Deals Brewing for Last Full Floors in 1M-SF Williams Square

"As Williams Square goes, the Urban Center in Las Colinas follows," says Mark Dickenson, senior vice president in Texas for Atlanta-based Cousins Properties Inc. He tells GlobeSt.com that the trophy real estate, belonging to New York City's TIAA Realty Inc. is sitting at 90% occupancy and will hit 95% within 30 days when final signatures go onto deals for two full floors in the 614,527-sf, 26-story Central Tower of the four-building stronghold along North O'Connor Boulevard. With those deals close to delivering, the only opening is the 25,709-sf, ninth floor, which has been put on the sublease market by five-floor tenant, Accenture LLP.

"We'll make a competitive deal on it for someone who wants to be in Williams Square," says Kelly Winn, corporate managing director in Studley's Dallas office. She tells GlobeSt.com that the master lease doesn't expire until August 2012. To sweeten the offer, she says there is a tenant improvement allowance still in the bank because the space has never been put to use by the long-time tenant.

Winn says the space hit the streets several months ago, but interest didn't pick up until just recently, mainly from Las Colinas tenants in search of expansion room. Now, there are several proposals being evaluated. "All of a sudden, we've got a shift in the market. There is an interesting dynamic in that market right now," she says. "The larger sublease space is not available."

Despite the hot ticket, Winn says the objective is to sublease to a good creditworthy user. "We are sensitive to who we will backfill the space with," she emphasizes. "But, we would like to have a deal as soon as possible."

According to Cushman & Wakefield of Texas Inc., the first quarter resulted in 829,733 sf of leasing activity in submarket's 24.5-million-sf inventory. Last year's Q1 activity was 398,954 sf. The upshot is the favored corporate landing ground outpaced its closest competitor for leasing activity, the LBJ Freeway Corridor, by 369,062 sf.

"Las Colinas is a reflection of corporate America," Dickenson says. "As the economy picks up, as corporate America starts to expand, you'll see that affect Las Colinas. As Williams Square gets 95% leased, the other buildings will fill up and the rates will go up." Overall occupancy is 24.4%, practically mirroring the Urban Center's current rate. But when times are good, the Urban Center typically far outpaces its nearby class A competitors.

ING Clarion, the new owner of Gables Residential Trust, and Henry S. Miller Commercial are stoking the Urban Center momentum with a plan to develop nearly 300,000 sf of retail and restaurant space plus residential units on 13 acres across the street from Williams Square. Another developer is planning an 800- to 1,000-room hotel. "It's going to have the biggest impact in Las Colinas in 10 or 15 years," Dickenson says about the emerging plans. "You're not going to recognize this market in the next 24 months."

TIAA hasn't been on the sidelines during the recovery process. All leases that were set to roll this year have been bed down, according to Dickenson. Plus, he says an agreement has just been inked with Sodexho USA of Gaithersburg, MD to operate a cafe with a Starbucks shop, Wi-Fi accessibility and plaza seating for tenants and the general public. The Cousins-managed Colorado Lounge will open in August in the former Mustang Cafe space, which has been dark two years. Meanwhile, TIAA's team has replaced a boat dock with slips with a 4,000-sf covered wooden deck for outdoor dining, private receptions and meetings. Since 2002, the 15-year owner has invested $6 million into upgrades, mostly amenities. "It's an amenity package of the five-star quality of Williams Square that's attracting corporate tenants," Dickenson adds. The cap-ex program included makeovers to an 8,000-sf fitness center and 5,000-sf conference center.

Because the submarket gain is so strong, Dickenson says the new plan will be to review Williams Square's rate structure of $22.50 per sf to $24.50 per sf plus electric on a monthly basis. "There's a reason to review and change," he explains.

With more than 100 tenants in Williams Square, Dickenson says "the building's always in somewhat of a transition, but 5% is a healthy vacancy because we can still accommodate existing tenants." That's not to say, he adds, that leasing is done for the year because there's still a chance that more deals could emerge for the small pockets of open space to push up occupancy another notch or two.