After decades in downtown Dallas, Ernst & Young is leaving for greener pastures in Uptown.
“It’s an exciting place to be even now as the buildings are just going up,” said Ernst & Young managing partner Clint McDonnough said about the firm’s new digs being built just north of Woodall Rodgers Freeway in the Victory Park project.
Although the big accounting firm no doubt could have gotten cheaper rent by staying downtown, company officials said they wanted a new location that would help retain and attract skilled workers. Uptown filled their bill, and they make the move in about 24 months.
“It’s important for us that our people love to come to work and enjoy the work environment,” Mr. McDonnough said. “If you work in a place that’s exciting and alive, that will rub off on you.”
The sex appeal of new buildings going up in Dallas’ booming Uptown district has drawn companies away from downtown. That’s bad news in the old business district, which is already burdened with an overall 28 percent vacancy rate.
Along with Ernst & Young, law firm Haynes and Boone has signed up for the new Victory Park building. The attorneys have been housed in downtown’s tallest building, Bank of America Plaza, for 22 years.
Other downtown businesses – including Amegy Bank – are eyeing the growing number of office projects being built north of Woodall Rodgers.
The tug-of-war over choice office tenants is likely to intensify, leasing agents predict.
“With as many new buildings as we have coming on line, they are going to woo people to come to Uptown,” said John Zogg, managing director of Crescent Real Estate Equities, which owns office buildings in both markets.
Not everyone is going.
Fireman’s Fund Insurance Co. just leased more than 131,000 square feet in downtown’s Lincoln Plaza tower on Akard Street for a dramatic expansion of its longtime downtown office.
And the Federal Deposit Insurance Corp. is moving its downtown operations to nicer quarters in the Energy Plaza building on Bryan Street.
An even bigger deal – Comerica Bank’s headquarters move from Detroit – is expected to land in one of two downtown skyscrapers.
“There are deals on the radar that are clearly aimed at downtown’s 1980s buildings,” said Jon Altschuler of Stream Realty Partners. “And there are a handful of tenants looking strictly at those Uptown buildings.”
Often the decision boils down to price, he said.
“We market properties in both markets – $36-per-square-foot new buildings in Uptown and $18 existing buildings downtown,” he said. “We rarely see tenants look at both products – they are two different customers.”
The shift of tenants north from downtown follows a trend begun decades ago. Starting in the 1950s, businesses began leaving the old financial district along Commerce, Main and Elm streets for newer towers to the northeast.
In the 1980s, office construction pushed farther out and Ross Avenue was touted as Dallas’ new “Main Street.”
Now, Woodall Rodgers may get a shot at becoming Big D’s main drag – with office towers going up in Uptown and in the Arts District.
Real estate brokers say big investments in housing and planned retail space in Dallas’ old core will attract some office tenants back downtown.
“We are beginning to see a number of folks in the Uptown area that are also looking in the downtown market,” said Daryl Mullin, senior director of Cushman & Wakefield of Texas. “The rental rates have been going up in Turtle Creek and Uptown, and they are looking downtown where they can still be in a great building and pay less.”
Mr. Mullin predicts that the success in Uptown will “spill over into downtown.”
But to remain competitive with New Millennium projects, downtown building owners may have to spend money on improvements.
“The ’80s buildings have to make sure they are not a Sony Walkman in an Apple iPod world,” said Mr. Altschuler. “There are things you need to do with existing buildings to make them competitive, from renovating lobbies and restrooms to adding amenities in and around the building.”
Economic development officials insist that the contest between downtown and Uptown isn’t a problem for Dallas.
“We certainly do not see any conflict,” said John Crawford, president and chief executive of Downtown Dallas Inc. “The competition is with Atlanta, Chicago, Denver – cities outside of Dallas.
“What’s happening in Uptown is good for downtown.”
WHO’S GOING, WHO’S STAYING Headed Uptown •Ernst & Young, moving its North Texas headquarters with more than 1,200 workers from 2100 Ross Ave. to the One Victory Park building. •Haynes and Boone, moving its offices from Bank of America Tower on Main Street to six floors in One Victory Park. More than 500 people will relocate in 2008. •Lincoln Property Co., from Lincoln Plaza tower on Akard Street downtown to its new 2000 McKinney tower in Uptown. Texas Capital Bank will be the lead tenant in the new high-rise. Staying downtown •Fireman’s Fund Insurance, leasing more than 131,000 square feet in the Lincoln Plaza tower for a relocation of its smaller downtown office and consolidation of operations from elsewhere. •FDIC, subleasing 185,000 square feet in the Energy Plaza tower on Bryan Street for a relocation of its downtown regional office. •Thompson & Knight, moving out of its longtime location at 1700 Pacific to the new One Arts Plaza building on the northeast corner of downtown. •Hunt Consolidated, leaving Fountain Place for its own new office headquarters at Akard Street and Woodall Rodgers Freeway. Still in the works •Comerica Inc., the national banking firm moving its headquarters from Detroit, has narrowed its pick to two downtown towers. •Amegy Bank, shopping for as much as 70,000 square feet of office space in the Saint Ann Court building, being built on Harry Hines Boulevard in Uptown. Amegy Bank now has its Dallas operations center at Ross Avenue and Akard Street. •AIG, looking at office sites in the downtown area and elsewhere. The big insurance firm is now in North Dallas. •Bank of America, looking for office space for back office operations now housed in a downtown office building.Recent big office deals include winners and losers for downtown.Recent big office deals include winners and losers for downtown.