Wednesday, July 13, 2005

Downtown Dallas & Uptown Real Estate News

Downtown Dallas & Uptown Real Estate News

DALLAS (NewYorkTimes.com) - The condo and apartment conversion craze has hit a wall here - a sleek corporate wall of smoked glass and cheap steel girding.

It was bound to happen. Across the country, buildings with character - old garment factories, warehouses, Art Deco skyscrapers and Beaux-Arts firehouses - are being revived as condominiums and loft apartments as cities try to draw residents back to their core. But with that historic stock depleting, developers are now turning to uglier candidates for condo makeover: moribund office towers.

From Dallas to Fort Worth, Los Angeles to Chicago, developers are lifting the corporate skin off these skyscrapers. They are installing new windows, limestone facades, balconies and contemporary ornament, and in some cases stripping the buildings to curtain walls and I-beams to do it.

"You've got to take off some of the old ugly facades and let there be glass and light," said Laura Miller, the mayor of Dallas. "If you take the skin off and restore it, it's beautiful."

These glass-and-steel monoliths sprang up in droves from 1950 to 1980, when cities like Dallas experienced explosive and unchecked commercial development. In the 1950's, Dallas added 7.2 million square feet of office space, second only to New York City, according to an article in May 1960 in The Dallas Morning News.

But as those buildings aged and jobs fled Dallas during the dot-com recession, many of those buildings emptied, giving Dallas the highest office vacancy rate in the country. From 2000 to 2005, amid a glut of office space, office rents declined by 22 percent, according to Reis Inc., a real estate research company.

Although the city's numbers have improved over the last year, 26.5 percent of its office space is still vacant. Downtown alone, nine million square feet of office space sits vacant, according to the brokerage firm Cushman & Wakefield.

"These buildings have kind of been shunned," said Ted Hamilton, who is working with his father, Larry, to redevelop and partly reface the vacant Fidelity Union Life Towers downtown to create 435 apartments and 20,000 square feet of retail space.

Developers like the Hamiltons have snatched up these buildings - some boarded up, some 15 percent occupied - for $10 a square foot and concocted sales pitches for lofts and new retailing spaces. The city is eager to unload its outmoded office stock and is serving up tens of millions of dollars in tax incentives for construction, exterior renovation and landscaping.

Dallas could use 10,000 residential units downtown, and about 3,800 have been built or are being developed, according to the Central Dallas Association.

In other cities, the choice to tear down or redevelop a dilapidated old building can instantly ignite an emotional battle, pitching preservationists and historians against developers. Less so in cities like Dallas, said Art Lomenick, managing director for the Trammel Crow Company, a Dallas real estate brokerage firm.

"It's not that old of a city," Mr. Lomenick said. "You've got buildings that are functionally obsolete now that were built in the 50's and 60's. They're not architecturally significant. They're terrible."

Razing or refacing often boils down to a cost-benefit analysis, said Joseph Sapp, a San Diego developer who plans to reface three downtown office buildings here and convert them to apartments. If the building's footprint is not too big (sprawling office floors beget cavelike apartments) and its bones are solid, it is often cheaper and faster to reface than rebuild.

"You're just buying it for bupkis," Mr. Sapp said. "Everything's already intact. Think of it as a big tenant improvement job. I call them recycling."

Mr. Sapp's company, 3J Development, plans to replace the dark-glass shell of an empty 1961 office building at 1600 Pacific Street with walls of blue glass, tack on balconies, add a contemporary cornice and cut terraces into the building.

On Main Street, he will expose the original stone facade and cornice of the Praetorian, a 1908 office building with a face that was girded in glass and silvery metal during the 60's. Other developers along Main Street have unwrapped small older buildings and set up stores and restaurants.