This fall, Downtown Dallas Inc. will launch a full research and discovery project related to Downtown commercial real estate, specifically the office market, aimed at pinpointing key strengths, as well as areas of opportunity, coupled with a local and national look at the key must-haves for location decision makers. I was fortunate to attend the DFWEurope2018 economic development mission to London and Paris in June with Mayor Rawlings, the Dallas Regional Chamber, DFW Airport, VisitDallas, and counterparts from Fort Worth, which solidified this effort in my mind: It’s time to show them what downtown Dallas is made of, I thought. Our fundamental strengths like low cost of living, central location, and minimal regulation are strong, but today, the Dallas story with a vitalized downtown as the cornerstone is so much more. And the market is ripe to hear it now.
In just the last year, there has been a resurgence of companies relocating or renewing leases in downtown. Harwood Center has leased or renewed over 50,000 square feet; Trammell Crow Center over 142,000 square feet, including the 135,000 square feet renewal of Vinson & Elkins; 32,000 square feet at Renaissance Tower; 40,000 square feet at Comerica Tower; 25,000 square feet at Bank of America Plaza; and Bell Nunnally & Martin has taken 42,000 square feet at KPMG Plaza. 1700 Pacific has welcomed and renewed over 50,000 square feet of new tenants, as has 1900 Pearl. Chase Tower has brought 35,000 square feet of new absorption into the market, AD EX and AIA Dallas are enlivening the ground floor of Republic Center; and Bryan Tower alone has recently seen five leases totaling nearly 20,000 square feet. Some of the latest news just this summer includes the relocation of Sam’s Club Innovation Center, taking 45,000 square feet at Factory Six03 in the West End, and Arcosa, a spinoff of Trinity Industries, will occupy nearly 40,000 square feet at Ross Tower. All told, according to CoStar, downtown has seen net positive absorption of 300,000 square feet of commercial office space in just this first half of 2018.
So what is the formula that has attracted these companies to downtown or ensured those who are here, remain? That is the key question we at DDI are set to find out in a very deliberate way. However, based on our own experience out in the market ever day, there are several common factors we can foreshadow.
Talent attraction: We know the downtown market attracts talent; the vibrancy and quality of life of urban living draws the young (and young-ish!) professionals to the heart of the city. That means building an energetic pulse that exists 24/7, a walkable environment, a rich arts and cultural scene, and amenities that extend from beyond the buildings themselves. Downtown can now tout a 90+ walk score, enhanced immensely by restaurants and retail, including the new 10,000-square-foot Urban Farmhouse in the Dallas Farmers Market and the first grocery store in the core of downtown, Royal Blue Grocery, on Main Street. There are nodes of daily activity, like the Dallas Farmers Market, West End, Main Street District, and Dallas Arts District, and a wide array of hundreds of events and activations per year to give you more options of “something to do” outside of the norm on any given day. Furthermore, downtown’s office towers and employment hubs are becoming better connected to amenities thanks to new mobility options like electric scooters and bike share that begin to solve the need to move around with ease.
Companies are also finding value in buildings close to future public projects that their employees can enjoy, like parks, including the four new signature parks coming soon thanks to the Parks for Downtown Dallas Foundation and City of Dallas. Take the now-under-construction three-acre Pacific Plaza, for example. Republic Tower, which sits at this future park’s doorstep, has signed several new leases recently, including the aforementioned AIA Dallas and AD EX. Within the same area, Jacobs Engineering, who moved their headquarters to Harwood Center last year, continues to grow its talent base, One Dallas Center remains the headquarters of global leader HKS Architects, and Bryan Tower has recently signed leases with everything from a digital law firm to a building supplies company.
These public amenities outside of our towers are proving just as important as what is inside the walls, which leads to a related trend that is attracting corporate attention and the reimagining and upgrading of signature buildings. Thanksgiving Tower’s update, including the addition of ground floor restaurants, attracted companies like WeWork and Santander. Major renovations are now underway at Trammell Crow Center to open up the street and entice businesses like Royal Blue Grocery, downtown’s second location of the popular grocer. These improvements have led to the renewal of Vinson & Elkins’ lease and the relocation of Goldman Sachs, which now has more than a thousand employees in the building. Fountain Place is also in the midst of a major renovation, all while construction continues on what will be a complimentary AMLI residential tower. Ross Tower, with a fresh entrance and signature ground-floor Starbucks location, just landed Arcosa, a spinoff company of Dallas’s Trinity Industries, whose CEO was quoted shortly after the deal was finalized as saying that moving downtown was a foundational element of their employee-based focus.
Innovation and Tech: The Blue Cross Blue Shield Innovation Lab move last year and the most recent announcement of Sam’s Club Innovation Center, both at Factory Six03, provide evidence of downtown’s attractiveness to the innovation and tech industries. Innovation is bourgeoning in areas like the West End, Dallas’ first Innovation District, which will also be home to West End Plaza, which is being planned as the “smartest park in America.” This trend is certainly a driver of Crescent’s Luminary project in the District, which will be anchored by the expansion of architecture firm Corgan and incorporates leading smart technology in its build out.
Because of these moves, downtown is becoming a hub of the region’s activity. DFW has the 9th largest concentration of tech jobs in the country, and last year EMSI named us the number one Metro for attracting skilled talent. In 2017, we jumped 17 positions to number 11 on Business Insider’s list of the most high-tech cities in the world, and 60 percent of the area’s more than $500 billion economy is in five innovation sectors. A headline to take away: We now have more than twice the number of tech jobs as Austin!
Startup: Often categorized with tech, but encapsulates so much more activity, is downtown’s welcoming environment for startup ventures. Building on the long-standing foundation of industry diversity in downtown – home to eight of the 10 largest advertising and marketing firms, 12 of the top 16 largest patent law firms, seven of the 10 largest North Texas accounting firms, 24 of the 25 largest law firms, and eight out of the top 15 largest architectural firms—new companies are being born with the spirit and bravado of entrepreneurship that is so fundamental in the character of Dallas. Adam Wacenske, General Manager of WeWork, said about recently establishing its southern headquarters in downtown Dallas, “With its growing population, prime business climate, and great energy, Dallas is everything we want in a city. We are especially excited to play a role in the revitalization of downtown, which is one of the reasons why we opened our largest Dallas space in Thanksgiving Tower.” Overall, within the city center we now have more than 500,000 square feet of co-working, accelerators, and incubators, which are fertile grounds for new business to be born. For example, cutting-edge companies with longtime downtown addresses like Tractor Beam and Order My Gear, which were once start ups, have confirmed expansion plans in the newly-announced East Quarter of downtown.
Workplace trends: Efficient floorplates, flex and remote work space, and collaborative environments are undeniable trends in almost all commercial office sectors. Downtown projects are certainly in line, whether new construction, full building conversion, or individual tenant renovations. Lincoln Property Company’s 1900 Pearl project has several tenants already on board, including Steward Healthcare Systems, Maverick Capital, and Husch Blackwell. This new Dallas Arts District building will neighbor other successful newer properties like KPMG Plaza at HALL Arts and the planned Two Arts Plaza. Traditional towers like Bank of America Plaza, Comerica Bank Tower, and Chase Tower are offering tenants the ability to create something new from something old(er), like Covalus’ must-see modern space at Bank of America Plaza.
There is no better headline that represents the value of these factors—talent, technology, innovation, workplace trends, and the foundational ecosystem of an economy ripe for new businesses—than AT&T, a company currently going through a $100 million renovation and expansion of its downtown global headquarters location. The AT&T Discovery District will include public amenities and community gathering spaces to not just serve their employees, but the entire neighborhood. As Michael Peterson, Regional Vice President of External Affairs, puts it, “We know a lot of corporations have looked to the suburbs … we like the feel of an urban campus. It’s a great way for us to attract talent, which is really important for a technology company like AT&T. We like it, our chairman likes it, our employees like it.”
In advance of the results from our formal effort to capitalize on all of this momentum and our position in the national and global market, it is obvious that several key factors are driving a resurgence of commercial activity in downtown that bring a new perspective to what Dallas has to offer. Cost, location, and business friendly—yes, which is now amplified by an authentic quality of place and forward-thinking community that meets the goals of 21st century business.
Kourtny Garrett is the president and CEO of Downtown Dallas Inc. Contact her to learn more about the market.