GlobeSt.com EXCLUSIVE: Market Forces Changes at Hall Office Park

"When the bids come back, we'll make a final decision," Craig Hall, chairman and founder of Hall Financial Group, says. Both spec office buildings were ticketed to rise last year, but the larger one was sidelined due to market dynamics and the high costs of steel and concrete, he explains.

Work quietly began in late November on the 90,000-sf 3211 Internet Blvd., now scheduled to deliver in the fall at a cost hovering $120 per sf. The 150,000-sf project went back to the drawing board, coming back to life without a parking deck and on another site in the park, 2600 Network Blvd., where surface parking can be part of the plan.

The wait-and-see attitude is the direct result of costs that are roughly 10% or $12.50 per sf higher than six months ago when the 120,000-sf 3011 Internet Blvd. was completed, Hall tells GlobeSt.com. "It's not a money issue," he says. "It's not a lack of desire issue." If the six-story project gets a green light, ground will break in the second quarter, he says.

Meanwhile, Hall has started revising the four-million-sf build-out plan for Hall Office Park. "We are significantly downsizing what our plans were," he says. Talks are focused on cutting off construction at 2.5 million to 3.1 million sf. "We're less optimistic than we were," he says, adding he's also pulled the park from the sales block.

Hall's foresight seven years ago to build in the far north sector has won consistent praise from his peers, several of whom are now talking about developing up to one million sf of office product in the far north Dallas submarkets. "If I didn't own all this land and have a momentum going, there is no way I'd build," he says. The goal is still to reach build-out in 15 years, using cash on hand to build spec space so it's ready to tour when the next deal comes along, according to Hall.

It's not about scaring off the competition, but rather the dynamics of the metroplex market in general, Hall stresses. "Real estate is doing well in many parts of the country, but it's not doing well in Dallas...In order for Frisco to do well, the metroplex has to do well," he says. "Frisco, over the long run, for office is a great location. But, it can't grow as an island without the whole region."

Of the park's existing stock, eight buildings with 1.1 million sf are 85% leased and last year's ninth one is sitting two-thirds empty. And, that's with last year's leasing activity reeling in 28 leases for 236,000 sf. Space ranges from $20 per sf to $22 per sf. "With six to 12 months' free rent, by the time it's done the effective rate is a lot lower," Hall says. "All the deals we are making are very hard-fought deals."

Not only are conditions highly competitive, but every building owner is discounting rates. "Truth is we need job creation," Hall emphasizes. "We are just passing tenants back and forth and doing it at lower rents. It gets tiring year after year not to hear good news. But, the news is what it is."