working with energy producers. “Supporting that industry—making equipment and construction loans and such—will have quicker payback,” he says.
A Swiss investment firm called Stropiq is behind the newly announced $500 million project, to include housing, hotels and 1.2 million square feet of retail.
Donn Fuller, a Jones Lang LaSalle executive who is managing the build-out and soliciting tenants, says the first phase will focus on what he calls commodities: “Grocery, pharmacy, theaters,” he says. “In that area we consider theaters a commodity. Which is a little different, but there’s not a lot of entertainment.”
Fuller hopes to have that phase—which may include department stores and women’s fashion—up and running in about three years. The project as a whole may take seven to ten.
“We’ve got a lot of work to do,” he says. “On the site plan, the financial model. All I can say is, we think it’s going to be profitable. How profitable remains to be seen.”
Fuller admits: He’s never done a project in a location like this before.