The sky is not the limit: Metroplex real estate's move to vertical

Construction cranes sit on either side of Dallas North Tollway near the Sam Rayburn Tollway in north Plano, helping bring towers skyward on either side of the roadway.

Upon completion, these towers will help bring as many as 30,000 new employees to this part of Plano, invigorating one of the largest business parks in North Texas, Legacy Business Park. To the east, the Federal National Mortgage Association, or Fannie Mae, will bring nearly 2,000 employees to a 10-story tower at Granite Park.

To the west, Boston-based Liberty Mutual Insurance Co. will set up a massive 19-story, 1.1 million-square-foot regional hub to house about 4,000 employees.

For Plano, these campuses in the sky mark a shift from the sprawling suburban campuses of the 1980s and 1990s in North Texas to the campus of the future: High-rise campuses within dense, walkable amenities to attract top talent.

The evolution of Plano isn’t surprising considering the growing value for land within the 2,665-acre Legacy Business Park and the surrounding area, said Sally Bane, executive director of Plano’s economic development office.

“Plano is going through a redevelopment,” said Bane, who is celebrating two decades at the helm of Plano’s economic development efforts. “The value of land has become so high that there’s a trend of campuses going through a re-configuration, as this is seen as an opportunity.”

In some cases, the value of land has quadrupled in the past three years, selling for $60 per square foot, sources say. That has convinced some of North Texas’ most venerable corporations to sell off portions of real estate as the company’s business models also change.

Last month, Plano-based retailer J.C. Penney & Co. (NYSE: JCP) sold its corporate campus in a sale-leaseback deal to a Dallas-based group totaling $353 million with plans for upgrades totaling more than $100 million. Upgrades at the former Texas Instruments (Nasdaq: TXN) campus at Legacy Drive and North Central Expressway will bring a well-amenitized office park, called Legacy Central, to the market in the next few years.

These corporate campuses won’t be the last ones to undergo a massive paradigm shift. Plano has “a handful of other campuses,” with ample land that will go through a similar process in the next decade, Bane said.

“When the timing is right for these companies, we’ll see the continued evolution of this community,” she said. “We have seen a lot more densification as development has continued its northward trend.”

A growing transformation
Plano’s growth as a city can certainly be tied to its corporate residents and their desire to be in a corporate campus in North Texas.

Legendary DFW businessman Ross Perot Sr. was part of a growing campus trend in Plano by buying several thousand acres in Plano in 1979, later forming mega-campus for Electronic Data Systems.

The IT company joined Frito Lay, J.C. Penney & Co. and Dr Pepper in making sprawling suburban campuses a big deal in North Texas.

Now, that campus life is going through a reinvention in Plano. Months after acquiring the Spring Creek campus from Dallas-based Texas Instruments, Los Angeles-based real estate firm Regent Properties is working on massive upgrades to the nearly 1 million-square-foot campus.

“We have demolished everything there is to demolish,” said Eric Fleiss, managing director and CEO of Regent Properties. “To say it’s a facelift isn’t giving it justice, we are completely gutting the campus and spending a tremendous sum of money redoing the asset.”

The $120 million overhaul of the 84-acre campus, which has been renamed Legacy Central, will bring a mixed-use destination to the east side of Plano, with plans for a luxury apartment tower, a hotel, a food hall showcasing a number of restaurants and retail shops.

Those walkable amenities, along with a modern, contemporary office campus, has brought in 4 million square feet of tenants, which are in “active discussions,” with Regent Properties to lease up to 960,000 square feet of redeveloped space or develop a built-to-suit campus on the additional acreage.

Up to half of those companies Fleiss and his team are talking to are potential relocations to North Texas.

In all, the campus is entitled for up to 3.7 million square feet of real estate. Legacy Central also will include a lap pool, coffee kiosks and other campus-style amenities.

“Even though the genesis of Plano’s growth was the suburban campuses from years ago, north Dallas has grown and they want a more urban environment,” Fleiss said. “Over time, they have shown they want ease of access to the towns in the north.”

Going vertical
Plano has gone through an “incredible 35-year-old cycle,” in which the city has become largely built out, leaving developers no other choice, but to go vertical, said Sam Ware, CEO of Dreien Opportunity Partners, which recently closed on the acquisition of the J.C. Penney campus for $353 million.

The three-story, 1.8 million-square-foot property, along with 45 acres of developable land surrounding the campus, was part of the deal. Plano-based J.C. Penney is leasing back 1.12 million square feet of office space — a little more than half of the building — in the deal.

Ware and his leasing team, Colliers International, has begun touring would-be tenants through about 680,000 square feet, which is the largest contiguous space existing in Legacy West. The campus has been renamed: The Campus at Legacy West.

“This is the only existing Class A, amenity rich space available in Legacy West,” Ware said. “There could potentially be some really disappointed tenants. Once it’s gone — it’s gone.”

To recreate the campus, Ware calculates he’d have to sink in $950 million for the land and facility. To him, landing the campus for $353 was a deal.

As part of the deal, Ware plans on spending $75 million on upgrades to The Campus at Legacy, with J.C. Penney putting in another $35 million to upgrade its carpet, paint and furniture.

Ware said he expects high-rises to come out of the ground at the land surrounding the campus, although he has yet to complete a deal.

As the business model of these companies, like J.C. Penney, continue to change over the years, Granite Properties President and COO Greg Fuller said he expects additional redevelopment.

“We always knew these suburban nodes would continue to densify,” said Fuller, adding now developers are looking to rehab space decades later.

In the 1990s, Plano-based Granite Properties acquired the acreage to build what is now Granite Park, which was the first multi-tenant office tower that was built among the single-tenant corporate campuses.

With only two land sites left to develop office towers in Granite Park, Fuller said he expects the developer will continue to redevelop the park to keep up with market demand — which could mean more high-rise buildings in the future.

Developers around U.S. choosing walkability
North Texas developers aren’t the only ones reevaluating real estate.

Throughout the United States, developers are building walkable, mixed-use developments as opposed to drive-up real estate, said Ed McMahon, senior resident fellow at the Washington, D.C.-based Urban Land Institute, a nonprofit education and research organization.

“Development in the cities has gone up and successful suburbs are the ones that redevelop places to bring a little bit of the city to the suburbs,” McMahon said. “People want walkable, mixed-use places.”

The land primed for this kind of redevelopment seems to be office parks, McMahon said, taking his cue from other office park reinventions throughout the nation.

Research Triangle Park between Raleigh, Durham and Chapel Hill in North Carolina, which — once the largest single office park in the United States — underwent a complete renovation to bring housing, retail and restaurants into the once office-only development, creating an urban-like environment.

Another one-time office park, Tysons Corner, Virginia, followed a comprehensive plan transforming it from a corporate magnet at the edge of the city into a mixed-use environment with access to nearby Washington, D.C. from five transit stations.

Each makeover marks the change of these places from under performing real estate into a walkable, or public transit, destination, McMahon said.

“Not everyone wants to move into a downtown environment, but a little bit of the city is coming to the suburbs,” he said. “The most successful suburbs in the nation have these mixed-use centers with amenities where they don’t have to get in the car. “

Another important redevelopment technique: Placemaking.

By giving a property a sense of place, McMahon said he’s seen it pay back in dividends to a developer as people come back often and spend more money.

“Placemaking will be an important part of suburban redevelopment and we are going to see more of this,” he said.

Officials expect development in the city to continue skyward with other big projects on Plano’s horizon, such as plans for Dallas-based tax firm Ryan to build a more than 30-floor office tower in Legacy West. Other projects include the Windrose Tower, a 24-story luxury condo high-rise, and two nearby luxury apartment towers.

In the past 16 years, Plano has added more than 50,000 residents and Bane, who has seen the evolution of the city first hand in her two decades of experience, says she expects Plano to continue to add density, with corporate campuses playing an important role in that city-wide redevelopment.

“We are claiming our piece of the sky; not just our piece of the Metroplex,” she added.

Source: Dallas Business Journal