Getting — And Keeping — Tenants In Uptown
Some of the older tenants in Uptown might be sitting pretty with rents in the mid-$30s, but when the time comes to renew, that number will not look the same. Panelists at Bisnow’s Future of Uptown and Turtle Creek event know keeping those rolling tenants will not be easy.
Gaedeke Group senior vice president Elliot Prieur said some rents will be increasing by 30% or 50%, and it is a challenge for the tenant and landlord to come together. Some tenants will opt for repositioned assets and forgo new buildings.
Uptown has not seen the redevelopment Downtown has, but we will see that now, Crescent Real Estate managing director John Zogg said. That is the next wave. Those '80s, and some '90s, buildings will be repositioned.
Quadrant Investment Properties has made a business out of renovating '80s product. Gaedeke underwent major renovations at One McKinney Plaza in 2010 and Oak Lawn Plaza in 2015. Rent at Quadrant’s The Centrum stands around $37/SF plus electric, a far more palatable number than new buildings asking $50/SF or more.
“Some tenants just won’t stay, and that’s OK if they really need that relief in rent,” Quadrant founder Chad Cook said. But as much as possible, landlords need to take that higher per SF price and turn it into amenities, common space and value for the tenant, he said.
For many companies, moving comes down to employee retention. Moving is costly and can negatively impact production and morale, Prieur said. If companies consider the cost of hiring new employees and compare that to the cost of real estate, it could impact a moving decision, Cook said.
But as Uptown and Turtle Creek densify with new and repositioned assets, Hillwood Urban executive vice president Ken Reese worries about mobility. Hillwood’s niche play with 3001 Turtle Creek and Turtle Creek Campus is because of the buildings’ proximity to Highland Park’s employee base. That circulation of drivers becomes compromised as the submarket densifies — both in number of buildings and in number of employees per SF.
Flexibility of office spaces comes into play for all assets — new and retrofitted. Offices such as Regus’ co-working concept Spaces on McKinney Avenue have an open concept design to foster more communication. Collaboration leads to community, and that helps you grow your business, Spaces area manager Brian Bigham said. And while the design may be good for business, it puts pressure on parking ratios.
Floor plates must accommodate for working together, Reese said. And while offset cores have taken center stage in some of Hillwood’s buildings, increased parking need has gotten tricky. Tenants demand six parking spaces per 1k SF of office space, but when it comes time to discuss cost, tenants do not want to commit to paying the price, Reese said.