Cresa Connection: Tollway Corridor - August 2020

Welcome to the August edition of Cresa Connection, a monthly update on the North Dallas • Plano • Frisco office market detailing lease transactions recently signed, tenants searching for office space in the market and the latest office building news.

If your business has been negatively impacted by the Coronavirus pandemic and you would like help preparing your office for re-entry from a workplace design strategy expert on our team, please contact me.

COVID-19 Office Re-Entry Resources


Lease Transactions
Comp – Building: 6303 Cowboys Way / The Offices Two at Frisco Station, Tenant: Addus HomeCare, Type: New, Size: 74,824 SF, Term: 132 months, Free Rent: 6 months, Start Rate: $32.00/NNN, Bumps: $0.75, TI: $65.00/SF

Comp – Building: 5340 Legacy Drive / The Campus at Legacy, Tenant: ArcBest Logistics, Type: Renewal, Size: 23,372 SF, Term: 109 months, Free Rent: 1 month, Start Rate: $23.50/NNN, Bumps: $0.60, TI: $31.00/SF

Comp – Building: 4975 Preston Park Boulevard / Preston Park Financial Centre, Tenant: L&T, Type: Renewal, Size: 6,424 SF, Term: 39 months, Free Rent: 3 months, Start Rate: $29.00 +E, Bumps: $0.50, TI: $0.00/SF

Comp – Building: 5757 Main Street / The Tower at Frisco Square, Tenant: Meritize Financial, Type: Renewal/Expansion, Size: 9,681 SF, Term: 64 months, Free Rent: 4 months, Start Rate: $21.00/NNN, Bumps: $0.50, TI: $50.00/SF


Market News
DFW lost 227,000 jobs
for the 12 months ended in May, which represents a 6% drop in non-farm employment. By far, that’s the deepest decline in 30 years, eclipsing the Great Recession and 9/11 fallout. But it’s only about half the decline when compared to the nation. Chicago, Los Angeles, San Francisco, Boston and New York have all experienced double-digit declines. Among the 50 largest metros with over 1 million residents, only Phoenix had a smaller percentage decline in jobs over the last year. In the financial services sector, which includes banking and insurance, the U.S. had a 1.5% decline in jobs – and DFW actually experienced a gain of 2.8%. Last week, the U.S. employment report showed a nationwide gain of 4.8 million jobs in June.

During the 2nd Quarter, net nationwide office leasing dropped by 21.5 million square feet, which represents the most substantial slide since 2001. The freeze in demand for office space across the country has caused a surge in the supply of sublease space as companies put surplus offices up for grabs. Almost one-half million square feet of sublease space has hit the DFW market in the last month. The Legacy/Frisco market has accounted for 400,000 square feet of the 830,000 square feet of sublease space to hit the market during the 2nd Quarter.

The COVID-19 pandemic has blown a massive hole in DFW’s office market. Business contractions from the pandemic and economic shutdown have resulted in negative 1.8 million square feet of net office leasing during the 2nd Quarter 2020, which is the largest decline since the Great Recession. Overall, DFW’s office occupancy is down almost 2 million square feet so far in 2020. Almost 4.7 million square feet of new office space is under construction in DFW, the majority of which is concentrated in three submarkets – Legacy/Frisco, Downtown Dallas and Uptown. Since many of the office projects now underway still have months to go to completion, developers are hoping the worst impact of the pandemic will be over by the time construction is finished.

In terms of commercial construction activity for the first half of 2020, the DFW market has produced $11.4 billion in building starts, which represents a 1% decline from one year ago and ranks number two nationwide behind New York City ($17.1 billion and down 17% from one year ago). This data presents good news that the DFW commercial construction declines aren’t as severe as earlier in the pandemic.

While some companies are talking about moving to permanent remote work arrangement, software giant Microsoft is committed to taking large swaths of office space across the country as its business – primarily from an increase in the use of Microsoft Teams – gets a boost from the pandemic. Microsoft has accounted for three of the largest five new U.S. office leases completed since March 1, totaling just under 1.2 million square feet of space in Atlanta, northern Virginia and Redmond, Washington. As you might imagine, the other two largest leases came from government entities – the U.S. Department of Defense and Securities and Exchange Commission.

Google is extending its work-from-home policy for more than 200,000 employees globally until at least June 2021 as a result of a recent increase in coronavirus cases across the U.S.

Frisco-based MTX Group narrowly bested consulting behemoth Accenture to win a $295 million contract to coordinate the state coronavirus contact tracing efforts. Accenture and MTX Group tied in the scoring process with 87 points each, but the state selected MTX due to its cost proposal being $15 million lower than Accenture’s proposal. As of May 31, MTX had hired 605 workers and set up a virtual call center.

Real estate investment management company PRP has refinanced its FedEx Office office building at Legacy West in a deal that increases the value of the property to $86.5 million, up about 8.6% since acquiring the property less than three years ago. PRP originally acquired the four-story, 263,621 square foot building in November 2017 in a joint venture with AXA Investment Managers for $79.7 million. PRP has been betting big on Texas with its December 2019 acquisition of the Pioneer Natural Resources corporate campus in Irving for $584 million and its February 2020 acquisition of the 3M campus in Austin.

Dreien Opportunity Partners, owner of The Campus at Legacy West (former JCPenney campus), is currently in lease negotiations with JCPenney as the company looks to shrink its 1,100,000 square foot corporate footprint as it shrinks its retail storefronts nationwide. JCPenney has already missed at least one $2.5 million rent payment at Legacy West. JCPenney is being wooed by four potential suitors interested in buying its retail operating business, which will include properties, as the company searches for ways to maximize its value and emerge from a pandemic-driven Chapter 11 bankruptcy. JCPenney filed for bankruptcy protection in May. The company operates 846 stores in all, both leased and owned, and is in the process of permanently closing 168 locations. JCPenney has announced that it has cut 1,000 corporate jobs, most of which are at its Legacy West headquarters, to match its smaller store count.

Liberty Mutual is marketing 227,000 SF on 7 floors of its Legacy West campus for lease at $44.50/SF. The white boxed space has never been occupied and includes a $50/SF tenant improvement allowance with a 5-year lease term.

Frisco held a virtual State of the City panel in which the mayor said he believes the pandemic could drive more businesses to the city, as Frisco’s geographic sprawl works to its advantage. Some of the things that Frisco lacks – a robust public transportation system and high-density neighborhoods – may increasingly be seen as positives by relocating companies that want to give workers plenty of social distance. The panel said they are seeing a healthy pipeline of corporate prospects looking to consolidate and relocate to Frisco over the next few years.

Local developer Billingsley Company is seeking zoning changes to kick off construction on Beacon Square, an 86-acre mixed-use project on Coit Road just north of SH-190 in Plano. The development would feature 1,100 apartments, 800,000 SF of office space, 100,000 SF of retail space and more than 7 acres of parks. The project was initially approved in 2014, but the pandemic and retail overbuilding have caused the developer to reconsider the amount of retail space they would offer and propose allowing the retail space under apartments to be utilized as live-work spaces for small businesses. The property is one of the largest undeveloped tracts remaining in the city of Plano.

A Missouri investor (Maxus Properties) has purchased The Tower at Frisco Square, a 5-story 175,000 SF office building in downtown Frisco at the corner of Main Street and World Cup Way. Built in 2015, the property is anchored by Gearbox Software and was sold by Encore Enterprises.

Houston-based Triten Real Estate Partners plans to redevelop 5495 Belt Line Road, a 200,000 SF mixed-use office and retail project in the Addison area west of Preston Road. The property sits on the west side of Prestonwood Country Club and includes several existing retail buildings and two, 3-story office buildings overlooking the golf course. The property makeover will be called “Work/Shop” and include the two office buildings and 81,500 SF of retail space.


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

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