Huge corporate campuses are being built in the northern suburbs, and Uptown office buildings are securing record-breaking rental rates. But the biggest commercial real estate story in Dallas may be the revitalization of the city’s urban core, where a staggering number of redevelopment projects are setting the stage for a major transformation.

Activity is focused on the city’s center, the area between Pacific Avenue and Main, Commerce, and Elm streets. Sales volume in the core is “off the charts,” says Jon Altschuler, partner at Altschuler and Co. Even more noticeable, he says, are the capital improvements new property owners are making. “When I step out of Thanksgiving Tower and head in either direction, it feels like I should be wearing a hard hat,” he says. “There is so much construction activity. Welding, banging, building—you can tell it’s going to be a different streetscape in 18 months.”

A number of factors are driving interest in the core: a growing downtown residential base, the popularity of new destinations like Klyde Warren Park and the Perot Museum (which are luring people to the city), the proven success of Headington Cos.’ redevelopment of The Joule hotel and its ongoing retail work along Main Street, bargain sales prices for vacant or troubled office buildings, investor eagerness to deploy capital, and the highly sought-after millennial workforce, which prefers an urban live-work-play environment. 

More than 5 million square feet in office leases will come up for renewal in downtown buildings during the next four years or so.

Many of the renovation projects would not be happening without city support, says John Crawford, president of Downtown Dallas Inc. “Public-private partnerships have been crucial,” he says. “The city is putting in a lot of money to support the revitalization of downtown—$50 million to 1401 Elm, $44 million into the Statler Hotel project, and $12.5 million for 1600 Pacific. This isn’t chump change. But at the end of the day, it’s going to grow the tax base.”

The timing couldn’t be better for redevelopment in the core, as more than 5 million square feet in office leases will come up for renewal in downtown buildings during the next four years or so. “It’s a perfect storm, with everything falling in this window of time,” says Phil Puckett, executive vice president with CBRE and an expert in the Uptown and downtown Dallas markets. “We’re looking at 800,000 to more than 1 million square feet a year. Normally, you don’t see that kind of hit. The question becomes, will the tenants stay in the core—or move?”

Puckett says the redevelopment activity is “very positive” for downtown Dallas, but two challenges remain: improving the streetscape and adding parking. “Parking is an issue that’s really going to come into play, with the higher-density workplace of the future,” he says.

ROSTER OF MAJOR PROJECTS
To provide a sense of the size and scope of redevelopment activity in the core, here’s a breakdown of significant projects:

1600 Pacific: After languishing for a number of years, the 32-story former LTV Building, which also fronts Elm Street, will soon become a mixed-use complex with 186 residential units and a 171-room Hilton Garden Inn Hotel. Built in 1964, the nearly 500,000-square-foot building was acquired in April by New Orleans-based HRI Properties, which is giving it an $80 million renovation. Residents will have access to the 206 self-park spaces in the building on floors 2 through 4; the hotel will use the 150 valet parking spaces in the building’s basement. Construction is expected to wrap up by the third quarter of 2015.

1700 Pacific: A block away, Olymbec Group of Canada has just acquired the 49-story, 1.3 million-square-foot 1700 Pacific building. Property upgrades reportedly are planned, although specifics were not available by press time.

Alto 211: Built in the late 1950s by Dallas developer Leo Corrigan, this 18-story aquamarine tower at 211 North Ervay is finally getting some love. It has a new owner—Alterra International Holdings—and its first new tenants in nearly 20 years (Tech Wildcatters, Health Wildcatters, and Linking the World). Alterra has made a number of significant upgrades and has even more in the works. 

Bank of America Plaza: On the west side of the core, Bank of America Plaza is getting a major overhaul courtesy of its owner, Chicago-based Metropolis Investment Holdings Inc. The 1.8 million-square-foot, 72-story tower (the tallest in Dallas) sits at 901 Main Street. A new exterior lighting system was introduced earlier this year, with more than 2 miles of LED lights installed. At the building’s base, a large outdoor sculpture was removed, making way for a new valet entrance off Main Street. Ongoing work includes an outdoor gateway to Belo Garden and improvements to the lobby, building entrances, and elevator cabs. All told, renovations are expected to cost about $15 million and wrap up by October.

The Olympic: The largest redevelopment underway in the core is the former First National Bank Building at 1401 Elm Street. It’s a joint venture between BDRC and Olympic Property Partners, which acquired the 1.5 million-square-foot property in February. The $170 million conversion will transform the historic 52-story skyscraper into a mixed-use complex that takes up an entire city block, bounded by Elm, Field, Pacific, and Akard streets. When complete, The Olympic will include 500 luxury apartments, 70,000 square feet of retail space, 100,000 square feet of office space, 950 parking spots, a ninth-floor terrace with an infinity pool, and an observation deck on the 50th floor. The owners are targeting a 2016 reopening.

Fountain Place: Just north of the core on Ross Avenue and North Field Street is Fountain Place, one of the most recognizable buildings in Dallas. The 58-story tower, designed by I.M. Pei, was acquired in June by Goddard Investment Group. The new owner is planning to make a number of improvements to Fountain Place, including a new parking garage and upgrades to the lobby, elevators, exterior fountains, and landscaping.  

KPMG Centre: Since acquiring this 34-story tower at 717 North Harwood Street in March, World Class Capital Group of Austin has already won two big relocations from California companies: Omnitracs and Active Network LLC. Combined, the deals will bring about 1,450 new jobs to the downtown core. The leases are expected to spark significant renovations to the 844,000-square-foot building, which was built in 1980. KPMG Centre also likely will be getting a new name, as its lead tenant has signed a deal to move to the Arts District when Craig Hall’s new tower opens in early 2015. 

Mid Elm Lofts: Last fall, Brytar Cos., in partnership with RREAF Holdings LLC, announced plans to convert three historic properties at 1516, 1514, and 1512 Elm Street into live-work-play loft units. The buildings, which total 55,000 square feet, are all more than 100 years old. 

One Dallas Center: Todd Interests and partners have wrapped up work on phase I of their renovation of One Dallas Center at 350 North St. Paul Street, a project that had HKS Inc. joining Greyhound as lead tenants in the building. Now work has begun on phase II, a renovation that will transform floors 15 to 30 of the I.M. Pei-designed tower to 276 luxury apartments and 13,000 square feet of amenity space. The residences are expected to be ready for occupancy this September.

One Main Place: Built in the late 1960s, this 1 million-square-foot fortress got a savior when KFK Group of New Orleans bought the half-empty building this past spring. The 32-story project takes up a full city block, bounded by Main, Field, Elm, and Griffin streets. KFK Group has yet to announce specific plans for its new buy, but brokers speculate that the company will redevelop the top floors into residential or hotel space. One Main Place also includes 65,000 square feet of retail space and a 20,000-square-foot recessed plaza that connects to Dallas’ underground pedestrian tunnel system.

Statler Hilton: Centurion American Development Group purchased this historic property at 1914 Commerce Street in May, after winning $46.5 million in TIF financing from the city of Dallas. Mehrdad Moayedi, Centurion’s president, said plans for the $175 million renovation include apartments, a flagship hotel, restaurants, office space, and a movie theater. 

Thanksgiving Tower: This 1.4 million-square-foot, 50-story icon at 1601 Elm Street was acquired last summer by Woods Capital, led by Jonas Woods. In short order, the building won a huge lease from Santander Consumer USA, which now occupies 14 full floors in Thanksgiving Tower. A $100 million renovation is in the works—one that will add 16,000 square feet of ground-floor retail space. Woods selected Gensler and New York architect James Carpenter to oversee the redesign. In an interview with D CEO earlier this year, he said his goal is to have most of the work done this year.

Tower Petroleum, Corrigan Tower: In the summer of 2012, Kirtland Realty Group announced plans to renovate these adjacent buildings at 1907 Elm Street and 1900 Pacific Avenue into residential towers—a $45 million redevelopment project. Now, according to Downtown Dallas Inc., the latest plans call for a hotel use instead. The Art Deco Tower Petroleum was built in the early 1930s. Developer Leo Corrigan acquired the building and added Corrigan Tower in the early 1950s.