Lack Of Construction Spurs Speculation CBRE’s Dallas HQ Project Has Stalled
Not only has CBRE’s development arm, Trammell Crow Co., not broken ground on the real estate giant's planned 27-story, 750K SF new headquarters building in Uptown Dallas as it said it would this year, the restaurant occupying the space is accepting reservations well into next year.
The continuing business of Truluck’s, an upscale, two-story seafood restaurant at 2401 McKinney Ave., is just one sign that CBRE’s office and retail tower project may be on pause amid high interest rates and inflation, CoStar News reported.
The restaurant must be demolished for the tower to be built at the same address. And that's not all.
Construction of the new headquarters was set to begin in February 2022, according to a city permit. But the city of Dallas hasn't received an update on the project's status since a formal agreement that included a package of local and state incentives was signed Dec. 1, 2021, CoStar reported. Both CBRE and Trammell Crow declined to comment.
CBRE moved its headquarters from Los Angeles to Dallas in 2020, announcing it would create about 1,000 new North Texas jobs and invest at least $42M into its Dallas headquarters and an operations center in Richardson. At the time, it said only a small number of its 5,000 California employees would move to Dallas.
The company made an agreement with the city in November 2021 that would help it get $6.75M in Texas Enterprise Fund grants, the Dallas Morning News reported. The commercial real estate firm agreed to add 460 jobs and invest $29M at its Dallas headquarters, as well as creating 550 new jobs and spending $13M on its Richardson offices.
The 131K SF Richardson operations center opened this year. More than 1,000 CBRE employees are based there, but it has a 1-to-1.5 ratio of desks to employees because it is based on a hybrid work model, Bisnow previously reported.
A week before the November 2021 agreement, the Dallas City Council also gave CBRE $250K to add jobs and build its Uptown Dallas tower, which would eventually house its headquarters, according to the Dallas Morning News.
But the construction delays could mean the project will not meet the timeline detailed in the incentive agreement, and that could jeopardize CBRE’s access to public funds, CoStar reported.
The agreement requires the new tower to be constructed by the end of 2024, with CBRE occupying it by the end of 2025, meaning the project is already behind from a development standpoint, CoStar reports.
"Right now, to get something completed from start to finish, you need a proven development team with a sophisticated lender with more equity than usual, and it has to be a strong deal," Jack Matthews, a Dallas developer not involved in the project, told CoStar. "In the past, other deals were getting done, but I think it's going to be two to five years before we get back to those deals. There's a lot of uncertainty in the market right now."
CoStar noted the deadline is still years away, and CBRE could still meet it, negotiate changes to continue qualifying for incentives or decide to walk away from the incentives entirely.
In 2021, CBRE had more than 3,000 North Texas employees, which marked a 70% increase over the past decade. But the company announced in late October it would be paring back staff as it seeks to cut $400M in costs amid worsening economic conditions.
About $300M of that was to be permanent reductions, mostly in the form of staff cuts, CBRE said in its third-quarter earnings report.