November 11, 2015

3 Reasons to Develop (Not Buy) Office

The Healthcare Event of the Year! Only 2 Weeks Away!

You might feel nervous taking out that loan and breaking ground on an office tower, but developing is less risky than buying these days, according to experts at Bisnow's Office Boom and Creative Revolution event yesterday. But if you're going to do it, you need to do it now.

The Clock Is Ticking

In office development, time is your biggest risk, Cawley Partners CEO Bill Cawley (left, with Servant Energy Partners' Ruben Duron) says. From design to build to leasing and ultimate delivery, the later you get in the cycle, the more of a chance you're taking. Bill says there's a point in the cycle that makes the most sense to develop. The strategy of “in early, out early” can be the most difficult because people are still uncertain; but, once they see things working, then it's easier to get debt. He has four buildings in the works with two pre-leased, one completely spec project and a build-to-suit. He's got a fifth he's hoping to get out of the ground, but his partner wants see at least 50k SF of pre-leasing before breaking ground on the 240k SF project.

Current Office Development = Drop in the Bucket

The Dallas office market is as good as it's ever been, says Gaedeke Group CEO Sabine Gaedeke Stener (right, with VTS' Grant Gordon and event moderator VTS' Ben Ramsey). DFW is the fifth-largest market in the US and what seems like a lot of office absorption (1M SF) is a drop in the bucket in a market with 350M SF of office space. When you put that into perspective, 6M SF of office space under development doesn't seem like anything to lose sleep over, she says. Gaedeke is developing a 14-story 308k SF Class-A tower adjacent to Toyota and FedEx in Legacy West. She says the market is at a historic point with the last vestiges of real estate infill sites in a top five market; that's something that won't exist in 2020. 

Cap Rates Compressing

Henry S. Miller management, appraisal/consulting president Mark O'Briant (right, with HSM president and COO Dan Arnold) says he's seeing compression of cap rates on office and some cap rates going down, a trend that'll drive conservative investors towards shovels. The equity that was chasing apartments and retail is now looking at office. HSM is also looking at buying office, he says. Office is starting to follow the multifamily trend of getting more money per square foot by decreasing individual spaces and adding common amenities to buildings. Just like multifamily projects have common entertaining spaces, office buildings are starting to add kitchens and amenities that are shared by multiple tenants.

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Hines, Boxer and Quadrant Talk Creative Office

Boxer Property Management Corp president Justin Segal (center, between Boxer's Ashwin Thakkar and Alston Construction's Jennifer Hooker at Bisnow's office event yesterday) says technology has made both subtle and significant changes in office space. No longer is an office just a place to locate your business tools; people don't have to be fixed to a space to do their jobs, he says. Office users today require less dedicated space and want more options for how and where to work. To remain relevant, landlords and property managers need to enhance customer service and create spaces for people to interact and collaborate, Justin says.

There's no definition for creative office, says Quadrant Investment Properties founder Chad Cook (right, with Caddo Holdings' Tim Slaughter). Maybe the biggest factor is moving away from the traditional cubicle and corner offices into something more open, where you can see across the space. Chad, whose Quadrant team is in the midst of a $20M renovation of The Centrum (where Bisnow's office event was held on Tuesday), tells us natural lighting plays a big role in enhancing spaces. Convenience plays a part, too, especially when it comes to technology. He's planning to make the WiFi at The Centrum continual so a user could be online in the courtyard and keep that WiFi while walking into the lobby, the elevator, the amenity deck and back to the workspace. Landlords need the foresight to think about those things as they enter renovations, he says. Amenities and walkability are also big factors in the office of the future, he says (while noting that The Centrum has the highest walkability score in Uptown).

Event panel: Chad, Granite Properties CIO Bill Brown, Justin, Hines managing director Drew Steffen and Staffelbach's Jim Rainbolt-Bailey (who moderated the panel). Drew says users of all professions can be creative, so the space isn't limited to particular kinds of companies. The key to creative office space is an environment that allows the users to choose how they can best collaborate and where is the space best suited to them. It's also about location, which gives users choices on how to get to work, as well.  

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Supporting Special Forces Veterans This Veterans Day

Leading up to Veterans Day, Bisnow has partnered with Your Grateful Nation, a nonprofit that helps our highly capable, motivated and determined Special Forces veterans find work in the private sector when their service comes to an end. The best part: through Your Grateful Nation, you can consider our nation's Special Forces vets for positions within your organization.

Your Grateful Nation executive director Rob Clapper reports some of the results of our partnership:

  • 18 of our readers are in conversation with Rob about hiring former Special Forces operators.
  • We've educated several hundred thousand about the mission of Your Grateful Nation.
  • Our event attendees and employees have contributed over $1,000 to Your Grateful Nation to help the cause.
  • Through Your Grateful Nation, five Special Forces vets have been hired by companies nationwide.
  • And finally, since Bisnow began working the nonprofit, its web traffic has increased by 35%.

Rob extends a sincere thank you to Bisnow readers and event attendees for helping our Special Forces vets and Your Grateful Nation. And we'd like to extend a huge thank you to Rob, Your Grateful Nation and all of America's veterans for all that they do to keep us safe. You can reach out to Rob directly at


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Dallas Power Players: The Women Who Rule CRE

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Bisnow Education's Fall Special: 50% off

Time to give your commercial real estate knowledge a refresh and a Class-A upgrade. Bisnow Education's videos are designed to help professionals at all levels understand our business from the ground up. The comprehensive subject list tackles valuation, negotiation, debt, asset classes, entrepreneurial strategies, industry jargon and more (including the questions you may be too shy or too afraid to ask). Here, Peter Linneman, Wharton's Real Estate program founder and chairman, shares his extensive experience of every aspect of the industry, offering fresh perspectives and pros/cons in easy-to-digest segments. Build-to-suit your collection with our 50% fall discount: Use the promo code BISNOWEDU50 and click here. You can also own the entire library for only $495. For training program group licenses, email


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Our DFW reporter's favorite veteran to honor today is her husband, Jesse Auer, who served in the Army. Hua!