Cresa Connection: Tollway Corridor - September 2022
Please find September'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.
Metro, State and National Office Market News
Silicon Valley-based technology giant Apple has set a September 5th deadline for corporate employees to return to the office a minimum of three days per week after delaying its return plans several times due to COVID-19 spikes. The company will require employees to work from the office on Tuesdays, Thursdays and a regular third day that will be determined by individual teams. This is a shift from Apple’s original plan, which called for in-person work on Mondays, Tuesdays and Thursdays. Apple’s renewed return-to-office policy will initially take effect for workers throughout its Silicon Valley offices and later spread around the world. The company employs more than 37,000 workers in the U.S. Apple, which has said it relies on in-person creativity and collaboration to develop its high-end products, has been especially eager to jump back on the path to pre-pandemic normalcy and has been one of the loudest advocates for a return to the workplace even as other large Silicon Valley companies have been more fluid in extending their flexible work models.
Apple Headquarters in Cupertino, California (Source: CoStar)
In a similar move, McLean, Virginia-based Capital One, which has a large regional office campus in Plano, has announced a return to the office after Labor Day with employees required to be in the office a minimum of three days per week after delaying its return plans several times due to COVID-19 spikes. Capital One will require employees to work from the office on Tuesdays, Wednesdays and Thursdays.
The legal sector has ramped up office leasing activity nationwide during the second quarter. Seven law firms leased more than 100,000 square feet each during the 2nd quarter of 2022 after no deals that size were signed during the 1st quarter of this year. The total volume of second-quarter leases amounted to 1.6 million square feet, which represented a 43% increase from the first quarter. Law firms play an important role in the office space sector due to their tendency to feature private offices and a larger amount of space per employee than other office-using business types. Law firms also lead the back-to-office push with office occupancy by law firms being 15 percentage points above the overall office average in 10 markets tracked by building security technology firm Kastle Systems.
Fueled by remote working and growing consumer demand, DFW remains one of the nation’s fastest-growing data center markets through the first half of 2022. Hybrid work and the growth in personal usage of social media, online gaming and streaming applications have produced a need for new technology, more robust internet connectivity and innovative data storage solutions and, therefore, an influx of data centers to support these needs. Only Phoenix, Northern Virginia and the Pacific Northwest saw a greater total of data center leasing by tenants. Nationwide, data center demand through the first half of 2022 was almost double that from the previous year. In DFW, new net leases rose to 177 megawatts, which is 10 times greater than demand through the first half of 2021.
Far North Dallas Office Submarket News
The North Texas Tollway Authority has announced they will be adding a fourth lane in both directions of the highway between Sam Rayburn Tollway (SH-121) and U.S. Highway 380 to accommodate explosive growth in Collin and Denton counties. Improvements to ramps and intersections will also be included. The $160 million project aims to improve commute times and provide better access to developments near the Dallas North Tollway. Collin and Denton counties ranked No. 2 and 6, respectively, in the U.S. last year for population growth. Collin County added 36,000 residents from 2020 to 2021 while Denton County added 27,000 residents. Construction is expected to be completed in late 2025.
The retail division of Japanese-based technology giant Toshiba will be opening an innovation hub in Frisco with the goal of creating 150 jobs over the next two years. Toshiba Global Commerce Solutions has signed a 14,341 square foot lease at Hall Park’s newest building at 3201 Dallas Parkway. The 6th floor suite features 15 private offices, 4 conference rooms, 51 workstations and a break room/lounge area. The new office will accelerate the company’s cloud development growth and add a team dedicated to mergers and acquisitions. Toshiba will recruit workers with cloud, microservices and edge computing skills with the goal of adding 50 new hires in 2022. The company selected DFW due to its central hub to Toshiba’s development centers in Raleigh-Durham, Guadalajara, Mexico, Singapore, Taiwan, Tokyo and cities across Europe. Toshiba Corporation reported sales of $27 billion in 2021. Its products include power, industrial and social infrastructure systems, elevators and escalators, electronic components, semiconductors, hard disk drives, printers, batteries and lighting.
Hall Park's 3201 Dallas Parkway (Source: CoStar)
Plano-based movie theater chain Cinemark (3900 Dallas Parkway) reported revenue of $744 million for the 2nd Quarter 2022, marking its highest quarterly revenue since before the COVID-19 pandemic began and a stunning turnaround from its pandemic low of $8.9 million in revenue during the 2nd Quarter 2020. However, the company that operates 521 theaters in the U.S., Central America and South America still posted a net loss of $73.4 million for the quarter, reducing its loss from one year ago by roughly half.
Cinemark Headquarters at 3900 Dallas Parkway (Source: CoStar)
New York City-based Seritage Growth Properties has started marketing a 17-acre development site (Vista Commons) in the northwest quadrant of LBJ Freeway (IH-635) and Preston Road surrounding the former Valley View mall that has been rebranded as the Dallas International District, a 450-acre master-planned development. The 17-acre site is fully entitled for a mix of high-density residential, office, retail and hospitality uses. The decision by Seritage to sell off its owned real estate comes after the company switched from a real estate investment trust (REIT) to a C corporation for tax purposes. The company must pay off $640 million owed to billionaire Warren Buffett’s Berkshire Hathaway by July 2023.
Conceptual Rendering of the 17-Acre Development Site branded as Vista Commons (Source: CoStar)
Newport Beach-based real estate investment firm KBS has completed a $4 million capital improvements campaign at its three-building, 522,043 square foot Legacy Town Center (LTC) project. The renovations included updated building lobbies and elevator cabs in all three buildings, updated conference centers in LTC I and II, new tenant lounge with grab n’ go food service in LTC II and a new fitness center in LTC III. The project has blocks of available space ranging in size from 2,000 to 75,000 square feet and is offering top-of-building signage. The project is currently 74% leased overall and is quoting a rental rate of $32.00/SF/NNN ($13.51/SF - $14/08/SF) plus electricity ($1.18/SF - $1.79/SF) for space in the three buildings.
Legacy Town Center (Source: CoStar)
Washington, D.C.-based electronic cigarette maker Juul Labs Inc., which has a regional office at The Star in Frisco, has agreed to pay $438.5 million to 33 states to resolve a two-year bipartisan probe into the marketing of its high-nicotine products, which have long been blamed for sparking a national surge in teen vaping. Texas will receive nearly $43 million from the settlement. Under the deal, Juul will refrain from all youth marketing, paid product placement, advertising on public transportation, funding education programs, depicting anyone under 35 years old in advertisements or using cartoons in ads. The settlement amounts to roughly 25% of Juul’s U.S. sales of $1.9 billion last year.
Plano-based Aligned Data Centers, which specializes in sustainable and more environmentally friendly facilities, is awaiting approval from the Plano Planning Commission to construct a three-story, 220,000 square foot addition to its existing 100,000 square foot data center facility at 2800 Summit Avenue. Earlier this year, the firm increased its debt program to $1.75 billion to provide for planned growth in Dallas, Chicago, Phoenix, Salt Lake City and other markets. DFW remains one of the nation’s fastest-growing data center markets. Only Phoenix, Northern Virginia and the Pacific Northwest saw a greater total of data center leasing through the first half of the year.
Hall Park’s upcoming 5.7-acre park, which is expected to be completed in late 2023 near the intersection of Warren Parkway and Gaylord Parkway, will be named Kaleidoscope Park and be part of Communities Foundation of Texas. The park is owned by the city of Frisco and is the result of a public-private partnership between Frisco and Hall Group. The park’s design will feature amenities including a performance pavilion, children's play area, dog park, gardens, water features, pickle ball courts, WiFi-equipped technology terraces and public art installations. The park will feature free, year-round public programming, including weekly films, concerts, performances and fitness and well-being activities.
Rendering of Hall Park's Kaleidoscope Park (Source: Kaleidoscope Park Foundation)
Peloton Interactive Inc., which operates a 131,500 square foot regional office at Legacy Central in Plano, will embark on a sweeping overhaul that includes cutting nearly 800 jobs and outsourcing functions such as equipment deliveries and customer service to outside companies. Peloton will be cutting about half of its customer support team, which is mainly in Plano and Tempe. As part of the local layoffs, Peloton has placed a 104,000 square foot office with a January 2029 lease expiration date on the market for sublease, keeping only 27,500 square feet for its remaining workforce. Plano was Peloton’s first support center outside New York City, providing member support, sales, field operations and other corporate functions. Peloton is hoping to turn around a business that had thrived during the early days of the pandemic, but suffered a punishing slowdown in the past year. Sales are declining, losses are mounting and the company’s stock price is down nearly 90% over the past 12 months.
Peloton's Regional Office at Legacy Central (Source: CoStar)
Music Audience Exchange, which currently occupies 9,679 square feet at 2595 Dallas Parkway in Frisco’s Hall Park, will expand to 11,000 square feet in the building after executing a new, 5-year lease extension. The company markets music artists’ work to advertising and marketing clients with a wide variety of brands.
Fremont, California-based global electronics firm Delta Electronics has purchased the former Alcatel USA manufacturing and office campus located at 601 Data Drive, which is situated along Plano Parkway just east of Coit Road in Plano. The 423,000 square foot complex was originally constructed in 1994 on 30 acres of land and comprises two buildings. Delta plans to use the facility for R&D, manufacturing and sales of smart energy-saving products and solutions for use in the industrial automation, building automation, telecom power, data center infrastructure, EV charging, renewable energy and energy storage and display industries. Delta operates sales offices, research center and manufacturing facilities across five continents.
601 Data Drive (Source: CoStar)
Plano-based developer Duggan Realty Advisors has purchased a 25-acre tract of land at the northwest corner of the Dallas North Tollway and Spring Creek Parkway. The land site had been owned for decades by descendants of Plano’s Bacchus family. Duggan has entered the planning phase for a mixed-use development incorporating office, retail and residential uses and will be called Spring Creek Plaza. The project will feature a lifestyle shopping center with 120,000 square feet of restaurants and an entertainment component, 140,000 square feet of mixed specialty retail space, a hotel and office towers. Six of the 25 acres are already under contract for a luxury independent senior living facility. Duggan is marketing two, 20-story Class “A” office sites along the Dallas North Tollway. A large, centrally located park space the size of a football field will feature prominently in the development. Two residential towers on the west side of the land site are being marketed with a height of 22 stories. Plano’s planning commission has approved site plans, which are being designed by Nelsen Partners of Austin. Duggan plans to begin construction in the 1st quarter of 2023 if the developer can achieve 50% preleasing. They are currently 25% preleased. Duggan is looking to capitalize on its recent success following the development of the 27-story Windrose Tower condominium project just north in Legacy West.
Rendering of Spring Creek Plaza (Source: Dallas Morning News)
Seattle-based national real estate company Redfin has placed 22,199 square feet of space on the market for sublease at 2611 Internet Boulevard in Frisco’s Hall Park. The facility was opened in 2019 as the primary office of Redfin Mortgage, which has been consolidated into Bay Equity Home Loans after Redfin’s acquisition of Bay Equity for $138 million in April 2022. At the time of initial occupancy, the Hall Park office housed mortgage and title teams, real estate agents and the company’s first engineering team outside of Seattle and San Francisco. Redfin eliminated 121 jobs as part of the Bay Equity acquisition and the majority of those positions were located in Frisco. The cut represented less than 2% of Redfin’s total staff and other Redfin Mortgage employees have moved over to the Bay Equity team, which maintains its headquarters in California. In addition to lending, Redfin operates an online home-search platform, has real estate agents across the country and runs an instant-buying service, RedfinNow.
Hall Park's 2611 Internet Boulevard (Source: CoStar)
The PGA of America’s new $33.5 million, 4-story, 106,621 square foot corporate headquarters in north Frisco recently hosted a ceremony unveiling their new facility, which functions as the centerpiece of their 660-acre, $550 million master-planned development featuring two championship-level golf courses, 30-acre practice facility, performance center, 510-room Omni PGA Frisco Resort and PGA District, which will feature a one-of-a-kind indoor and outdoor golf-centered entertainment area. PGA Frisco is currently the largest development under construction in North America and is projected to drive $2.5 billion in economic impact over the next 20 years. The headquarters facility will initially house 120 employees along with the executive leadership team. Click here to see a virtual drone tour of the new facility.
PGA of America Headquarters (Source: Dallas Morning News)
A high-profile, 77-acre site that sits just north of the PGA of America headquarters and is located on the south side of U.S. Highway 380 has traded hands. The previous owner, Hong Kong-based Lesso Group, had obtained zoning approval to construct a mixed-use project featuring office, retail, residential and hotel uses on the site. A Frisco-based real estate partnership represented by Shiva Kondru has acquired the development site. Plans have not been disclosed yet. The partnership’s purchase was financed with a $25 million loan from Louisiana-based B1Bank.
Dallas-based apartment builder Leeds Residential has acquired and demolished a 14,966 square foot office building (17501 Dallas Parkway) that was constructed in 1994 along the west side of the Dallas North Tollway just south of Trinity Mills Road. With fewer available apartment sites, developers are increasingly turning to existing buildings to create new multi-family locations. The property will become the site of Bent Tree Flats, featuring 183 luxury apartment units along with 8,500 square feet of retail space. Site work has already commenced with Leeds targeting a 2024 completion date.
Dallas-based developer Crow Holdings has received a $79.5 million loan from Frost Bank to begin construction on the first phase of Crow’s 45-acre office campus called Southstone Yards, which will be situated in the northeast corner of State Highway 121 and Spring Creek Parkway and include four office buildings comprising 1.1 million square feet of space. The initial 235,000 square foot office building will feature wood timber frame construction and will be completed by the end of 2023. Architects Duda Paine and Gensler are designing the building. The city of Frisco in July agreed to provide Crow with up to $10 million in economic incentives over the next 8 years to support the development of the project. The family-owned real estate firm, which has more than $6 billion in projects underway nationwide and is one of Dallas’ largest apartment and industrial developers, is making a play in the competitive Frisco office market.
Crow Holdings' Southstone Yards (Source: CoStar)
Dallas-based office developer Cawley Partners has announced construction will start in December on phase two of The Parkwood, which will feature a 4-story, 120,000 square foot office building situated in the southwest quadrant of Parkwood Boulevard and Windhaven Parkway, just east of the Dallas North Tollway. The $28.6 million project is expected to be completed by mid-2024. The site sits on part of the Haggard family’s former Plano land holdings and will be next door to its first phase, which is a 120,000 square foot building nearing completion and is anchored by First United Bank. Cawley is currently quoting a rental rate of $36.00/SF/NNN for The Parkwood.
Rendering of Cawley Partners' Phase Two of The Parkwood (Source: CoStar)
Plano-based Toyota North America is working on the installation of a hydrogen-based fuel cell power generator at the National Renewable Energy Laboratory’s campus in Arvada, Colorado. The NREL, a division of the U.S. Department of Energy, will study the performance limitations and degradation of the one-megawatt fuel cell system, as well as the way it performs when integrated with energy storage systems and renewables like solar and wind. The $6.5 million partnership between Toyota and the NREL to install the generator is partially funded by the DOE’s Hydrogen and Fuel Cell Technologies Office.
Dallas-based Comerica Bank has executed a 100,000 square foot office lease at the 11-story office tower (17 Cowboys Way) currently under construction at The Star in Frisco. Comerica will occupy the top three floors of the new building, which is midway through construction at the northwest corner of the Dallas North Tollway and Cowboys Way. The bank will also occupy a ground-floor retail space and have building crown signage. The new office will become a business and innovation hub for the bank and will house 300 workers. The Frisco location allows the company to tap into the top-tier digital and technology talent in the area. Comerica’s downtown Dallas office will continue to be the site of the bank’s executive offices, commercial banking operations, wealth management, credit and other business units. Comerica currently has 950 employees in the DFW area after having relocated its headquarters from Detroit to Dallas in 2007. The 300,000 square foot building is being developed by a partnership of Jerry Jones’ Blue Star Land and Lincoln Property Company and is already 50% leased with a completion date of early 2023. 17 Cowboys Way is currently quoting a rental rate of $38.00/NNN for vacancy.
17 Cowboys Way at The Star (Source: CoStar)
Frisco’s Music City, a $40 million entertainment and restaurant venue located in the northeast quadrant of the Dallas North Tollway and Warren Parkway across the Tollway from The Star, may finally be moving ahead after plans were initially drawn up in 2018. The project, which includes a 1,000-seat indoor theater, 390-seat outdoor stage and restaurants, is owned by the Frisco Economic Development Corporation and Dallas-based Hodges Architecture. Construction is scheduled to start by December 2022 with a scheduled completion date in early 2024.
Frisco Music City Venue (Source: Dallas Morning News)
Irvine, California-based residential interiors firm Interior Logic Group, which signed a 17,681 square foot lease agreement in October 2021 at The Offices Three at Frisco Station (5844 John Hickman Parkway), which is situated in the shadow of The Star at the southeast corner of Cowboys Way and John Hickman Parkway, has elected to market their space for sublease due to a change in corporate office strategy. Interior Logic Group is the largest national provider of interior design and finish solutions for the building industry. The Class “AA” space is fully furnished with very high-end finishes and was only initially utilized by a few staff members. Interior Logic Group is currently quoting a sublease rental rate of $38.00/NNN ($13.62/SF) plus electricity ($0.71/SF) and has a March 31, 2029 lease expiration date.
Telecommunications infrastructure company ExteNet Systems has executed a 37,450 square foot lease agreement on the 6th floor at The Offices Three at Frisco Station (5844 John Hickman Parkway) as the firm announced they will be relocating from the Chicago metropolitan area after an extensive search process. The company evaluated various markets, including Southern California, Las Vegas and New Jersey, and determined DFW presented the best opportunity to leverage some of the company’s most successful projects and a city heavily invested in 5G technology. Texas’ strong business-friendly climate with fewer business regulations, a less costly workforce and no state income tax also weighed heavily on ExteNet’s decision-making process. ExteNet is the nation’s largest privately-held provider of LTE/5G wireless and fiber-neutral host communications infrastructure solutions.
ExteNet Systems, which is expected to occupy their new space in early 2023, will bring 110 new jobs to Frisco. The entire senior leadership team is expected to be based out of the new headquarters. The company already provides private wireless network services to The Star and Ford Center as well as having made telecommunications upgrades to AT&T Stadium in Arlington, AT&T Center in San Antonio and the Circuit of the Americas Formula 1 racing facility in Austin. The move will place the ExteNet closer to the center of gravity for the telecommunications industry’s ecosystem, which includes many of the firm’s clients and industry partners. To help with the company’s transition, the Frisco Economic Development Corporation approved a five-year agreement with ExteNet to provide up to $306,800 in performance-based grants with certain requirements based on new full-time job creation, real property improvements and business personal property improvements.
The Offices at Frisco Station Campus (Source: CoStar)
Germany-based, privately-held medical device company Ulrich Medical has announced the company will relocate its U.S. headquarters from St. Louis to Plano in a move that is expected to bolster the company’s bottom line and help its clients and distributors move products throughout the country. The interior construction on their new, 100,000 square foot industrial facility at 3712 E. Plano Parkway will begin in late September with an estimated completion date of year-end 2022. Ulrich Medical, which develops musculoskeletal implant technologies, needed a larger facility to keep pace with its growing business fueled by a recently-signed sales agreement with a “premier global orthopedic leader.”
Lease Transaction Comps
Building: 6105 Tennyson Parkway / The Tennyson
Type: New Lease
Size: 36,471 SF
Term: 93 months
Free Rent: 0 months
Start Rate: $30.00/NNN
TI: "As Is"
2. ILE Homes
Building: 14800 Quorum Drive / 14800 Quorum
Type: New Lease
Size: 5,302 SF
Term: 17 months
Free Rent: 0 months
Start Rate: $20.00/SF + Electric
TI: "As Is”
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).
Tor Erickson | Senior Vice President
One Cowboys Way, Suite 350
Frisco, TX 75034