After Years Of Blood, Sweat And Tears, Transformation Of Dallas' Design District Is On The Horizon
Activity in Dallas’ Design District is ramping up as years of investment by developers and the city comes to fruition.
“While [The Design District] looks like an overnight success, it’s really been in the making for decades,” said Chelby Sanders, executive vice president with CBRE’s Advisory & Transaction Services group. “It just takes a while for that neighborhood investment to show up — if you build it, they will come.”
Over the past month, major announcements coming out of the district include the sale of an 800K SF property portfolio to HN Capital Partners, plans for the opening of experiential dining concept TOCA Social and the future groundbreaking of Thirteen Thirty Three, the first new office building to be added in the district in decades.
Sanders said thoughtful planning on behalf of the district’s visionaries as well as infrastructure investments made by the city have been instrumental in raising the district’s profile. One move that has proven to be catalytic was the 2005 establishment of a Tax Increment Financing zone in the district, Sanders said.
According to planning documents from the city of Dallas, the goal of the TIF zone was to transform the formerly industrial area into a walkable, mixed-use district by encouraging developers to both update deteriorating buildings and add new ones.
Over the years, this move has proven fruitful, especially when it comes to food and beverage tenants. In addition to its base of showrooms and art galleries, there are now dozens of restaurants and breweries in the district, including The Charles, Rodeo Goat, Ferris Wheelers, Meddlesome Moth and Peticolas Brewing Company, among other popular concepts.
“We have these neighborhoods that once were pockets that no one wanted to go to, but there has been a focused investment in those areas,” Sanders said. “What that does is incentivize developers to get in there and make an investment and take that risk … and that’s the reason that we have tenants flocking to the area now.”
Dunhill Partners was one of the early investors in the district. The company acquired the Dallas Design Center and the Dallas Decorative Center in 2014. Since then, Dunhill has expanded its portfolio to include 800K SF of retail, restaurant and showroom space, 200K SF of multifamily and the Virgin Hotel.
The former was sold last week to HN Capital Partners. Andy Crosland, Dunhill’s president, called the sale a win-win for all parties involved and said Dunhill will remain involved in the district by helping to lease space in the portfolio.
“Both HN Capital and our team are committed to keeping the personality of the district intact while we add interesting new tenants and [use that to] complement the district,” Crosland said.
Vipin Nambiar, managing partner for HN Capital Partners, said several factors will inform where his company takes redevelopment efforts. His overall vision is to continue to raise the profile of the district so more companies choose to set up shop there rather than flocking to suburban markets.
“You see all these headlines about growth in the Metroplex, and the reality is most of that growth has really gone to the Friscos of the world,” he said. “Our hope and goal is, as this demand plays out, we are successful in finding ways to bring that vibrancy and demand into our urban core.”
Nambiar said he wants to honor the area’s history by keeping showrooms as the base canvas for the district, but he also hopes to improve key corridors by attracting more entertainment, food and beverage, and hospitality businesses.
One of the latest wins for the district is the forthcoming addition of TOCA Social, an experiential dining concept that is essentially the Topgolf of soccer, according to Matthew Rosenfeld, executive vice president and director of brokerage for DFW’s Weitzman office. TOCA Social, which also has offices in the district, plans to open its first American venue on Riverfront Boulevard in 2023. The one-story warehouse will be transformed into a 56K SF, three-level destination outfitted with soccer boxes, a bar and a restaurant featuring a Michelin-trained chef.
Rosenfeld said Weitzman worked closely with the property owner, Ed Ewing of Ewing Properties Texas, for several years to find the right tenant for the space.
“We worked four or five deals there, and ultimately we decided none of those deals made sense for the Design District,” Rosenfeld said. “We were all trying to find the right tenant that would transform the Design District [and take it to] the next level.”
Ewing had a vision for the building to become a landmark venue in the district, and he made several strategic moves to ensure the property could attract a transformational tenant. One particularly shrewd decision was the purchase of railway track behind the building, which Ewing turned into parking, Rosenfeld said.
“This property also has an abundance of parking, and that’s what you need for a big entertainment-type use,” he said, noting that adequate parking can be incredibly hard to come by in the district.
The issue of parking has been a major barrier for development in the Design District, especially for office users, said Chad Cook, founder of Quadrant Investment Properties, another large property owner in the district. Quadrant recently announced plans to build Thirteen Thirty Three, a 120K SF Class-A property and the first office building to be added to the district in decades.
“For some time now, we have felt a shift in the way users of office approach their space needs, with a focus more on curating the culture of their companies,” Cook said in a statement. “We believe there is significant demand for a smaller scale office building that still provides the full offering of non-commodity amenities. Thirteen Thirty Three is the culmination of that thought process.”
Quadrant saw an opportunity to open up the district to more office users when it began acquiring property in the area four years ago. Issues posed by the cost of updating aging buildings and the lack of available parking caused many potential office tenants to look to other submarkets, which are easier to maneuver but tend to be more expensive.
According to Cook, office rental rates in the adjacent Uptown submarket can push $70 per SF, which is twice the cost of space in the Design District.
“The thesis sort of became, ‘Hey, if we can figure this out and scale this somehow, there are a lot of users in that 6.8M SF Class-A and B market we are staring at across the freeway that would probably like to come down here,’” he said. “We can offer a discount and something kind of cool, a true adaptive reuse as opposed to renovating an ’80s office building.”
Quadrant currently owns 23 properties in the district, including the future sites of two office buildings, Thirteen Thirty Three and River Edge. Also among its Design District portfolio is The International on Turtle Creek and a 13-building creative office and flex portfolio that Quadrant is in the midst of renovating. The portfolio is around 30% leased today, but Cook said he is in talks with enough tenants to occupy up to 85%.
HN Capital’s Nambiar views office as an area of opportunity for the district, especially given the trend of corporate relocations to North Texas. But he said his first area of focus will be on supporting uses, such as restaurants, entertainment and retail.
“To make the Design District relevant from an office standpoint, we have to bring certain amenities into the district,” he said. “Especially in a post-Covid world, you’ve got to make workspaces more attractive, more engaging and more interesting.”
Cook argued that the amenities to support office tenants are already in place in the district. He said continued office development will only spur more retail and restaurant activity in the area.
“We’re already sensing it,” he said. “Down here you have all these cool, well-branded restaurants — some are hole-in-the-wall diners and some of them are very high-end. So you have this nice mix. Our thesis was, if we can find a way to put our office buildings around these, then we’ve already got a nice campus.”
