Downtown Dallas is on the Right Track
Brendan Zrowka – Associate
Through the 1980’s, the country gathered around the television to find out “Who Shot J.R.?”. In the opening credits of Dallas, viewers were introduced to the glass skyscrapers and sprawling size of Downtown Dallas. In 1987, the hit film, Robocop our own City Hall served as the fictional OCP Headquarters. Due to its “futuristic appearance” downtown Dallas was filmed as the backdrop for Detroit where the film is set.
Back then, downtown Dallas was on the forefront of urban development. However, since the construction boom of the 1980s, father time has certainly caught up. The submarket historically has had one of largest vacancy rates in DFW, even above the national average. Since 2015, this vacancy has leveled out, hovering around 20%-24%. Furthermore, other submarkets have arose in DFW, providing new areas to work, live and play. Uptown and more recently West Plano and Frisco, have been stiff competition when attracting businesses and residents into downtown.
All this said, it’s not gloom and doom for our beloved CBD. In fact, I’m bullish on the downtown Dallas submarket and I’m optimistic the submarket is on the right track heading into 2020.
Over the last few years, all but a few of the premier downtown Dallas buildings have put in millions of dollars in renovations. The Central Business District has experienced more renovation activity than any other submarket in DFW. Owners have made more than 9.4 million SF in renovations, or 28% percent of the total inventory. Renovations have included upgraded common areas, state of the art fitness centers, conference centers, increased parking, and even high-end hotels and retail.
We have even seen reactivations of entire neighborhoods in just the last year. The introduction of the Luminary, a 104,000 SF building has helped jumpstart development in the historic West End. Opened just a few months ago, The Dallas Holocaust and Human Rights Museum will serve as another tourist stop a few blocks away from the Sixth Floor Museum. In Deep Ellum, it’s more than tattoo shops and grunge bands. The Epic opened this year and announced the new office for Uber. Baylor Scott & White will be calling Deep Ellum their new home next year.
Into 2020, we’ll see major leaps forward in Arts District and East Quarter. The new HALL Arts Hotel opened last month in the Arts District and the JW Marriot will be nearby, currently being developed by the Sam Moon Group. Eighteen historic buildings in the East Quarter will have new life in the form of retail, office, and multifamily.
After a slow 2018, this year the submarket has seen $433 M in Sales in just the first three quarters. This shows that investors are seeing the value in downtown assets. At $700/SF, 1900 Pearl sold to the State Teachers Retirement Systems of Ohio. This sale is said to be the most per square foot an office building as sold for in the state of Texas. A Korean group saw value in the 965,000 SF Whitacre Tower purchasing the downtown building this year. Currently under contract, Saint Paul Place and Bank of America Plaza are set to trade hands early next year.
While there has been cover stories in surrounding submarkets of corporate relocations in new developments, the CBD is still receiving its share of big-time real estate deals. The Japanese financial firm ORIX recently took 100,000 SF at Trammell Crow Center. This month it was announced that TripActions, a tech company out of California will be opening an 80,000 SF Dallas office at Renaissance Tower. Our own David Harris, Evan Hammer, and Jade Scott represented the Tenant. Because of the discount that the submarket provides, companies are finding value in the core of Dallas.
As we move into a new decade, I believe there are many reasons to be optimistic and look forward to what the future holds. The Dallas CBD submarket is certainly moving in the right direction as seen by the overhaul of building renovations, the reactivation of neighborhoods, interest by investors in downtown real estate assets, and the continued faith companies are making in the CBD. Those reasons, among others, are why you should also feel confident downtown will be coming back bigger and better than ever.