Cresa Connection: Tollway Corridor - December 2021

Please find December'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.
Market News

As the office market’s recovery begins to take hold across Texas, demand has primarily been driven by high-end space. The pandemic has only accelerated the flight-to-quality narrative, as office jobs were some of the lightest-hit employment sectors during the pandemic. With the labor market for office talent tight, companies have been offering new office space with high-end amenities to lure and retain their workforce. After five quarters of negative net absorption (meaning more tenants vacated space than took occupancy), the DFW area is indicating a stable rebound. Since April, the DFW office market has reported 1.1 million square feet of positive net absorption. While Class “A” office properties comprise only 43% of the total inventory, they captured 71% of the total net office absorption during this period. The suburbs have experienced the largest move-ins, with the recently delivered build-to-suit projects for Charles Schwab (Westlake), Keurig Dr. Pepper (Frisco) and JPMorgan Chase (Legacy West).

Fourteen DFW companies have earned their way onto this year’s Deloitte Fast 500, which recognizes revenue growth over a three-year period across the nation at public and private technology companies. Among the list are two Plano-based companies, data-center operator Aligned, which ranked #157, and software firm Alkami, which ranked #367. The three-year revenue growth rates were 870% for Aligned and 318% for Alkami. A separate ranking by SMU’s Cox School of Business recognized Frisco-based cloud technology company MTX Group, headquartered at Frisco Station, as the region’s fastest-growing, privately-held company with a three-year revenue growth rate over 2,000%.

Vanguard, one of the world’s largest investment management firms, has found a home for its fifth U.S. office – Liberty Mutual Insurance’s regional campus at Legacy West. Vanguard, a Pennsylvania-based company with more than 30 million investors in 170 countries, has executed a lease agreement at 7900 Windrose Avenue to take 104,301 square feet on floors 10, 11 and 12 with remodeling work starting in late November and expected to finish in time for a May 2022 move-in date. A state permit valued the cost of the tenant improvements at $7 million or $67/SF. The transaction included a $50/SF tenant improvement allowance from Liberty Mutual, so Vanguard will be spending approximately $17/SF or $1.8 million of their own funds on remodeling the existing Liberty Mutual space. Vanguard currently employs 17,300 workers in four office hubs – Valley Forge, PA, Charlotte, Scottsdale and Washington, D.C. The Legacy West location will house workers for Vanguard’s Personal Adviser Services division, which manages $231 billion in customer assets. Liberty Mutual owns their campus, so this transaction is technically not a sublease of space. Liberty Mutual, whose campus comprises 1.1 million square feet of space, still has another 278,167 square feet of space on the market for lease on floors 9 and 13 through 19 at $44.50/SF.

Vanguard Legacy West

Vanguard's new office at Legacy West (Source: CoStar)

Austin-based Capital Commercial Investment has purchased two high-profile Plano office properties - the former J.C. Penney headquarters campus (now called The Campus at Legacy West) and computer security company McAfee’s building (5000 Headquarters Drive).  The two properties present a combined 2 million square feet of Class “A” office space in attractive locations in the Legacy market.  Capital Commercial plans to spend $3 to $4 million on amenity upgrades to The Campus at Legacy West as well as a model suite for prospective tenants to tour that will showcase glass partition walls, raised ceilings and LED lighting.  The Campus at Legacy West was placed on the market after lender Beal Bank foreclosed on the property.  J.C. Penney vacated the campus a year ago before it emerged from Chapter 11 bankruptcy proceedings, dropping its 1.2 million square foot lease.  NTT Data currently anchors the building with 233,000 square feet of office space.  Capital Commercial is on a buying spree with two additional office towers under contract in Houston with plans to buy up to 7 million square feet of Texas real estate during the next three years.  The firm expects the in-migration to Texas to only accelerate due to job opportunities and a lower cost of living as employers flee from California and other higher-cost states.

Legacy Commons (5301 Legacy Drive), which is located halfway between the Dallas North Tollway and Preston Road on the north side of Legacy Drive, is undergoing a major renovation and repositioning project that will include an updated building lobby, common areas and new exterior entryway and drive-up, food hall with coffee shop, outdoor kitchen, fitness center, WiFi-enabled collaboration area, on-site security station and white-boxed floors.  The fully vacant, 3-story, 314,700 square foot office building, which was originally constructed in 1998 and was home to Keurig Dr. Pepper until their relocation this year to The Star in Frisco, features 104,900 square foot floorplates with high ceilings (10.5 – 11.0 feet) and 5.0/1,000 SF parking (60% covered).  The property can also accommodate larger users via expansion capability of another 300,000 square feet on the adjacent 5.3 acres of excess land.  Legacy Commons was acquired by Dallas-based Champion Partners in December 2019 for $50 million or $169/SF.  Ownership is currently marketing their full-floor vacancies at a rental rate of $33.00/SF, NNN.

Legacy Commons

Legacy Commons at 5301 Legacy Drive (Source: CoStar)

One of the last remaining development sites in Plano’s $3 billion Legacy West mixed-use project has traded hands.  Dallas-based developer KDC, which specializes in large corporate office campus projects, has purchased the 10-acre site at the southwest corner of the Dallas North Tollway and State Highway 121, north of Liberty Mutual Insurance’s high-rise campus.  The property had been owned by the partnership of Karahan Companies and Columbus Realty that started in 2014 to develop the 250 acres surrounding J.C. Penney’s former headquarters campus.  Since then, Karahan and Columbus Realty have built what many consider to be the most successful mixed-use development in the entire state.  The just-sold building site sits across the street from where tax consulting firm Ryan LLC recently announced it will build a 24-story, 400,000 square foot office tower with construction set to start in the 1st quarter of 2022.  Karahan and Columbus Realty still have a 2-acre site left to build on in Legacy West.

Developers have provided a first look at the next high-rise planned in Legacy West for Dallas-based tax consulting firm Ryan LLC.  The 24-story, 400,000 square foot office tower will be built near the southwest corner of the Dallas North Tollway and State Highway 121.  The vacant 6-acre site, which was purchased by Ryan in 2017, is situated just north of the Liberty Mutual Insurance and JPMorgan Chase office campuses.  Construction is scheduled to start in the 1st quarter of 2022 and reach completion in early 2024.  Ryan LLC will occupy approximately half the building, with the remaining 200,000 square feet being available for lease on eight floors.  Ryan LLC plans to relocate more than 500 workers now housed in Three Galleria Tower (13155 Noel Road) in Dallas to the new building.  The tower will be developed by Minneapolis-based Ryan Cos. (no affiliation to Ryan LLC) and designed by San Francisco-based Gensler.  

 

Ryan Rendering

Rendering of Ryan LLC's planned office tower at Legacy West (Source: CoStar)

First United Bank, which will be relocating early next year into 84,479 square feet of space in a new building currently under construction at 3930 Dallas Parkway (“The Parkwood”) near the intersection of Parkwood Boulevard and Windhaven Parkway, is marketing its current 31,026 square feet of space at 2805 Dallas Parkway (Parkway Centre II) for sublease.  The space comprises 9,718 square feet on the 3rd floor and 21,308 square feet on the 5th floor and both suites run co-terminously through May 31, 2026 but can be subleased separately.  The sublease includes an opportunity to gain building signage fronting the Dallas North Tollway and the spaces are currently being marketed at $29.50/SF.

Houston-based Triten Real Estate Partners has started construction on a new office development near Spring Creek Parkway and North Central Expressway in east Plano.  This redevelopment of the former Plano Market Square Mall will be rebranded as Assembly Park and consist of 180,000 square feet of Class “A” creative office space on two floors featuring exposed ceilings, floor-to-ceiling windows, indoor bike storage, 4,300 square feet of conference and fitness center space, collaboration areas, and ½-acre of green space for concerts, fitness classes and outdoor lunch area.  The office building is scheduled to be completed by April 2022.

Plano’s Planning and Zoning Commission has approved the proposed Haggard Farm development, sending the project to the city council for a final decision on rezoning of the land, which represents one of the last remaining sections of the pioneer Haggard family’s farm.  Haggard Enterprises and Dallas-based developer Stillwater Capital are seeking rezoning of 142 acres along the south side of Spring Creek Parkway and east side of Parkwood Boulevard to build a mixed-use project with office, retail, hotel and residential components.  Current zoning would allow Haggard to build office and retail uses, including high-rise buildings.  The approved plan would limit most of the buildings to four floors for offices and apartments.  A boutique hotel would be five stories.  A portion of the Haggard Farms project would consist of a farm theme, recognizing the property’s heritage.  At the heart of the development would be a destination food/beverage/event venue called The Almanac that would include a winery, brewery and distillery.  The proposed zoning change would allow for 700,000 square feet of office space, 700 multi-family residential units, a 98-room hotel, a retail village, a senior housing community and townhomes.  More than two dozen acres of land would be set aside for parks and greenbelt space, which would also act as a buffer between the development and the adjacent high-end residential subdivision, Avignon Windhaven, to the south.  If the Plano City Council approves the project and rezoning, construction could start in as soon as six to nine months.

 

Haggard Farm Mixed Use

Haggard Farm mixed-use development rendering (Source: CoStar) 

Frisco-based medical firm Argon Medical Devices is relocating south into Plano to Headquarters I (7800 Dallas Parkway), which is situated at the southeast corner of the Dallas North Tollway and Headquarters Drive.  Argon has executed a lease agreement for 23,592 square feet, which will accommodate the company’s growth.  Argon, which is a global manufacturer of specialty medical products, including devices used for interventional radiology, vascular surgery, interventional cardiology and oncology, employs more than 1,000 workers with manufacturing facilities in Athens, Texas, Wheeling, Illinois, and Rochester, New York.  The new lease takes the Headquarters I occupancy level to 88%.


Plano-based Heady Investments has announced plans for an 80-acre, $2.5 billion mixed-use project called The Railhead, which will be located just north of Frisco’s Main Street on the west side of the Dallas North Tollway.  Plans for The Railhead include over 1 million square feet of office, hotel and high-rise residential development.  Frisco’s Planning and Zoning Commission recently approved 1,280 apartments within the development plans.  Randy Heady expects to break ground by January 2022.  A partnership set up by Heady Investments acquired the development site from two local investors.  The planned buildings will surround a 5-acre park with $1.2 million in landscaping and water features.  Heady plans to sell building sites in the project to other developers.  Heady already has deals in the works for a medical building and apartments.  Top DFW apartment builder JPI has contracted to purchase land for an 875-unit rental community that would start next year.  Sites for up to five, high-rise office and hotel buildings are earmarked for the east side of the property along the Dallas North Tollway.  The site is ideally situated between two major Frisco developments – with The Star/Frisco Station development further south on Warren Parkway and the 2,500-acre Fields/PGA HQ development under construction on Frisco’s north end near U.S. Highway 380.  Heady’s development experience spans four decades, with its most recent development being the 14-story Headquarters II project that was acquired this year by New York-based investor Monarch Alternative Capital.  

 

Railhead

Rendering of The Railhead mixed-use project (Source: CoStar)

The former SMU-in Plano campus along Tennyson Parkway in Plano’s Legacy area has been purchased by Los Angeles-based Alvarez & Marsal Capital Real Estate from Los Angeles-based CBRE Global Investors.  The property, which currently consists of four, two-story office buildings comprising 282,240 square feet of Class “C” office space, was originally constructed in 1985.  The 16-acre site campus is ideal for a repositioning project, whereby the new ownership can leverage the Legacy location and a flight to quality occurring in the office market with tenants desiring prime Class “A” space with an abundance of amenities that will attract and retain workforce talent.

North-Dallas based Shiftsmart, a tech startup that connects shift workers with employers, has raised $95 million in a new funding round.  Shiftsmart provides workforce management software, allowing employers to tap into a network of more than 600,000 workers seeking shift work.  The $95 million funding round represents one of the largest investment rounds of 2021.  The company employs 60 workers and operates in more than 50 countries with clients including Apple, HP, Airbnb, Chick-fil-A, Humana and even the U.S. Small Business Administration.  Shiftsmart allows workers to use the platform free of charge and the company generates revenue based on fees charged to employers for use of the platform and on a per-shift basis.  The new investment round was led by D1 Capital.  Existing investors in the company include Mark Cuban, Softbank, WeWork and Perot Jain.  Shiftsmart has now raised a total of $117 million from investors.  Its total userbase has grown 50% from 400,000 reported as recently as April 2021.  The company was named the fastest-growing firm in North Texas this year and ranked #96 on the Deloitte Technology Fast 500 list.

Plano-based developer Granite Properties has officially broken ground on its newest building, Granite Park Six, which will be situated along the south side of State Highway 121 and the west side of Granite Parkway adjacent to Granite Park Three.  Granite Park Six will consist of an 18-story, 439,866 square foot tower and include a 9,000 square foot amenity deck with outdoor seating, WiFi, yoga lawn, grill and covered area, customer lounge with coffee and wine bar and golf simulator, conference facilities including a 100-person lecture hall, two boardrooms and catering and event space, and a fitness center with curated group classes.  The building is scheduled to deliver in the summer of 2023 with tenant occupancy as early as October 2023.  Granite Properties is marketing the space at $40.00/NNN and has, thus far, leased the top floor of 26,562 square feet.

 

Granite Park Six

Granite Park Six (Source: CoStar)


Lease Transaction Comps
 

1. Tenant: Eikon Consulting Group
Building: 6513 Windcrest Drive / Tollway North Office Park
Type: Renewal, Size: 5,324 SF
Term: 62 months
Free Rent: 2 months
Start Rate: $17.00/NNN
Bumps: $0.50/SF
TI: As Is

2. Tenant: VisiQuate
Building: 7160 Dallas Parkway / Legacy Town Center I
Type: New Lease
Size: 3,845 SF
Term: 64 months
Free Rent: 4 months
Start Rate: $30.00/NNN
Bumps: $0.50/SF
TI: Turnkey

3. Tenant: Sweet Water Financial
Building: 5057 Keller Springs Road / Liberty Plaza II
Type: New Lease
Size: 4,408 SF
Term: 65 months
Free Rent: 5 months
Start Rate: $22.00 + Electric
Bumps: $0.50/SF
TI: $15.00/SF

4. Tenant: ILG
Building: 5844 John Hickman Parkway / The Offices Three at Frisco Station,
Type: New Lease
Size: 17,681 SF
Term: 120 months
Free Rent: 0 months
Start Rate: $34.00/NNN
Bumps: $0.75/SF
TI: Turnkey

5. Tenant: Gulf Coast Western
Building: 14160 Dallas Parkway / Parkway Office Center
Type: New Lease
Size: 14,029 SF
Term: 120 months
Free Rent: 0 months
Start Rate: $22.00 + Electric
Bumps: $0.50/SF
TI: $17.50/SF

 

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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).

Learn why Cresa only represents tenants/occupiers exclusively.

Tor Erickson | Senior Vice President

Cresa
5005 Lyndon B. Johnson Freeway, Suite 800
Dallas, TX 75244

469.323.5395
terickson@cresa.com
cresa.com/dallas

 

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