Thursday March 29, 2012
Dallas Morning News – by Steve Brown
Forecasts are calling for an end to the drought in North Texas office construction.
But will a potential deluge in office developments turn out to be just a trickle?
Almost a dozen multitenant office projects are on the drawing boards for the Dallas area, planned mostly for Uptown, downtown and along the Dallas North Tollway in Plano and Frisco.
With the Dallas area at the top of the list of the country’s fastest-growing economies and employment centers, office demand is likely to jump during the next couple of years.
But getting money to construct buildings is still tough, developers say.
“It’s still very difficult to get any kind of speculative office financing,” said developer Randy Heady, who’s building a six-story multitenant building in Legacy Business Park in West Plano. “Most developers can’t make the numbers work yet.”
Without a large amount of leasing from business tenants, Heady said, developers will have to put up a chunk of cash before an office groundbreaking.
“You have to put in 40 or 50 percent equity,” he said. “And you have to have a really great site.”The Spire: The 21-story building is planned on San Jacinto Street just south of Ross Avenue and the Arts District. The 389,977-square-foot tower is planned by developer Spire Realty and was designed by WDG Architecture.
Other developers scrambling to get projects under way in the tollway corridor include Trammell Crow Co., Hines and Granite Properties.
Granite is marketing a fourth building in its Granite Park project at the tollway and State Highway 121.
Granite chief operating officer Greg Fuller said only some of the office buildings being talked about will actually be started.
“About half of the smaller projects and maybe one of the larger projects, if pre-leased in 2012,” Fuller said. “Who knows what 2013 will bring?”
Ran Holman of Hines is more optimistic. He predicts about half of the office buildings now being pondered in the Dallas area will make it to groundbreaking.
But rents have to come up, he said.
“The lift in rents is needed to justify higher construction costs,” Holman said.
Developers also know that with the economy improving, the first builder who can deliver office space to the market will have an edge. It typically takes 18 to 24 months to build an office project.
“In the past, the projects that have been the most successful have been the first to deliver,” said Joel Pustmueller of Peloton Commercial Real Estate. “In Uptown, my gut tells me one or two buildings will get kicked off in the next 24 months.”Victory Park Tower: The 23-story, 400,000-square-foot high-rise is planned on Victory Avenue, two blocks south of American Airlines Center. The building is a project of developer KDC and Estein & Associates and was designed by BOKA Powell.
Office projects are proposed in Uptown by developers KDC, Crescent Real Estate and Harwood International. And nearby on the north side of downtown, Billingsley Co., Hall Financial and Spire Realty have projects planned.
“In Legacy, there is more chance of speculative development,” Pustmueller said. “Maybe two to three will happen in Legacy.”
Office construction in North Texas picked up at year-end 2011, when less than a half-million square feet of building was under way in the D-FW area.
Currently about 800,000 square feet of office construction is under way, according to estimates from Cushman & Wakefield Inc.
“It’s small compared to where it will be in 24 months,” said Matt Heidelbaugh, Cushman & Wakefield senior director. “People are taking land positions in Uptown, and Legacy speaks for itself.”