Wednesday, June 19, 2024 Jun 19, 2024
77° F Dallas, TX
Advertisement
Commercial Real Estate

Johnny Johnson: Are 1 Million-Square-Foot Deals the ‘New Norm’ for Dallas?

Although many companies have chosen to build, this does not mean our existing building inventory is obsolete. Quality options for large users do exist, in most of our major office markets. However, not many exist for requirements in excess of 500,000 square feet.
|
Johnny Johnson
Johnny Johnson

Over the last three years, Dallas has experienced a significant turnaround in the office market. We are fortunate that big tenants with large space requirements have helped sustain continued growth, with both meaningful expansions and new relocations to the region.

The question now is, are we on the verge of seeing this trend not only continue, but having to accommodate even bigger office requests?

State Farm Insurance set the bar at an all-time high with its evolving relocation to North Texas for over 2.5 million square feet and 8,000 new workers who will live, work, and play in our community.

On the heels of State Farm, Raytheon inked a deal for nearly 490,000 square feet of office space, and will build a new corporate campus next to State Farm, which reflects more of an expansion in our area.

With the announcement of Toyota last week, and its plan to relocate its North American Headquarters and, building over 1 million square feet of office space, and bringing approximately 4,000 new jobs to Plano, it is time to pause and determine how best to accommodate all of this explosive growth.

Dallas-Fort Worth has long been the benefactor for large relocations and has had always had a successful track record of winning our fair share. However, the market has never seen the types of large transactions we’ve seen lately. No longer are the relocations topping out at 100,000 to 300,000 square feet, like we saw when Exxon, JC Penney, Kimberly Clark, Fluor Corp., Pioneer Natural Resources, and many other Fortune 500 companies chose Dallas as their home over the years.

It doesn’t appear that this is an anomaly either, as there are other large requirements exceeding 500,000 square feet on the horizon. Financial services giant Charles Schwab, which is building a $230 million office campus in suburban Denver, recently announced that it may transfer thousands of San Francisco employees to less expensive areas. Local brokers and developers say Dallas is high on the list of possible locations.  Other rumored corporations on the radar screen include Google, Caterpillar, and TD Ameritrade, just to name a few, all with requirements for 500,000 to 1 million square feet of space.

With this high volume of interest and big square footage demands, build-to-suit options tend to be the preferred choice for many companies. Major build-to-suits in recent years include Encana Oil & Gas for 318,000 square feet, Pizza Hut for 200,000 square feet, and FedEx Office for 265,000 square feet, which is now underway in Plano.

Although many companies have chosen to build, this does not mean our existing building inventory is obsolete. Quality options for large users do exist, in most of our major office markets. However, not many exist for requirements in excess of 500,000 square feet.

Freeport has been a big winner over the past couple of years for companies with large space needs of up to 400,000 square feet. Most recently, American Eagle Airlines Inc., a division of American Airlines, chose 4301 and 4401 Regent Boulevard for its new corporate headquarters for 150,000 square feet.

Although fewer in total, quality options for significant users do exist. Just recently, more than 450,000 square feet became available at Riverside Commons in Las Colinas, as a result of the anchor tenant consolidating operations and the project selling to a new owner. Brookfield Property Group, a proven and creditable office investor, seized the chance to take on this opportunity to compete for a large user. To help facilitate this process, it has already embarked on a significant redevelopment plan to help reposition the asset.

Well, it is a likely bet that very large tenant requirements will continue to find their way to Dallas and the surrounding region in the future. And you can also bet that we will find a way to accommodate them, regardless of the ultimate size. After all, we are the friendly Lone Star State that is open for business 24/7!

As executive managing director and principal, Johnny Johnson is responsible for co-leading Cassidy Turley’s landlord representation team in Texas. Contact him at [email protected].

Advertisement