North Texas Takes Office Tenants From All Over ... Including Itself
The booming office market — and especially the corporate relocations — have office brokers, landlords and developers walking with a spring in their step. While landlords elsewhere in the U.S. wonder how they will fill all the space corporate giants left behind on their way to the Lone Star State, North Texas is gobbling up relocations from all over, including from within North Texas.
Dallas-Fort Worth trails only New York City as the nation’s top job growth market; it added 113,000 jobs in 2016. Of the 51 Fortune 500 companies based in Texas, 21 call DFW home. Liberty Mutual and Toyota will deliver new campuses in Q3 and JP Morgan Chase will deliver in Q1 2018.
“Dallas has been a magnet for corporate relocations, like American Airlines and JC Penney, for quite a while, so it’s unsurprising that these companies are coming in higher numbers from California and other places,” said Robert Kramp, CBRE director of research and analytics for Texas, Oklahoma and Arkansas.
Why? Take your pick of solid arguments: good infrastructure, warm climate, central time zone, skilled labor force, good schools, DFW Airport, queso.
But these new tenants also come from within DFW. Last Wednesday, TreppWire reported that JP Morgan Chase will vacate 244K SF across two buildings in Lewisville when its lease expires in November. In most other geographic areas, this would be a detrimental blow to the landlord.
The buildings, Lago Vista III and IV, are part of the $58M Vista Ridge portfolio rollup.
This story has a happy ending, but many others do not, Trepp senior managing director Manus Clancy said. The landlord has a new lease under review with Nationstar Mortgage that could start in July 2018, according to servicer watchlist notes from earlier in March.
If Nationstar enters into a lease at the Vista Ridge portfolio, this loan will be in good shape to be paid — more or less — on time, Clancy said.
Clancy said this portfolio’s Texas location makes it easier for the landlord to fill the vacancy. Even if JP Morgan Chase has chosen not to renew its Lewisville space, that location will be valuable to another company looking to move from within or outside of the area. Nationstar is already headquartered in the Dallas area.
Those corporate users head to the Platinum Corridor more often than any other place in North Texas. Legacy West has become the epicenter with Liberty Mutual, Toyota, JC Penney, FedEx and many small and midsize businesses that service the big corporate users.
The average office lease in DFW is 12K to 15K SF, and the average floor plate is much bigger, so those midsize and small deals drive the leasing activity, Kramp said.
Kramp said CBRE has run the numbers and DFW’s employment profile mirrors the diversity of Atlanta more closely than any other Texas city. That means North Texas has pulled tenants from all over, which has left a string of empty office buildings elsewhere in the U.S.
Clancy has seen plenty of cases where a tenant that occupies an entire building in New Jersey or Chicago moves to Texas.
As early as 2013, pharmaceutical companies started leaving New Jersey, decreasing its manufacturing jobs by more than half and leaving behind empty office space.
“When that happens the borrower thinks, ‘Where do I turn now?’,” Clancy said.
Perhaps toward a Texas investment.
Hear more about the Platinum Corridor at Bisnow's Big Platinum Corridor event on April 11.