Cresa Connection: Tollway Corridor - April 2022
Please find April's edition of my monthly update on the North Dallas-Plano-Frisco office market detailing the latest office tenant and building news as well as lease transactions recently signed.
If you have an office decision to make, please contact me for help with your real estate needs.
As more companies push to get their workforce back into the office, the DFW office market is leading the charge as one of the top U.S. markets for pending office transactions. DFW, Houston and Boston are the office markets experiencing the most tenants-in-the-market levels nationwide. In terms of office tenants scouting for new space, these three markets are at levels that have exceeded their pre-pandemic levels. Nationwide, the number of office tenants in the market is at the highest level since early 2020 before the country experienced the COVID lockdowns. Currently, about 50% of DFW area office buildings are back in business with employees returning to the office, according to the latest figures from office security/access systems provider Kastle Systems.
Office leasing in the DFW region is signaling a stable recovery with 18.8 million square feet of new leases signed in 2021. That momentum has continued into 2022 with 3.5 million square feet of new space being leased year to date. Subleases have accounted for 10% of new leasing activity – totaling 342,000 square feet of space and representing the second-highest level achieved in a decade. Across the metroplex, subleasing activity has been the highest in the Legacy/West Plano submarket, which accounted for 22.2% of all leases signed in the Legacy/West Plano submarket in 2021.
DFW commercial construction rose 28% year-over-year from February 2021 levels. DFW was second only to New York City for total construction starts, registering $28 billion in 2021.
Dallas is now Goldman Sachs’ second largest U.S. office outside of New York City, surpassing Salt Lake City. In less than a year, Goldman has grown its DFW presence from 2,000 to 4,000 employees. Goldman, which had 44,000 global employees as of year-end 2021, is particularly focused on engineering talent in the DFW market. Stephanie Cohen, who co-leads the consumer and wealth management division at Goldman, said “our vision for this (market) is that in the same way that we have developed a really good talent base in places like London and Hong Kong and New York, where people come to Goldman Sachs in order to work in finance and investment banking, I think there will be people who come to Dallas who want to work in fintech and want to do that at Goldman Sachs.”
Cohen moved to Dallas from New York City in August to lead the company’s growth in this market for the consumer and wealth management platform, which is close to 1,200 employees now and is on par with the headcount for the same team in New York City. Dallas led all metropolitan areas nationwide in 2021 in net technology job growth, adding 5,321 positions last year. That number is expected to grow to 7,700 net new positions in 2022 and the DFW region’s tech workforce is projected to expand by 17% over the next decade. Goldman recently unveiled a branded terrace at The University of Texas at Dallas in Richardson in the hopes of inspiring engineering students to pursue financial technology careers at the company.
New York-based MetLife has brought The Plaza at Legacy (5465 Legacy Drive) out to market for sale. The 7-story, 223,389 square foot office building, which is situated along the north side of Legacy Drive just west of Hedgcoxe Road, is currently 82% leased with a 5.0-year weighted average lease term remaining and is anchored by LoanDepot (61,149 SF), Broadcom (50,543 SF) and Randstad (31,884 SF). MetLife acquired the building in 2014 for $58 million or $260/SF. The initial offer due date has been set for April 28.
The Plaza at Legacy (Source: CoStar)
Plano-based commercial finance firm Stonebriar Commercial Finance, which currently occupies 14,651 square feet at Granite Park Three, has executed a new lease agreement for 52,390 square feet over a 12-year lease term to occupy the top two floors at Granite Park Six. Granite Park Six is Granite Properties’ 19-story, 422,109 square foot office building that is currently under construction along the south side of the SH-121 service road and is projected to deliver by August 2023. Granite is currently marketing space in Granite Park Six at $40.00/NNN ($16.00). Stonebriar Commercial Finance is the first tenant to execute a lease agreement at the building.
Granite Park Six (Source: CoStar)
Philadelphia-based Rubenstein Partners has purchased 5600 Headquarters Drive in Legacy, making its first foray into the Dallas market. The 3-story, 251,478 square foot office building is located at the southeast corner of Parkwood Boulevard and Headquarters Drive in Plano and was previously owner-occupied by PepsiCo, which had owned the property since 2003 and had as many as 1,700 employees working from the facility at one point. The 27-acre site includes a 5/1,000 SF parking ratio and the building consists of three pods connected by multi-level corridors. Rubenstein plans to reposition the asset for a headquarters destination through making capital improvements to the building lobby, new wing lobbies and an upgraded amenities package consisting of a new fitness center, tenant lounge, conference center and dining options.
5600 Headquarters Drive (Source: CoStar)
Plano-based Main Event announced it is being acquired by Dallas-based Dave & Buster’s Entertainment, a restaurant and arcade chain with 145 locations in North America. The $835 million deal to purchase restaurant and entertainment venue rival Main Event and its 50 locations will be an all-cash deal and is expected to be completed later this year. The deal comes as the restaurant industry emerges from a pandemic that changed consumer dining habits, leading to more takeout order and a greater willingness to avoid dining rooms at eateries. Dave & Buster’s, which relies heavily on providing customer experiences, was hit hard financially by the pandemic and warned investors it might have to file for Chapter 11 bankruptcy protection as it dealt with the disruption and lost revenue from closed venues in 2020. However, Dave & Buster’s returned to profitability in 2021 as customers returned. Main Event is one of the fastest growing family entertainment brands in the country and has aggressive expansion plans. Chris Morris, the current CEO of Main Event, is expected to lead the combined company once the deal closes. The two brands will continue to operate as distinct entities once the deal closes. Upon acquisition, Dave & Buster’s expects to save $20 million in the first two years in consolidating store support centers and efficiencies gained with a shared supply chain. It is unclear if the two companies plan on combining corporate offices. Dave & Buster’s recently signed a new lease to relocate its headquarters into a 67,200 square foot office building in Coppell after being in Dallas for three decades.
Addison Town Council has approved a memorandum of understanding for a $472 million transit-oriented, mixed-use project adjacent to Addison Circle. Master developers Stream Realty Partners and AMLI Residential were selected by the city following an extensive RFP process and will team up to develop the 18-acre tract of land into a mixed-use project that will comprise two, 150,000 square foot Class “A” office buildings, two luxury apartment buildings, 24,000 square feet of ground-floor retail space, a 120-room boutique hotel and a 45,000 square foot entertainment complex called The Hub. The three-phase project will be built around the future DART Silver Line, which is the east-west commuter rail that will traverse seven cities between DFW International Airport and Plano. Addison’s station is expected to be completed by mid-2024. Addison will be providing $23 million worth of incentives for the first phase of the project, which is anticipated to cost $344 million. Phase one is expected to break ground in the second quarter of 2023 and be completed by mid-2024. All phases are expected to be completed by 2028.
Addison Circle Park (Source: AMLI Residential)
Jerry Jones’ Blue Star Land has filed plans for another office addition to his $1.5 billion The Star development in Frisco. Last summer, Blue Star Land and developer Lincoln Property Company began construction on an 11-story, 314,000 square foot office tower located along the Dallas North Tollway across the street from luxury apartment tower The Twelve. Now, Blue Star Land has filed plans for a second, larger high-rise office tower. The 15-story, 525,500 square foot office tower will be constructed to the north of the 11-story tower currently under construction and the two buildings will be separated by a parking garage. No timetable has been disclosed for the project.
The Star (Source: Dallas Morning News)
Plano-based cybersecurity firm Critical Start announced a $215 million investment from Austin’s Vista Equity Partners that will help accelerate the company’s growth and expand its customer base. Critical Start works with midsize and large companies across a range of industries, including manufacturing, retail, government, healthcare, financial services and energy. The company's managed detection and response platform simplifies breach prevention in real time while also analyzing threats to inform future responses. Cyber attacks cost businesses an estimated $1.79 million every minute. Critical Start has grown its annual recurring revenue more than 400% over the past three years. The Vista investment will be utilized to hire additional workers and enhance technology and product offerings. In 2019, Critical Start hauled in a $40 million investment from private equity firm Sagemount to fuel a national expansion and, in 2021, the company spun off its value-added reseller, CyberOne, into a separate company.
Frisco-based home healthcare services company Addus HomeCare, which relocated from Hall Park to two floors at The Offices Two at Frisco Station (6303 Cowboys Way) in 2020, has begun marketing their 37,412 square foot, 5th floor space for sublease. The 5th floor suite is fully furnished and features 53 exterior private offices, 175 workstations, 5 conference rooms and a training room. Addus, which still occupies the entire 6th floor, is quoting $34.00/NNN ($16.26/SF) + Electric ($1.08/SF) for the 5th floor suite and the lease agreement expires August 31, 2031.
The Offices Two at Frisco Station (Source: CoStar)
New York-based real estate investment firm Acram Group has purchased Addison's Spectrum Center from Plano-based Granite Properties. The two-building, 12-story, 613,858 square foot Class “A” office project is located at the northwest corner of the Dallas North Tollway and Belt Line Road and is anchored by Concentra (95,751 SF), Elevate Credit (52,589 SF) and Muse Stancil (23,890 SF). Spectrum Center was 72.4% leased at the time of sale and is currently quoting $24.00/NNN for direct vacancy in the two buildings. The reported purchase price was $114,300,000 or $186.20 per square foot.
Spectrum Center (Source: CoStar)
San Francisco-based pharmacy company Alto Pharmacy, which signed an 88,748 square foot lease agreement at 6201 W. Plano Parkway (International Business Park) in 2020, is now marketing the entirety of their space for sublease. Alto’s footprint covers the entire 3rd and 4th floors of Billingsley Company’s newest office building at IBP, which is situated along the east side of Plano Parkway and just west of the Dallas North Tollway. The pandemic halted the opening of their Plano office, as their 3rd floor space remains in shell condition and the 4th floor space does not appear to have ever been occupied.
Alto is offering a $57.10 per square foot tenant improvement allowance for a subtenant to finish out the 3rd floor space. The 4th floor space is fully finished out in new condition with an open concept plan and comes fully furnished, inclusive of 281 sit-to-stand desks, 2 training rooms, 10 open collaboration areas, 18 conference/huddle rooms and an expansive reception area/entry lounge. This building is also very conveniently situated adjacent to IBP’s new Amenity Center building, which consists of a 100-seat capacity conference center, kitchen/lounge area and a 4,300 square foot fitness center with locker rooms, showers and towel service. Alto is quoting $23.50/NNN ($8.50/SF) + Electric ($1.00/SF) for the 3rd floor space and $26.00/NNN ($8.50/SF) + Electric ($1.00/SF) for the 4th floor space. Alto’s lease agreement expires on November 30, 2028.
6201 W. Plano Parkway (Source: CoStar)
Plano-based Prosperity Home Mortgage has begun marketing its 2-story, 69,189 square foot Class “B” office building for sale. The building, 5560 Tennyson Parkway, is situated in the Legacy area along the south side of Tennyson Parkway just east of Parkwood Boulevard and is currently 92.6% leased. Prosperity Home Mortgage, which has owned the building since 2015, owner-occupies 18,646 square feet with Ebby Halliday occupying 16,010 square feet.
5560 Tennyson Parkway (Source: CoStar)
Boston-based Franklin Street Properties is marketing its capital improvements project underway at 5100 Tennyson, which consists of building lobby renovations along with a new tenant lounge and conference center. The 4-story, 106,917 square foot Class “A” property, which is located along the south side of Tennyson Parkway just west of Preston Road, is currently 0% leased following World Ventures vacating the entire building in December 2021. The building features floor-to-ceiling glass, 4.0/1,000 SF parking ratio with covered parking and overlooks White Rock Creek. Franklin Street has owned the asset since 2011 and is marketing its vacancy at $23.00/NNN.
5100 Tennyson Parkway (Source: CoStar)
Dallas-based Caddis Healthcare Real Estate has broken ground on a new medical office building (Frisco Medical Pavilion II at 12950 Dallas Parkway) located along the east side of the Dallas North Tollway just north of Eldorado Parkway. The 3-story, 60,000 square foot building will feature 20,000 square foot floorplates, Dallas North Tollway visibility and building signage opportunities, physician ownership opportunities, ambulatory surgical center capability for a 1st floor tenant, covered parking with a 5.0/1,000 SF parking ratio, elevator with gurney capacity and a covered patient drop-off area. The facility is scheduled to deliver in Q3 2023. Caddis is currently quoting $34.50/NNN for space in the building.
Frisco Medical Pavilion II (Source: CoStar)
Dallas-based real estate developer Cawley Partners has begun marketing phase two of Fourteen5, which is an office park located along the west side of the Dallas North Tollway just north of Spring Valley Road and comprising two, 6-story, 240,000 square foot Class “A” office buildings and a centrally located 3-story amenity hub. The first building, 14555 Dallas Parkway, was completed in 2018 and awarded Development of the Year by DCEO Magazine. The amenity hub includes a restaurant, fitness center with locker rooms, rooftop lounge and large courtyard. Cawley is currently quoting $36.00/NNN ($15.19/SF) for space at the proposed 14545 Dallas Parkway and intends to break ground upon achieving a pre-leasing level of 30,000 square feet.
14545 Dallas Parkway (Source: CoStar)
Green Brick Partners, which is one of Fortune Magazine’s top 20 fastest-growing companies of 2021 and its fastest-growing public homebuilder, announced that it has closed on the purchase of 427 acres in Princeton, Texas, for the development of its newest residential community, Windmore. The site has been entitled by Green Brick for up to 1,762 single-family homes, 225 build-to-rent single-family units and 4 acres of commercial development.
A rumor is circulating that a Fortune 100 company has executed a lease agreement to relocate its headquarters from out of state to the city of Frisco.
Lease Transaction Comps
1. Northwest Hardwoods
Building: 2600 Network Boulevard / Hall Park
Type: New Lease, Size: 23,000 SF
Term: 129 months
Free Rent: 9 months
Start Rate: $24.75/NNN
2. Titan Rock Investors
Building: 2701 Dallas Parkway / Parkway Centre IV
Type: New Lease
Size: 4,211 SF
Term: 65 months
Free Rent: 5 months
Start Rate: $17.25/NNN
3. Proterra Ad0vertising
Building: 16415 Addison Road / Addison Tower
Type: New Lease
Size: 3,943 SF
Term: 36 months
Free Rent: 0 months
Start Rate: $22.50/Full Service
Bumps: $0.50/SF, TI: $5.00/SF
I specialize in representing office tenants in the North Dallas/Plano/Frisco market. Please let me know if I can be of service with your real estate needs (relocation search, expansion, lease renewal negotiations, building/condo purchase, sublease, portfolio management).
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Tor Erickson | Senior Vice President
5005 Lyndon B. Johnson Freeway, Suite 800
Dallas, TX 75244