Uptown’s turn: Office building wave starting up in top Dallas market
Crescent Real Estate/Crescent Real Estate
The tower, where Gardere will occupy four floors, will include ground-floor shopping.
The building boom that’s taken hold in the northern suburbs is spreading to central Dallas with a series of new office towers starting in Uptown and the Arts District.
One office high-rise is already under construction downtown, and another is on the way in Victory Park.
And now, one of Dallas’ largest and most prestigious law firms will anchor a tower to be constructed on McKinney Avenue.
Gardere Wynne Sewell LLP is leaving its longtime home in Thanksgiving Tower for Crescent Real Estate’s 20-story Uptown high-rise. Work will start this summer on the building next door to the Ritz-Carlton Dallas hotel.
Gardere will take four floors in the sleek glass tower, which will have a ground-floor shopping center and a lush park stretching along Olive Street. The law firm will move into its 109,000-square-foot offices in 2016.
“We’ve been in Thanksgiving Tower since 1989 — it’s been a good 25 years,” said Gardere chairman Holland O’Neil. “It was a difficult decision for us to make, but we are excited about the move.”
Gardere is renting about 100,000 fewer square feet than in its current downtown location.
“We have a lot of dead space in our current office,” O’Neil said. “When we moved into this building, the way we constructed our space was for a time when there were main-frame computers, big file rooms and libraries.”
New technology has allowed law firms to cut back their office size.
Even so, Gardere had only a handful of choices for its new location, said partner Kevin Kelley.
“Our real estate brokers told us in advance our options would be fairly limited,” Kelley said. “Our competitors are moving out of this area and either moving along Ross Avenue or to Uptown.
“The location for the new building is fantastic.”
Designed by award-winning architect Pelli Clarke Pelli, the 530,000-square-foot Crescent tower has been in the works for more than two years.
“I don’t give up easily,” said Crescent Real Estate CEO John Goff. “I think our timing for this building is very good.
“Once this project is underway, it will attract even more attention from prospective tenants.”
With the signing of Gardere’s lease, the building will move ahead quickly.
The project will have about 50,000 square feet of retail space fronting a landscaped plaza on Olive Street.
Phil Puckett and Jeff Ellerman of CBRE Group represented Gardere in its search for a new location.
The firm looked at two or three older buildings and three proposed projects before making its choice, Kelley said.
Uptown is one of Dallas’ tightest office markets, with less than 10 percent vacancy in first-class business space. And rents are up to twice the cost of space in nearby downtown.
Only one office building is under construction in the neighborhood — a 22-story tower developer Harwood International is building that is anchored by Frost Bank.
“In the Uptown market you can probably find only one building with a full floor of currently available office space,” said Crescent managing director John Zogg. “In my 25-year career, I’ve never seen this market as tight.
“So many people are trying to move to Uptown because of all the great things that are happening.”
But of almost 20 office projects underway in North Texas, only one is being built in Uptown. And downtown Dallas has only one new project, the 18-story Hall Financial Group office tower being built on Ross Avenue.
The high cost of building in Uptown and downtown vs. the suburbs means that most of the projects are outside Dallas’ core.
Also, building sites are more scarce and expensive in central Dallas.
“The dynamic that is different from 10 or 15 years ago is you have very limited development sites,” said Steve Everbach, senior managing director of Cushman & Wakefield of Texas Inc. “It’s pushing pricing for land and construction costs.
“And the market in Uptown and downtown is demanding premium properties.”
Developers can construct a value-oriented low-rise office campus in Plano, Frisco or Irving. But with development sites in Uptown topping $300 per square foot, office buildings have to be taller and more expensive.
“Right now, the fundamentals are the best I’ve ever seen for this market,” Everbach said. “You are going to have premium rents and premium tenants, and they are going to pay for it because they want to be in prime real estate.”
CBRE Group’s Puckett said that expanding and relocating businesses leased most of the prime office space in Dallas’ suburbs as the economy rebounded from the recession.
Puckett said that in the suburbs, he saw “office building construction starting sooner than the Uptown and Arts District market.”
Now it’s Uptown and downtown’s turn.
This week Houston-based developer Hines announced it will build a 23-story office tower starting later this year at Victory Park.
Developer KDC and Invesco Real Estate are working on a smaller office building at McKinney Avenue and Harwood Street in Uptown.
“There are a couple of three other buildings that could conceivably be built in this cycle in Uptown,” said CBRE Group’s Ellerman. “For a long time, the Crescent was the only game in town in Uptown.
“All of the office buildings that have recently been built have done well,” he said.