2100 McKinney: Office Tower At 2100 McKinney Ave.

[TexasStar]

Complex May Be Uptown's Missing Link

Big McKinney Avenue project envisioned as connection to downtown

12:00 AM CDT on Friday, June 23, 2006

By STEVE BROWN / The Dallas Morning News

A vacant block that developers hope will provide a link between Uptown and downtown Dallas will soon be sprouting a mixed-use complex.

Developers plan to build an office tower, retail space and condominiums on the 2.9 acres overlooking Woodall Rodgers Freeway and McKinney Avenue.

Lincoln Property Co. is about four months away from a groundbreaking for the complex it will construct in partnership with Dallas' Corrigan Properties.

The modern tower at 2000 McKinney Ave. will house the headquarters of Texas Capital Bank, which is already located in Uptown.

"We were looking for a significant building," said Jody Grant, chairman and CEO of Texas Capital Bank.

The bank will take about 100,000 square feet of the 445,000-square-foot building.

The 20-story tower will be the biggest office building constructed in Uptown in more than a decade.

Lincoln Property will also move its home office from downtown to the new building when it opens in 2008.

Corrigan Properties will also locate in the building.

It's the first center city office tower Lincoln has built since 1984.

"We've been working on this site for the better part of two years," said David Pettle, executive vice president of Lincoln Property.

In the meantime, construction has boomed in Uptown.

And plans have progressed to construct a park that would bridge Woodall Rodgers Freeway between Lincoln's building site and downtown.

"We wanted this project to have a presence on McKinney Avenue and the south end fronting the park toward downtown," said Lincoln's senior vice president Elliott Prieur. "The project will look like it will have two front doors."

About 20,000 square feet of retail space

[KinkaidAlum]

Another decent looking project. Not nearly as nice as most of the other Uptown announcements though.

Also, I noticed that another downtown firm will be moving out to this new building. How is Downtown holding up to Uptown's growth?

[slfunk]

Another decent looking project. Not nearly as nice as most of the other Uptown announcements though.

Also, I noticed that another downtown firm will be moving out to this new building. How is Downtown holding up to Uptown's growth?

Well the numbers don't sound too promising at first glance. There is about 3,000,000 sq ft of vacant office space. That includes class AA, A, B, and C. Most of the class C and B vacancies are some towers that are completely vacant purchased by a developer being converted or awaiting being converted into residential. One of those buildings is 1900 Elm which is awaiting TIF money from the city to start the conversion. Another building is one near city hall, which has JUST been giving approval for TIF to rip away the stucco and cast stone to reveal the original brick fascade and be converted in a loft/retail complex. The other buildings included in the count are the Atmos buildings donated last year to the city and the Continental building. All five of the buildings are awaiting being renovated into resdiential buildings and/or retail components. This will happen once Forest City completes the Mercantile complex conversion to residential. (Part of the agreement between Forest City and Dallas is that Forest will convert the Atmos complex or find someone who will. This was the agreement that secured Forest City 70 mil dollars to convert the Mercantile Complex and Continental building) From what I can understand these real estate companies include vacancies of buildings that are being converted, but not 100 percent certain of that. Another office building currently being converted is 1200 Main.

Now class A office space remains at 95% occupied and out pacing the other submarkets in the metro for Class A and AA. From what I understand in my amateur studies it has been hard to attract big corporate relocations to downtown Dallas because of the lack of available consolidated Class A and AA space married with the fact that many developers are traditionally skeptical of buildng new towers downtown. Meanwhile it is not a huge risk for the burbs where land is cheap etc. So the fact that these new buildings are coming on board I believe will help. It should free up large blocks for class A office space downtown that would be attractive for relocations. I think in the future Class B buildings that are not being converted will attract those firms that want to be close to all the "new" action without paying the price. So we'll see.

[Houston19514]

Now class A office space remains at 95% occupied and out pacing the other submarkets in the metro for Class A and AA.

Source?

According to the Texas A & M Real Estate Center, Dallas' CBD had a vacancy rate of 19.1% at the end of 2005, and that's just direct vacancy (not including space available for sublease).

[slfunk]

Source?

According to the Texas A & M Real Estate Center, Dallas' CBD had a vacancy rate of 19.1% at the end of 2005, and that's just direct vacancy (not including space available for sublease).

Again that 19.1 vacancy comes off of a general vacancy including all classes of buildings. Dallas Business Journal, Globe Street, and Steve Brown with the Dallas Morning News have done a break down of what that number represents. Class A and AA remains in the mid 90 % range depending who is reporting it. All of them reporting the Class A and AA remains at a shortage for the downtown market when comparing to the developments in the suburbs. Thus making downtown be at a disadvantage when luring big corporate tenants. I forget the agency who reports the vacancy nationally, but in the DMN reported the organization as admitting they include all vacant office buildings that have proposals or are under conversion. Its is not until those conversions are complete that they will no longer count them as leasable vacant office space.

[Houston19514]

Again that 19.1 vacancy comes off of a general vacancy including all classes of buildings. Dallas Business Journal, Globe Street, and Steve Brown with the Dallas Morning News have done a break down of what that number represents. Class A and AA remains in the mid 90 % range depending who is reporting it. All of them reporting the Class A and AA remains at a shortage for the downtown market when comparing to the developments in the suburbs. Thus making downtown be at a disadvantage when luring big corporate tenants. I forget the agency who reports the vacancy nationally, but in the DMN reported the organization as admitting they include all vacant office buildings that have proposals or are under conversion. Its is not until those conversions are complete that they will no longer count them as leasable vacant office space.

"Again," no it does not come off a general vacancy including all classes of buildings. Texas A&M Real Estate Center quotes a 19.1 percent vacancy for Class "A" space in the CBD, and again, that is "direct vacancy" (not including space available for sublease.) FYI, the Class "B" direct vacancy rate is 27%. Here is the link

And this from Steve Brown in the April 4, 2006 Dallas Morning News: " Downtown – which lost about 175,000 square feet of tenants in the first quarter – is about 28 percent vacant."

And while we're at it, here's a quote from the May 19, 2006 Dallas Business Journal:

"various redevelopment projects and new headquarters buildings for Hunt Consolidated Inc. and 7-Eleven Inc. -- is generating positive buzz about the downtown market.

But few are talking about the gaping holes relocating and consolidating tenants are leaving behind.

Here's the situation: a dozen Class A buildings in the central business district will soon have vacancies totaling more than 3 million square feet. All will have openings of 130,000 square feet or more. Over the last five years, the overall vacancy rate for downtown Dallas has hovered between 27% and 31%. But the Class A buildings have performed much better, with average vacancies of about 15%." (and soon to take big jump due to the new construction)

[bachanon]

as much as i dislike visiting dallas, i do enjoy the buildings. i'm always excited to hear about new developments in and around downtown.

[firstngoal]

Nice project in a strategic location... Dallas has some really impressive developments going up. I spend a lot of time there on business (in real estate), and it is really fascinating to see the flurry of construction activity.

It is no surprise that there are vacancy issues in downtown Dallas... it has been that way for 20 years. What is surprising is the volume of multifamily construction and conversions in the downtown core and the amount of office, condo, retail, and hotel development in Uptown / Victory. Lenders clearly aren't bothered with the issue of too much supply - or future vacancy issues - so I won't be either.

In the meantime, some of these projects offer good examples for Houston (particularly Midtown) on increasing densities and mixing uses.

[slfunk]

the overall vacancy rate for downtown Dallas has hovered between 27% and 31%. But the Class A buildings have performed much better, with average vacancies of about 15%." (and soon to take big jump due to the new construction)

Houston19514. About this time last year or earlier in the spring Steve Brown did an in depth story hammering the real estate agency that reports these numbers and the truth behind the numbers. He stated that if these national agencies looked at what downtown actually had available and operable, what has been taken off the market due to conversions the overall vacancy rate would be much less then what they are reporting, and how tight the Class A space market actually is downtown. Neither he nor I dismiss the notion that there is a lot speculative office building. I would look up the story, but I am not that bored for an internet blog. In that break down he talked how the vacancies are scattered throughout downtown making it hard for downtown to attract big corporate relocations to downtown. He ran another report shortly after 7-eleven deciding to move to the Arts District. It essentailly talked about concerns over the vacancies downtown and about how their move will free up much needed whole blocks for Class A space to attract major corporate tenants downtown and compete with the burbs/tollway corridor. One example was when Citi Bank decided to build a corporate campus in the burbs and Flour's relocation from California to I believe Las Collinas. Dallas Business Journal ran a similar report shortly there after. After that story in the spring Steve Brown continues to write stories including information based on the what is being reported by the these agencies including Texas A&M.

Now I have worked personally with UCR urban division on some projects. UCR urban is UCR's division which specializes in leasing in downtown/uptown. Their outlook is that numbers are not reported accurately taking into account all the construction and buy ups in downtown for conversions. Building owners are offering a lot less to attract tenants, rents are increasing, and buidlings are trading hands with out-of-town investors which has not seen this much trading since the 80's. UCR are the ones that were able to put together the scenario needed to bring Forest City to downtown. Forest City had no interest in downtown Dallas because they thought it was dead. UCR showed them the tunnels and the numbers that are changing in the positive direction for downtown Dallas.

[Houston19514]

Houston19514. About this time last year or earlier in the spring Steve Brown did an in depth story hammering the real estate agency that reports these numbers and the truth behind the numbers. He stated that if these national agencies looked at what downtown actually had available and operable, what has been taken off the market due to conversions the overall vacancy rate would be much less then what they are reporting, and how tight the Class A space market actually is downtown. Neither he nor I dismiss the notion that there is a lot speculative office building. I would look up the story, but I am not that bored for an internet blog. In that break down he talked how the vacancies are scattered throughout downtown making it hard for downtown to attract big corporate relocations to downtown. He ran another report shortly after 7-eleven deciding to move to the Arts District. It essentailly talked about concerns over the vacancies downtown and about how their move will free up much needed whole blocks for Class A space to attract major corporate tenants downtown and compete with the burbs/tollway corridor. One example was when Citi Bank decided to build a corporate campus in the burbs and Flour's relocation from California to I believe Las Collinas. Dallas Business Journal ran a similar report shortly there after. After that story in the spring Steve Brown continues to write stories including information based on the what is being reported by the these agencies including Texas A&M.

Now I have worked personally with UCR urban division on some projects. UCR urban is UCR's division which specializes in leasing in downtown/uptown. Their outlook is that numbers are not reported accurately taking into account all the construction and buy ups in downtown for conversions. Building owners are offering a lot less to attract tenants, rents are increasing, and buidlings are trading hands with out-of-town investors which has not seen this much trading since the 80's. UCR are the ones that were able to put together the scenario needed to bring Forest City to downtown. Forest City had no interest in downtown Dallas because they thought it was dead. UCR showed them the tunnels and the numbers that are changing in the positive direction for downtown Dallas.

I am aware that a lot of Dallas chamber of commerce types have been trying for many years to get the national agencies to change their rules just for Dallas, because they didn't much like having vacant buildings being included in the office vacancy reports... The national agencies apply their methods consistently to every city; if they do otherwise, their reports would be worthless. And whether you acknowledge the existence of empty office buildings or not, the fact remains, they exist, they are empty and they are available.

All that being said, even if we take out all of the empty space for which there are even vague plans of conversion to lofts or whatever, none of that is going to effect the Class A vacancy rate (because Class A buildings are not sitting empty or being converted to lofts). I have seen no evidence anywhere that downtown Dallas has anything near a 5% vacancy rate for Class A space. (See the Dallas Business Journal figure quoted above)

[RedScare]

Houston19514. About this time last year or earlier in the spring Steve Brown did an in depth story hammering the real estate agency that reports these numbers and the truth behind the numbers. He stated that if these national agencies looked at what downtown actually had available and operable, what has been taken off the market due to conversions the overall vacancy rate would be much less then what they are reporting, and how tight the Class A space market actually is downtown. Neither he nor I dismiss the notion that there is a lot speculative office building. I would look up the story, but I am not that bored for an internet blog. In that break down he talked how the vacancies are scattered throughout downtown making it hard for downtown to attract big corporate relocations to downtown. He ran another report shortly after 7-eleven deciding to move to the Arts District. It essentailly talked about concerns over the vacancies downtown and about how their move will free up much needed whole blocks for Class A space to attract major corporate tenants downtown and compete with the burbs/tollway corridor. One example was when Citi Bank decided to build a corporate campus in the burbs and Flour's relocation from California to I believe Las Collinas. Dallas Business Journal ran a similar report shortly there after. After that story in the spring Steve Brown continues to write stories including information based on the what is being reported by the these agencies including Texas A&M.

Now I have worked personally with UCR urban division on some projects. UCR urban is UCR's division which specializes in leasing in downtown/uptown. Their outlook is that numbers are not reported accurately taking into account all the construction and buy ups in downtown for conversions. Building owners are offering a lot less to attract tenants, rents are increasing, and buidlings are trading hands with out-of-town investors which has not seen this much trading since the 80's. UCR are the ones that were able to put together the scenario needed to bring Forest City to downtown. Forest City had no interest in downtown Dallas because they thought it was dead. UCR showed them the tunnels and the numbers that are changing in the positive direction for downtown Dallas.

This sounds strangely similar to the argument Mark Cuban and the Mavs were making last week.

Is there something in your water? And do you really expect the Tex A&M Real Estate Center's numbers to be accurate for all Texas cities BUT Dallas? Remember, you are only off by 14%...3 million sf or so.