What Coronavirus Slowdown? Allen Commercial Development Soars During Pandemic
Allen, Texas, is running contrary to the national narrative.
While commercial real estate development has slowed across the country in the wake of the coronavirus outbreak, the North Dallas suburb has clocked more than 2M SF of office development during the summer months, according to the Allen Economic Development Corp. That has included a mix of projects wrapping up construction and ones just gearing up despite the pandemic and market slowdown.
Some developers even foresee the pandemic giving Allen a bit of a comparative edge.
In March, the North Dallas suburb green lighted plans for a 105K SF tech-focused office development, known as Allen Tech Hub, which is scheduled to break ground and deliver next year.
JaRyCo announced plans in July to transform 135 acres of farmland into a mixed-use development called The Farm at Allen. It is slated to bring 2M SF of office, retail, hotel, dining and residential space into the community.
Kaizen Development Partners' 200K SF One Bethany West speculative office building opened in July. It hopes to follow on the success of a neighboring Kaizen-developed office destination, One Bethany East, which opened in 2018 and quickly leased up to 90%.
These projects are banking on the steady demand for office space in Allen — demand typically outweighs supply in the area.
“I think historically that has been true, specifically of Allen and McKinney on the north side of the [Interstate] 75 Corridor," Transwestern Research Manager Andrew Matheny said. "Supply has typically been lower when compared to what you have seen on the Dallas North Tollway. That’s one of the reasons why you have seen development [in Allen] continue to move forward.”
Total inventory data from CBRE's Q2 2020 Richardson/Plano office market report (which includes most of Allen and McKinney) shows the area with only 12M SF in net rentable Class-A office space, compared to 22.2M SF in Class-A office space in the Dallas Central Business District alone.
JaRyCo sees the pandemic as a potential plus for The Farm and Allen.
Roughly 1.6M SF of The Farm will be set aside for office, with enough room to accommodate a large Toyota-like campus or smaller tenants.
"We specifically designed it to where we can accommodate the large corporate end user, and we think we're going to see more corporate users from the West Coast and East Coast because the challenges they continue to have there are more complex and challenging with COVID-19 than what we have here in Dallas," JaRyCo President Bruce Heller said.
Kaizen Development Partners CEO Derrick Evers said it is a good time to be building in Allen because corporate end users nationwide are turning to the suburbs in economically friendly states to escape denser areas and high taxes.
He said anecdotal discussions from the field suggest companies want to return to the office when the pandemic ends, and Kaizen's new Class-A, tech-focused buildings are sitting in the sweet spot of desired amenities.
Today's office tenants are more focused on modern HVAC and mechanical systems with enough space flexibility to accommodate different types of work environments, he said.
"We are fortunate enough to have newer product in the market," Evers said. "We seem to be on the leading edge of what users are looking for."
And Kaizen intends to keep building in Allen.
"What we are doing in One Bethany, we have the ability to continue to grow out on those sites," Evers said, adding future projects could be multi-tenant or build-to-suit.
"I can tell you those communities are hungry to continue the momentum that we have been blessed to catalyze."
The momentum is so strong in the broader North Dallas suburbs, Kaizen partnered with Allen's neighboring city of McKinney to move forward on an eight-story, 200K SF speculative office building inside Craig International’s District 121 mixed-use development.
The velocity of leasing activity at Kaizen's One Bethany East project set the stage for Kaizen's One Bethany West, which quickly caught the eye of office tenants wanting space in Allen, Allen EDC CEO Dan Bowman told Bisnow.
"One Bethany West, which is our newest eight-story Class-A building, pretty much just opened last week, and it is already about 50% leased up," Bowman said.
Leasing traction has been strong throughout the city, he said.
"I have seen a number of leases that even happened during the pandemic."
Since the start of 2020, Allen EDC has confirmed new leases with Highlands Residential Mortgage, Billings Productions and Brass Roots Technologies, all of which moved to or expanded their footprints in Allen.
Insurance firm Crawford & Co. also inked a 70K SF lease in the city, bringing 600 jobs with it, the EDC said.