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REA
June 20, 2018  

Dallas-Area Campus Pitched to Redevelopers

A soon-to-be vacant office campus that’s suitable for redevelopment is on the block in suburban Dallas.

The 1.6 million-square-foot property, in Plano, Texas, could attract bids of roughly $125 million. CBRE is representing the owner, DXC Technology, which was formed last year by the merger of Computer Sciences with a division of Hewlett Packard Enterprise.

DXC, the only occupant, uses less than 40% of the space. The company is willing to lease back some space on a short-term basis to provide the buyer with income while it maps out a game plan for the sprawling property.

The campus, at 5400 Legacy Drive in the strong and growing Legacy submarket, encompasses two eight-story wings connected on the upper floors by a centerpiece. It formerly was the headquarters of H. Ross Perot’s Electronic Data Systems, which built the property in 1992. EDS was acquired in 2008 by Hewlett-Packard, which in 2015 split into two companies, HP and Hewlett Packard Enterprise.

A buyer would have several potential investment strategies, ranging from a simple renovation to complete redevelopment. The existing structure could be expanded or reconfigured — or torn down to make more-efficient use of the site, such as by developing a mixed-use complex.

Only 30% of the 97-acre site has been developed, well below the 45% maximum. Current zoning allows mixed-use development, with an emphasis on offices. A buyer could seek zoning changes in order to build higher structures that would add substantial retail and residential space, thereby capitalizing on demand for live-work-play developments.

The Legacy submarket has 19.9 million sf of office space that is 92.2% leased. The average asking rent is $35.77/sf.

The area, about 20 miles north of Dallas, has become a magnet for corporate relocations. It was recently chosen for Toyota’s new 2.1 million-sf North American headquarters and for regional offices of J.P. Morgan (1.4 million sf), Liberty Mutual (1.1 million sf) and Fannie Mae (300,000 sf).

The submarket also has 5,125 apartments, which are 93.9% occupied at an average rent of $1,326. That includes 1,021 units that were completed in the past two years. Another 628 units are under construction, and 1,729 more are in the planning stage. The submarket’s residential neighborhoods also include a mix of condominiums, townhomes and single-family homes.

Residents have been drawn to Legacy by its proximity to Dallas, high-quality schools, employment opportunities and a 24/7 lifestyle with shopping, dining and entertainment venues.

Employers are attracted by a highly educated workforce. Two-thirds of the submarket’s residents have college degrees (double the level in the Dallas area overall); the average household income is $144,000 (60% higher); and the average house price is $467,000 (twice as high).

Another big corporate headquarters in Plano traded in December 2016. Dreien Opportunity Partners of Plano acquired a 1.8 million-sf complex from JC Penney for $353 million, or $193/sf, in a deal brokered by CBRE. The department-store chain leased back 65% of the space. Dreien renamed the property Campus at Legacy West and embarked on a major redevelopment. It is also seeking a zoning change to pave the way for the development of mixed-use space on 45 acres it assumed as part of the deal. Dreien plans to divide that land into multiple parcels that it would sell.