Uber Puts 117K SF Of Office Space Up For Sublease In Deep Ellum
Marquee office tenant Uber Technologies placed 117K SF inside The Epic I office building on the sublease market, spooking the Deep Ellum district a year after giving the area a huge boost of confidence.
The news is a blow for Deep Ellum and Westdale Real Estate Investment's The Epic mixed-use development, particularly since Uber already agreed to build out a second office tower, The Epic II, next door to serve as its regional hub.
Uber is giving up almost all of its office space inside The Epic I with the exception of roughly two floors, CoStar Group Director of Market Analytics Paul Hendershot said. Uber announced last year it was leasing 168K SF across seven floors, indicating it is retaining about 51K SF after the sublease.
A spokesperson for Westdale confirmed construction continues on Uber's Epic II office tower and all construction finish-out and move-in dates remain the same. Uber still intends to move into The Epic II in 2022, sources familiar with the deal told Bisnow, but is subleasing existing office space in Epic I that is unlikely to be used between now and 2022.
Even with The Epic II still on the table as a future 470K SF hub for Uber, Younger Partners Research Director Steve Triolet said it's always concerning when an anchor tenant like Uber lists that much space at once.
Uber is dealing with economic pain; it is a major player in ride-sharing, a sector decimated by the coronavirus as people have more often stayed home.
Uber's gross bookings fell 35% year-over-year to $10.2B in Q2 and revenue dropped 29% from a year ago, according to the firm's latest earnings report.
Uber is part of a much bigger trend of office subleasing activity picking up in DFW this year. Before the coronavirus hit, DFW had roughly 6M SF of office space on the sublease market. That figure quickly rose to about 9.1M SF today, according to Triolet.
This move by Uber isn't the only possible coronavirus-induced challenge for The Epic in Deep Ellum. Another key Epic I tenant is coworking firm Spaces, a brand tied to Regus, which put some of its affiliated entities into Chapter 11 bankruptcy last month, The Wall Street Journal reports. It is threatening to do the same in the U.K. if landlords don't cut it rent deals.
Despite the emergence of Uber's space on the sublease market, Hendershot remains confident in The Epic project and Deep Ellum.
"Quite a few businesses indirectly tied to Uber's revenues, restaurants, bars and air travel have been severely restricted due to the pandemic," Hendershot said. "As a result, they are adjusting their costs and business plans. As the economy turns around, Uber will be in a strong position as we advance. All the reasons they decided to locate their tech hub in Dallas — educated labor force, business-friendly environment and the connectivity provided by Dallas Love Field and DFW airports — are still in place."