Friday, March 08, 2013

Downtown Dallas’ office market looking up with new lease deals


By STEVE BROWN
Real Estate Editor
For years, downtown Dallas has been playing a game of Texas hold ’em with the suburbs.
Dallas’ central business district upped the ante with new housing, retail and public parks in an attempt to persuade businesses to stay put downtown and not move to the suburbs.
The efforts are starting to pay off.
Last year was the first time since 2008 that downtown Dallas gained more office tenants than it lost.
Several pending moves to the city’s core will bring hundreds of new office workers. And other major tenants that looked at leaving have decided to hang around now that the future of downtown Dallas is looking up.
“Those lease renewals and new tenants coming downtown are certainly providing an indication that what’s been done is working,” said Jon Ruff, senior vice president of Spire Realty Group.
Spire is scouting the Dallas area for tenants to go in a 21-story tower it plans to construct on the northeast corner of downtown.
“You are going to still see some people leave downtown for neighboring areas,” Ruff said. “But that’s different than going to Far North Dallas.
“I don’t view that as a black eye for downtown.”
In 2012, downtown office tenants leased more than 800,000 square feet of space.
That resulted in a gain in office occupancy of almost 100,000 square feet, according to figures from Cushman & Wakefield of Texas Inc.
The increase follows more than 1 million square feet of declines in leasing downtown starting in 2009.
Notable turnaround
The turnaround may be small, but it’s notable, commercial property brokers say.
“All of this is a good sign for downtown,” said Cushman & Wakefield executive director Mike Wyatt. “Some tenants are going to pay those big rents to be in new buildings in Uptown.
“But some of them are staying right where they are and refurbishing and putting the extra money in their pocket.”
The spread between first-class downtown office space and the handful of new towers planned in nearby Uptown is more than $10 per square foot.
“It’s wonderful to be in a new building, but you have to pay for it,” Wyatt said.
To compete with planned projects, owners of some of downtown’s offices — including the Plaza of the Americas, Patriot Tower and 2100 Ross — are spending millions of dollars on upgrades.
“Landlords are getting creative to add more parking,” Wyatt said. “They are putting in fitness centers and new areas on the first floor for employees.”
The tower remodelings have attracted two new large office employers downtown: architect HKS Inc. and Jacobs Engineering.
And other firms — including Greyhound Corp. — have decided to renew their leases downtown or relocate within the central business district.
Law firms that are downsizing their offices are still the mainstay of the downtown office market, said Tommy Nelson, vice president with Stream Realty Partners.
“Their footprints are getting smaller,” Nelson said. “The 200,000-square-foot tenant is now 110,000 square feet.
“The change in technology has made a lot of their big file rooms and libraries obsolete,” he said.
But the change in downtown is keeping some of those companies from leaving, Nelson said.
“We’ve seen people stay downtown because the revival of Main Street has been so successful,” he said. “They are not willing to double or triple their rates to move six blocks to Uptown.
“And downtown is only going to get better.”
The construction of billions of dollars in new cultural facilities, parks, apartments and retail space may have been key to improving the appeal of the district to businesses.
Parking problematic
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Full article at: http://www.dallasnews.com/business/commercial-real-estate/headlines/20130228-downtown-dallas-office-market-looking-up-with-new-lease-deals.ece