ARLINGTON, TX-The Fort Worth Star Telegram reported last week that Skymark Tower, a nine-story office building at Cooper Street and Interstate 30, is facing foreclosure. Even as the 115,700-square-foot building is headed toward an Aug. 6 foreclosure sale, brokers familiar both with the building specifically and the submarket in general aren't too surprised.
Daniel Rudd with Colliers International and David Walters with Jones Lang LaSalle have shown the building at 1521 N. Cooper St. to a variety of tenants and both say that, despite the ownership issues that plague it, the office building itself is a solid one with decent occupancy. The brokers did tell GlobeSt.com that, while Skymark is a structurally sound building, it needs to be updated from its current vintage look. "When you go into the building, you see nice finishes – from the 1980s," Rudd says.
And while the building is at a busy intersection, "ingress and egress can be difficult at rush hour," Walters comments.
Part of the reason for issues facing Skymark Tower involved the owners' expectations. A multinational group acquired the property in 2006 for $12.3 million from US Office Holdings. Rudd notes that it was acquired at a time during which the Arlington office market was enjoying a sub-5% vacancy. "The group that sold it timed it pretty well," he says.
But the new owners immediately pushed to increase rental rates; the average ask for a class A office building in Arlington is the high teens. "They immediately tried to take the ask up to $21 per square foot to $22 per square foot, plus electric," Rudd says. Tenants left, the economy crashed and Skymark suffered as a result.
Despite upgrades and renovations over the years, the building is not only a victim of ownership, it could be a victim of its submarket. More or less equidistant from Dallas to the east and Fort Worth on the west, Arlington has an office inventory of 4.7 million and a vacancy of just under 14%. Walters says that Arlington is mainly a local and regional tenant market with mainly short-term deals. Small deals as well. "You won't find many full-floor tenants in Arlington," Walter says. Though Arlington contains regional offices, he adds, the major corporations are more likely to head toward Las Colinas, Southlake, Fort Worth, Westlake or Dallas for their headquarters.
Rudd agrees, noting that he's also seeing current tenants in Arlington that are tired of straddling the DFW fence and choosing to move either to Dallas or Fort Worth. "Also, I think one of the expectations for awhile driving the office market was linked to Cowboy Stadium (and its construction)," Rudd observes. "A lot of people felt it would drive growth in Arlington, and from a retail standpoint it might. But it hasn't had any impact at all on the office market."
Rudd believes that once Skymark Tower moves through bankruptcy and has the right owner, it could do well, provided appropriate upgrades are put into place. Walters, in the meantime, predicts that someone will come in and put a moderate hold time on it. "It's a nice building in a secondary metroplex office market," he adds.
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