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As The Headquarters Of Headquarters, Few DFW Office Markets Shine Brighter Than Irving-Las Colinas

When it comes to snagging corporate headquarters, few cities in North Texas perform better than Irving-Las Colinas, an inner-ring submarket northwest of Dallas.

Of the 24 Fortune 500 companies headquartered in North Texas, 10 are located in Irving-Las Colinas. The area also has the most Fortune 1000 headquarters per capita in Texas, according to its economic development partnership. And just yesterday, the city approved $31M in incentive funds to land Wells Fargo’s regional office hub, which will house as many as 5,000 workers in 800K SF of new office space in Las Colinas Urban Center by the end of 2026.

Las Colinas Urban Center has the largest concentration of office space in North Texas.

Beth Bowman, president and CEO of the partnership as well as the city’s chamber of commerce, said earning the unofficial moniker of headquarters of headquarters was an intentional move outlined in the city’s five-year strategic plan, up for renewal this year.

“We didn’t just fall upon it — it’s been very much purposeful and with intent,” she said. “For the past five years, the team at the chamber, the city, the Convention and Visitors Bureau and the Las Colinas Association have been laser-focused on recruiting and retaining headquarters in Irving-Las Colinas.”

The submarket offers many of the same benefits as the rest of the Metroplex, including a business-friendly environment, access to a diverse and educated workforce, and a variety of nearby transit options. But one upside unique to Irving-Las Colinas is it is home to Dallas Fort Worth International Airport, which is a huge draw for companies, said Leander Johnson, vice president of brokerage and investment at Koa Partners. 

“When you have the opportunity to be able to travel anywhere in the country within four hours — we’ve got a number of options to take direct international flights anywhere across the world — I think that’s going to be attractive to a lot of C-suite level executives and a lot of corporations,” he said.

Irving-Las Colinas offers competitive rental rates for its office space, which could be another reason behind its success, JLL Managing Director Torrey Littlejohn said. The average asking rate per square foot in Las Colinas was $29.99 per SF in Q2, which is on the cheaper side compared to other DFW submarkets.

“It's at a slightly lower price point than Plano/Legacy but can still provide the suburban benefits of that market while offering a wide variety of office products to choose from,” Littlejohn said in an email. “These include several mixed-use developments that provide the amenities tenants are drawn to.”

Unlike other cities in North Texas that use sales tax to foot the bill, Irving’s economic development efforts are paid for through the city’s general fund, in addition to revenue from several tax increment finance zones and public improvement districts. A large chunk of the Wells Fargo deal is made up of TIF funds, which will be used to reimburse $19M worth of the company’s $436M development costs. The other $12M in property tax rebates is funded through an economic development grant.

Wells Fargo's regional hub will be built on Lake Carolyn, a 220-acre lake in the Las Colinas Urban Center.

“The way I see it, this is a massive return on investment, to say the least,” Council Member Brad M. LaMorgese said ahead of the Aug. 4 approval, noting the development is expected to increase the area’s taxable value by $200M. 

Incentives are one way the city lands business, but Bowman said they are used sparingly. In fiscal year 2020-21, the EDP approved nine incentive agreements that created 460 new jobs, $154M in new capital investment and 825K SF of new office buildings, according to the most recent budget. 

The following fiscal year, the city allocated $23.8M toward incentives, and Bowman said less than 13% of businesses recruited by the EDP were granted those funds. Caterpillar Inc., a global manufacturer of construction and mining equipment, announced in June it would relocate its HQ from Illinois to Irving-Las Colinas. A company spokesperson told Peoria Public Radio the company did not request or receive any incentives related to its move.

"We believe it's in the best strategic interest of the company to make this move, which supports Caterpillar's strategy for profitable growth as we help our customers build a better, more sustainable world," Chairman and CEO Jim Umpleby said in a statement.

Despite its ability to pull household names, the submarket is not without its challenges. A lack of move-in-ready office space has been a deal breaker in the past, and Bowman said that is a bitter pill to swallow. Strategizing ways to incentivize more speculative office development will be part of the city’s conversation around its revised strategic plan, she said.

“I wish we had more spec buildings ready to take down the demand,” she said. “There is a timeframe that has to be met, so when we are not able to meet that timeframe, that stings a little bit.”

Roughly 30% of Las Colinas’ 32.6M SF of office space is currently available, according to a Q2 report from CBRE. Most of that vacancy is concentrated in Class-B space, which also has a vacancy rate of about 30%. Irving-Las Colinas has not been immune to the flight-to-quality trend experienced across the Metroplex, Johnson said, and many developers are responding by upgrading lower-tiered properties.

“The average age of office stock in Las Colinas is somewhere around 25 years old,” he said. “The fact of the matter is that when you have ownership groups that are willing to invest, that becomes less of a challenge.” 

The departure of Exxon Mobil Corp. will open up more office space in Irving-Las Colinas by mid-2023. The company announced plans earlier this year to move its HQ to Houston, leaving its 365K SF headquarters in Las Colinas up for grabs. The company cited operational efficiencies as the reason for the move.

“We greatly value our long history in Irving and appreciate the strong ties we have developed in the North Texas community,” chairman and CEO Darren Woods said in a statement. “Closer collaboration and the new streamlined business model will enable the company to grow shareholder value and position ExxonMobil for success through the energy transition.”

While losing a business or missing out on a deal is disappointing, Bowman said she strives to see the silver lining in every loss. There are 714 acres remaining for commercial development in Irving-Las Colinas, and about 1M SF of new office space under construction as of the second quarter of this year, according to CBRE. These parcels and projects represent the next frontier of opportunity for the submarket, Bowman said.

“We’re going to win as a community, and we are going to lose as a community,” she said. “When we lose, it provides us an opportunity to reflect. In that reflection, we continue to just dive into our plan and be laser-focused to deliver on that plan.”