Monday, August 24, 2015

More construction cranes coming for Dallas’ booming Uptown district

Developers are cranking up the heat in what is already Dallas’ hottest office building market.
More than 1.5 million square feet of office space is under construction in Uptown and on the north edge of downtown Dallas.
An additional 2 million square feet is in the works in a half-dozen proposed projects.
“I don’t see all of what’s planned getting built,” said Joel Pustmueller, one of the founders of Dallas’ Peloton Commercial Real Estate. “But in the past, more of these buildings have been built than were at first predicted.
“Recent history shows that there will be demand for all of them,” he said.
Less than 10 percent of the first-class office space in the Uptown area was empty at midyear.
And rents have jumped almost 20 percent in the last two years, brokerage company reports show. Uptown rents in proposed projects are now twice the citywide average.
“The new normal for new buildings in Uptown is $50-per-square-foot rent,” Pustmueller said. “We are at all-time-high rental rates in Uptown and poised for even more.”
The buildings in or near Uptown that are opening this year are substantially rented.
Developer Harwood International is just finishing construction on its 168,000-square-foot Frost Tower on McKinnon Street near the entrance to the Dallas North Tollway.
“Frost Tower is at 94.22 percent leased,” said Harwood vice president Jihane Boury.
Both the law firm Polsinelli and Frost Bank have moved in.
Construction on the 22-story office tower will wrap up in October.
Harwood International just started another office project in Uptown. The seven-story Rolex Building on Moody Street will be fully occupied by the luxury watchmaker.
Developer Hall Financial has started moving tenants into its 18-story KPMG Plaza in the Dallas Arts District.
The high-rise on Ross Avenue is about 70 percent leased to tenants including accounting giant KPMG, law firm Jackson Walker and UMB Bank.
The biggest office project underway in Uptown is Crescent Real Estate’s McKinney & Olive Tower on McKinney Avenue.
“We are 50 percent pre-leased and seeing a lot of good activity,” said Crescent managing director John Zogg. “But I worry about what happens in 2018 and 2019 if all these buildings being talked about start.
“I’ve never heard so many people say they are going to start a building without a lead tenant,” Zogg said.
McKinney & Olive has signed major leases with tenants including law firms Gardere Wynne Sewell LLP and Sidley Austin LLP.
Three more major office towers could kick off in the Uptown area before the end of the year.
RED Development plans to break ground in the next few months on a 16-story office tower in its Union mixed-use project spanning Field and Akard streets at Cedar Springs Road.
And developers Hines and Cousins Properties are finalizing their plans for a 466,000-square-foot office tower in Victory Park.
Developer Trammell Crow Co. and Metropolitan Life Insurance are also set to break ground soon on a 19-story office tower in their Park District project at Pearl Street and Woodall Rodgers Freeway.
Park District’s partners — along with other Uptown developers — are pursuing PricewaterhouseCoopers LLC as a lead tenant in the office tower.
But the Park District office tower and a 250,000-square-foot tower that Lincoln Property Co. plans across the street, next to the Meyerson Symphony Center, are expected to start without significant signed leases.
“Uptown right now … still remains as one of the hottest office submarkets in Dallas-Fort Worth with little supply of class-A office space, and it will continue to be one of the hottest office submarkets for years to come,” said Phil Puckett of CBRE. “Even at $50 a foot, they are still coming.
“There will be some new announcements of new tenants moving to Uptown in the very near future that will continue to take both existing office space off the Uptown and new tenants that will anchor to-be-constructed office buildings.”
Developer Granite Properties has begun construction to convert the former West End Marketplace retail complex on Woodall Rodgers into more than 200,000 square feet of offices.
Granite is talking to prospective tenants for the project, which will open in September 2016.
“The market is very active, and if demand continues at this pace, the new buildings should be absorbed,” said Greg Fuller, Granite chief operating officer. “Construction costs continue to rise, which will help mitigate supply.”
Steve Brown/Dallas Morning News