This article first appeared in D Magazine’s CRE Opinion section.
Adios, vacancy!
Downtown Dallas is about to get a whole lot different. From the outside, it’s likely to look the same. But in some of Dallas’ most historic and notable skyline-gracers, the halls that housed a number of corporations will soon be home to, well, homes!
The core of Downtown gave it a valiant effort when Uptown began courting its tenants with stronger amenity bases and structured and attached parking. Owners in the CBD tried more appealing lease terms, such as more competitive rents and increased concessions, but that didn’t quite work. Vertical call centers then became the rage. However, they still didn’t fill the need. Simply put, too much office space was available in too many buildings. With an ever-increasing vacancy rate, the demand was not there, causing the outlook for occupancy within those buildings to be bleak.
Fortunately, in the coming months and years, downtown Dallas will potentially add somewhere in the vein of 2 -3 million square feet of conversions from office to multi-family.
This is a welcome change for all interested in seeing how CBD will transform. And, it’s certainly needed. Much of the space set for conversion has proven all but unleasable. Tenants continue to flock outside CBDs or remain in the area but within more amenity-rich buildings and regions.
If these conversions are successful, they will be an absolute windfall for the core of Downtown, though there will still be challenges. Most buildings set for large-scale conversions were built in the 1980s or before and made with the 8 to 5 office occupier in mind. So, an office lobby with the hustle and bustle of business may experience a new dynamic–becoming a location that is half business and half pleasure, with people in pajamas, sipping lattes, and walking their dogs alongside those engaging in their daily work grind.
Regardless, Downtown Dallas needs this B-12 shot and is likely to be more than receptive to it since residential demand is rising. Case in point: 20 years ago, there were 2,301 residents that claimed downtown Dallas as an address. Today, there are over 11,459. With record high vacancy (over 33% in the core of downtown) and record low multi-family vacancy (less than 2%), this looks to be a winning formula.
Who knew all that Downtown Dallas needed was a place to call home?