Office Retrofits Tell The Story Of Uptown’s Success
The newness of Uptown saves it from many of the redevelopment challenges of other older neighborhoods with functionally obsolete buildings, which makes it attractive to capital investors. As the submarket evolves, landlords are increasingly pumping capital, amenities and ground-floor retail and restaurants into existing properties, giving a glimpse into the future of the young submarket.
“Uptown’s success has been organic, so there has not been one singular driving force to credit,” Quadrant Investment Properties founder Chad Cook said. The walkable nature of the submarket was created authentically and without a lot of city and government backing, he said.
Uptown founding father Robert Shaw said the '80s crash allowed noneconomic players — those who had more ideas about the yet-to-be-coined concept of new urbanism than deep pockets — to enter the Uptown market to much success. So unlike Downtown, Uptown was built alongside multifamily and retail, saving it the growing pains of adding mixed-use into a homogeneous submarket.
Now Uptown has a chamber of commerce equivalent in Uptown Dallas Inc., an outspoken city councilman in Philip Kingston, and a slew of investors looking to pump capital into the Uptown office market.
The revitalization of Downtown is happening because of Uptown’s success, Gaedeke Group CEO Sabine Gaedeke Stener said. Tenants get priced out of Uptown and look south. The office gentrification happening in concentric circles around Klyde Warren Park will only get denser and denser, Stener said.
Gaedeke Group entered Uptown in 1991 with the purchase of Regency Plaza (where it is headquartered). Since then, Gaedeke has acquired CBS Radio Tower (which it sold in November), Oak Lawn Plaza, 4211 Cedar Springs (which it later sold to Kent Texas Properties), One McKinney Plaza and 17Seventeen McKinney (above) in the submarket. Gaedeke spent more than $5M to expand and upgrade One McKinney Plaza in 2010, and about $4M to upgrade Oak Lawn Plaza in 2015.
More recently, newer players like Quadrant Investment Properties have entered the Uptown office market. After purchasing 2811 McKinney and 3400 Carlisle about three years ago, Quadrant now has a $25M renovation project at The Centrum (above) and a $2.5M renovation project at Park Creek Place, which will be rebranded Hall Street.
It is more cost efficient to retrofit buildings and bring them into the 21st century, Stener said. “We find more and more tenants seeking retrofit buildings because not everyone wants the newest product.”
And not everyone can afford the steep price tags of new buildings. McKinney & Olive quoted more than $50/SF when it opened in Q3 2016. But even retrofitting buildings can cause rents to double.
When Quadrant bought The Centrum, rents stood around $20/SF plus electric. Today it is around $37/SF plus electric. A lot of that increase is because the original rent was underpriced, Cook said.
Of the investors who have come into Uptown with renovation budgets and big plans, the ones who have succeeded did so because they created value for tenants and the surrounding community, Cook said. He thinks we’ll continue to see new owners coming in with redevelopment approaches. His only major concern is that the increased tenant and resident base will only worsen traffic and infrastructure woes.
Hear more from Quadrant's Chad Cook and Gaedeke's Elliot Prieur at our Future of Uptown and Turtle Creek event on Feb. 28. Get tickets here.
Uptate Feb. 9, 9 a.m. CT: Gaedeke Group senior vice president Elliot Prieur will be speaking in Stener's (above) place for our Future of Uptown and Turtle Creek event. The article has been updated to reflect this.