Hillwood Development Corp. bought a three-building office portfolio near one of the nation’s busiest airports in the firm’s latest bet on the future of workspace properties in the nation’s fourth largest metropolitan area.
The real estate investment and development firm of Dallas, founded by Ross Perot Jr., has purchased the three-building office park — Freeport Business Center I, Freeport Business Center II and Freeport Business Center III — for an undisclosed sum. The buildings totaling more than 383,000 square feet of space were last appraised for a total of $45.4 million, according to the Dallas Central Appraisal District.
“It’s not often you have the opportunity to buy a property this size within five minutes of the world’s third busiest airport,” Steve Aldrich, senior vice president at Hillwood, told CoStar News, citing recently released data showing Dallas-Fort Worth International Airport ranking No. 3 after Dubai International Airport last year based on airport traffic.
“This is a really well-located piece of real estate and is in proximity to such a massive workforce,” he said, adding this acquisition exemplifies Hillwood’s decision to strategically obtain well-located, quality real estate in infill locations in North Texas. The firm touts a workforce pool of 3.3 million residents within a 30-minute drive of the property, with the help of Interstate 635 and State Highway 114.
Even as the Dallas-Fort Worth region has grown, with more than 8.1 million residents in the nation’s fourth largest metropolitan area, the office market is likely to be “slow and subdued in 2024 due to economic headwinds,” according to Newmark’s latest quarterly report on office space. Newmark was the brokerage that marketed the office portfolio on behalf of UBS before Hillwood nabbed the real estate.
“Office investment activity will remain low in the near term due to elevated inflation and a steeper cost of debt,” the report added.
Higher Rents
Aldrich said he’s well aware of the office sentiment in North Texas and throughout the country, but Hillwood has a strong belief that there’s “a space for this kind of office in the market,” with not all companies being able to afford per square foot rents nearing a record high of $30 per square foot.
According to Newmark’s data, the annual asking rent for office space in the Dallas-Fort Worth region was $29.77 per square foot, a historical high for the area and a 1.4% increase year-over-year. In the first quarter, the brokerage noted that 3 million square feet of new leases were completed, reflecting slower leasing activity with smaller office leases.
One of those office leases signed in the first quarter was Boeing’s expansion for one of its divisional offices, to help it add additional employees, the company told CoStar News. The three buildings are about 70% occupied, with spaces available between 26,406 square feet and 82,500 square feet. Along with Boeing, Sirius XM, Yardi Systems and Northrop Grumman Corp. lease space at the properties.
The prior owner invested more than $6.5 million in upgrades to the properties, adding to its amenities with an on-site, full-service cafe, as well as lobby renovations and new landscaping.