Dallas Growth Propels Increased Office Development

DALLAS—In less than a decade, Dallas has added a cool million residents to its roster. This population rush continues to bring in more construction projects for companies of all stripes as well as housing developments. In this exclusive, Brett Merz, asset manager at KBS, discusses this growth, office amenity trends, spec suites and investment outlook.

GlobeSt.com: What is driving growth throughout the Dallas market?

Merz: The Dallas market is a vibrant and thriving ecosystem of diverse companies, top talent and local culture, all of which are attractive to KBS as an office owner.

Dallas is experiencing strong population growth. The city added more than 1 million new residents over the last eight years, which is more than any other metropolitan area in the country and more than 75 companies have relocated their headquarters to the Dallas region over the past seven years. The most recent Fortune 500 company is Core-Mark, which is relocating from San Francisco this year.

These corporate moves are also contributing to a healthy leasing market in Dallas. In Legacy Town Center, a three-building 522,043-square-foot office property KBS owns in Plano, we recently leased more than 53,000 square feet to WeWork, which now occupies the second and third floors of one of the buildings. We also leased 8,696 square feet to VLK Architects and 7,723 square feet to Fundbox in the same Legacy Town Center property. At Sterling Plaza, another office property KBS owns in Dallas, Blue Racer Midstream renewed and expanded its lease.

These are great examples of the continued growth throughout the region. We anticipate that the talent and corporate migration to Dallas will continue, which is driven by many different factors. Dallas has a lower cost of living than other major metros and a high quality of life, good education and schools, a friendly environment to conduct business and no income tax. We expect Dallas to remain a top-tier market for many years to come.

GlobeSt.com: What are the latest trends in office properties/office amenities that are attracting tenants to the region?

Merz: There is certainly a flight to quality underway throughout the Dallas market. Tenants desire communities that offer a live/work/play vibe with high-quality amenities, open community spaces and unique features they can’t find in a traditional office space. As a result, we are seeing many older office buildings throughout Dallas being repositioned to meet this demand.

With deep roots as an owner-operator of major office assets and a forward-looking approach, KBS is always at the forefront of what tenants and their employees desire and we work continuously to incorporate these sought-after amenities and environments into each of our assets.

Our iconic Preston Commons asset in Dallas is currently undergoing a repositioning which will include a state-of-the-art conference center and outdoor work areas that provide a variety of different types of workspaces, collaboration areas, common area space and outdoor kitchen areas, among others.

Beyond physical attributes, there is also an emerging trend of adding new service amenities such as nail salons, shoe repair, mobile spas, food delivery, dog walking and mobile trucks that provide gas for employees’ cars, among others. These services also include concierge-type services that are inspired by the hospitality of hotels providing unique experiences to tenants and their employees.

This is a trend we are seeing not only in Dallas, but throughout the US. By adding service-focused amenities, landlords can deliver tremendous convenience for tenants, which is highly valued by today’s Millennial workforce.

GlobeSt.com: What types of unique features does KBS incorporate into its office properties to differentiate it from others in the region?

Merz: One key differentiator for KBS is our spec suites. Rather than white boxing spec suites, we are building them out and creating innovative spaces that are attracting tenants, which is driving new leasing activity and infusing a new energy into each property. Our progressive spec suite program goes above and beyond traditional spec suite space, incorporating fully furnished suites and the latest in the live/work/play amenities. We are building these units without a committed tenant in place.

We recently launched a repositioning of Union Bank Plaza in Los Angeles, which includes eight spec suites, three of which have already been pre-leased during construction. Prospective tenants like being able to move right into the spec suite rather than having to renovate the space themselves.

This strategy has been extremely successful and is largely based on our depth of knowledge in the office market. KBS owns one of the largest office portfolios in the country and we have been serving office tenants for nearly three decades. During this time, we are continually refining and adapting our properties to fit the needs of today’s tenants.

GlobeSt.com: What are your investment plans this year and into 2020?

Merz: Our investment outlook for 2020 remains positive. We continue to seek out premier class-A office properties in core markets across the US. The key to our success is that we invest only in the very best locations–always in urban nodes in the epicenter of growth markets.

The Dallas market is an excellent example of this strategy. With an extremely diverse economy that is not dominated by a single industry, the market boasts a large presence of major tech, finance, healthcare, real estate and insurance companies, among a variety of other sectors. Dallas continues to demonstrate exceptionally strong fundamentals, which will support continued value creation in the years ahead. KBS plans to continue our investment in this region, and in other growth markets across the nation.