Richardson one of top 3 submarkets for growth

 

Richardson landed two of North Texas’ largest office deals in 2011: Fossil Inc.’s corporate headquarters and Ericsson’s expansion on the former Nortel Networks campus. And the city is poised to land even more deals, with about 1.6 million square feet of Class A office space on the market.

“There is so much going on in Richardson,” said Mayor Bob Townsend. “The city attracts good companies that want to be located near a highly educated workforce, good infrastructure and access to the University of Texas at Dallas, which is getting close to becoming a tier-one university.”

Fossil was North Texas’ largest office deal, a multimillion-dollar, 10-year lease for the former Blue Cross Blue Shield campus at 901 Central in Richardson. (See list, Page 15.) The lease was for 535,731 square feet of office space.

The watch and fashion accessory company had Dallas-based developer KDC completely renovate the former Blue Cross Blue Shield campus into a trendy headquarters. KDC acquired three former Fossil-owned buildings as part of the deal.

The deal was an important one for Richardson, retaining the company and its 1,200 corporate employees that helped grow the once-small business into a worldwide brand, Townsend said.

Ericsson’s expansion onto the former Nortel Networks campus at 2201-2221 Lakeside Blvd. in Richardson has kept jobs within the city limits, he said. The lease was for 460,000 square feet of office space.

Through the Fossil and Ericsson deals, Richardson retained about 6,800 employees, which adds to the city’s hiring power, Townsend said.

“Our population is a little less than 100,000 people, but during the day our population reaches 130,000 people because people come to Richardson from other places to work,” he said.

With 1.6 million square feet of Class A office space on the market, Richardson plans on landing big-game tenants in the next year.

The Richardson-area submarket has an overall vacancy rate of 26 percent, which has declined year-over-year by 2.8 percent, according to the latest data from Cushman & Wakefield of Texas Inc.   

The lease rates have increased to $19.81, up nearly a dollar, or 4.7 percent, year-over-year, according to the data.

Those statistics have helped attract investment into office properties in Richardson, including Pillar Commercial’s acquisition of the former Nortel Network buildings, Champion Partners’ acquisition of 1011 Galatyn Pkwy., and KBS and JP Realty Partners’ acquisition of a five-office-building portfolio.

Richardson’s latest investor: New York City-based CapLease Inc., which bought a two-building office complex at North Central Expressway and Campbell Road for $46 million.

The office complex consists of a 203,000-square-foot building leased to a large subsidiary of AT&T Inc. and the 115,000-square-foot headquarters of MetroPCS Wireless. CapLease made the investment because it was able to purchase the complex for about half of the estimated replacement value.

So why is there so much activity in Richardson?

It’s a market that’s improving, which has attracted wise investors who are banking on a rebounding office market, said Bill McClung, an executive vice president with Cushman & Wakefield of Texas Inc. and one of the brokers on the Ericsson deal.

“Richardson is a good alternative to markets, such as the Legacy market, where the rates have gone up, and the area is benefiting from tenants looking to move north to get away from LBJ construction,” McClung said. “The market is on its way up.”

A home run

Richardson recently landed the headquarters of Safety-Kleen Systems Inc., which will bring the company’s 300 corporate employees from West Plano to 2600 N. Central Expwy.

And there’s potential to build on that success, said Bill Sproull, CEO of the Richardson Economic Development Partnership.

“We’ve had a lot of singles and doubles, using a baseball analogy, but there’s a chance for a company to take a big chunk of space here,” Sproull said.

It’s those large blocks of contiguous space at newly acquired and repositioned properties that will land tenants, he said.

Richardson is one of the top three submarkets in North Texas that is situated for growth, said John Brownlee, senior vice president at KDC, which redeveloped Fossil’s new headquarters and is now marketing the three buildings that Fossil formerly called home.

One of the reasons for the projected demand: quality office space.