When a new office tower in an unproven location is quickly rented in the midst of a pandemic, you can bet the real estate industry is paying attention.
That’s what happened at The Stack office and retail building in Dallas‘ Deep Ellum neighborhood.
Dallas advertising company TRG – formerly The Richards Group – has just taken over 100,000 square feet, filling the 16-story Commerce Street building.
TRG joins logistics company Worldwide Express, insurance company Bestow and developer Hines as office tenants in the 215,000 square foot project.
The rental of the new Deep Ellum building is already rippling through the neighborhood just east of downtown, as another developer prepares to break ground and rental agents scramble to fill other empty spaces.
Stack developers Hines and Westdale Real Estate Investment and Management have reason to boast about the success of their Stack project, construction of which began in January 2020, just before COVID hit.
“Landing these marquee office tenants in The Stack while competing with other urban Dallas neighborhoods further confirms Deep Ellum as a highly desirable office location,” said Westdale CEO Joe Beard. “Deep Ellum continues to evolve from its entertainment district roots.
“The availability of additional housing and office options as well as the development of neighborhood services will continue to drive this progress.”
The Stack was only the second speculative office project launched in Deep Ellum, which had previously been dominated by restaurants, nightclubs and loft-style apartments.
But other office constructions are underway in the area.
Chicago-based developer Sterling Bay plans to open a 450,000+ square foot office building soon on Malcolm X Boulevard and Indiana Street across from the Dallas Area Rapid Transit train station.
The Assembly, a more than $100 million office building designed by HKS of Dallas, is expected to open in late 2024, according to planning documents filed with the state.
Sterling Bay obtained planning permission for the project last week.
Rents for new office buildings in downtown Dallas have risen 8% this year, said Andrew Matheny, director of research for commercial real estate firm Transwestern.
“Demand for space in new builds is high, but tenants face dwindling supply until new projects are delivered in 2023,” Matheny said. “Tenants are snapping up lower-cost space built before and during the pandemic.
“Weir’s Square [on Knox Street] was fully let just six months after delivery,” he said. “The Stack was fully let nine months after delivery.”
Matheny said quoted office rents for new Uptown office buildings are now between $50 and $60 per square foot.
The largest block of office space up for grabs on the near east side of Dallas could be a great deal for the right company. More than 450,000 square feet of office space in the Epic development on Pacific Avenue has been built for transportation company Uber. But with Uber scaling back operations during the pandemic, new offices on the outskirts of downtown are being offered for subletting.
The sublease of office space in the 23-story Epic II tower is marketed by commercial real estate company CBRE Group.
“Since mid-January, we have seen improved activity at Deep Ellum,” said CBRE’s Dennis Barnes. “This business includes several smaller tenants and larger prospects, such as Worldwide Express and TRG.
“If this activity is confirmed, I anticipate that there will be conversations for further development.”
Developer Todd Interests has just completed its 300 Pearl office building across from Deep Ellum in downtown. Real estate brokers say the new building, which also includes apartments and retail, is attracting a lot of attention from potential tenants.
Hines general manager Ben Brewer said that as premier tenants move to The Stack and other Deep Ellum sites, the neighborhood is expected to see more business moves.
“There’s so much momentum in the district,” Brewer said. “It’s a great home, and it’s only getting better.
“The pandemic has been difficult, with businesses trying to figure out where they would go,” he said. “These companies aren’t betting on one or two years – they’re saying they want to be here for a long time.”