Office leases gobble up empty space in Richardson’s Telecom Corridor

09/06/2012

By Steve Brown | Real Estate Editor
The Dallas Morning News 

 
Richardson’s Telecom Corridor celebrates its 20th birthday this year.
 

The name for the business district along North Central Expressway and State Highway 190 was coined by city boosters who were on a roll in the 1980s in attracting telecommunications and tech firms to the area.

 

But recently, the biggest office leases signed in the area have come from insurance, finance, industrial and health care firms.

 

Last month, insurance giant State Farm leased an entire empty building — about 300,000 square feet — just east of North Central Expressway on Galatyn Parkway. The building originally housed operations of bankrupt communications firm Nortel.

 

Besides being one of the biggest office leases in North Texas this year, the State Farm lease filled one of the largest vacant office buildings in the Telecom Corridor.

 

“When it comes to the better buildings in that market, there is no longer as much space available,” said Steve Modory, a principal with Champion Partners, the owner of the Richardson building that State Farm leased.

 

In 2010, Champion and its investment partners bought the building and another office tower at 2600 N. Central. Both were vacant and purchased from lenders that had foreclosed on them.

 

For most of last year, Champion worked hard to attract interest in the properties. But starting in late 2011 and early 2012, the market changed.

 

In January, Champion leased 82,500 square feet of office space in its Tower 2600 for the headquarters of industrial recycling firm Safety-Kleen Systems Inc.

 

“Since then, they have expanded their offices and have signed two more leases,” Modory said. “We have 10 to 12 real prospects we are working on for the rest of the space.”

 

About half of that building is left to rent.

 

“I’ve never been more encouraged with the level of activity in the Telecom Corridor,” Modory said.

 

Bouncing back

Developer KDC owns another major block of empty office space in the Telecom Corridor. It took over the former Fossil Inc. office space when the fashion accessories firm moved to new digs at North Central and Spring Valley.

 

KDC has more than 330,000 square feet of former Fossil space to lease in two buildings.

 

“It’s affordable office space and a nice location with lots of parking,” said KDC senior vice president John Brownlee. “The velocity has really picked up in the Telecom Corridor.

 

“That market gets pounded every now and then. But when it picks up, it bounces back quickly,” Brownlee said.

 

During the first half of 2012, net office leasing in the Telecom Corridor was among the strongest of all Dallas-area business districts, according to Cushman & Wakefield of Texas. Total vacancy in the area fell more than 1 percentage point from mid-2011.

 

Not just telecom

“It’s starting to remind me of the good old days,” said John Jacobs, senior vice president of the Richardson Economic Development Partnership. “Companies that have been doing more with less for a number of years are now at the breaking point and have to lease space.

 

“And it’s not just the big leases like State Farm, but smaller stuff, too,” he said.

 

After tech firms, the Telecom Corridor is now home to more financial services, insurance and banking companies, Jacobs said.

 

The Richardson Chamber of Commerce trademarked the term Telecom Corridor in 1992, when demand for office and industrial space in the area boomed from telecommunications, dot-com and tech companies.

 

“Literally the world beat a path to Richardson,” Jacobs said. “It was a classic business cluster that built up around telecom.”

 

It all turned around starting in 2001, when the telecom industry went through a painful downsizing. At the peak, more than 90,000 telecom workers were in the area.

 

Now about 25,000 telecom workers, about a quarter of total employment, are in the district.

 

“It’s morphed in the last decade, but telecom is still prominent,” Jacobs said.

 

Chuck Sellers of Peloton Commercial Real Estate said the number of tenants in the market for office space in Richardson has ramped up since the start of 2012.

 

“We are seeing quite a bit of insurance companies and financial service firms looking in the area,” Sellers said. “And there are a lot of technology companies considering Richardson that don’t have anything to do with the telecommunications business.

 

“Typically summer is slow in our business, but not this year at all.”

 
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