UPDATED: Cypress Waters Tenants Put Space Up For Sublease, Continuing 'Dangerous Trend'
The 1,000-acre Cypress Waters master-planned community near Dallas-Fort Worth International Airport in Irving lost more than 81K SF of top-tier corporate office occupancy to the sublease market this month.
The good news is a large portion of that space is already in the hands of new sublease tenants with virtually no price reductions implemented, Billingsley Co. partner Lucy Burns told Bisnow Thursday.
Del Frisco’s Restaurant Group is putting 31K SF at 2900 Ranch Trail Drive inside Cypress Waters on the sublease market after leasing the site that was created for Cheddar’s six years ago.
Burns noted in a statement to Bisnow Wednesday that Del Frisco’s sublease is a result of the restaurant group being purchased by another company and relocating its office to another market as part of the restructuring. Even though the facility is unique and features a test kitchen, potential tenants are already nibbling at the space.
Nokia, which moved into the Billingsley Co. development roughly two years ago to some fanfare, is subletting 100K SF, Burns said.
“Nokia leased 350K SF from us a couple of years ago and built out some really beautiful space,” Burns said. “They are trying to sublease 100K of the 350K SF, and they have already sublet 75K SF of it between two groups at market rates on long-term leases. So these are not groups that are coming to squat for two years or three years and then grow and move on. These people came in and saw the space and said this is stunning and exactly what we want. In my mind that was really encouraging.”
Burns didn’t have a definitive explanation for Nokia's sublease move, but she noted the tech firm still has all of its space inside Cypress Waters’ 3201 Olympus Blvd. building. She isn’t aware of any intentions to put up space for sublease there.
“I believe prior to COVID they had a work-from-home policy that was pretty generous and perhaps they did not hire as many people as projected,” Burns said of Nokia. “But I honestly do not know if that was the reasoning behind subleasing. They have subleased the majority of the space they are trying to sublease at 3100 [Olympus]. They still have all of 3201 with no current intentions of subleasing that building. Most of these tenants have their own brokers subleasing the space on their behalf.”
But that space is going quickly, Burns said. “We have a handful of people who are interested in that space right now, so even though it is such a specific use and has fixed square footage, it is still interesting to see that there is activity around it with the test kitchen,” Burns said.
The corporate subleases, which sit inside a relatively new Class-A office asset, are arriving on a market already glutted with sublease listings. There is already almost 10M SF of sublease space in DFW, according to Younger Partners.
Whatever the reason for the subleases at Cypress Waters, it’s a bad sign for an office market that already saw Uber sublease some of its space at The Epic in Deep Ellum and another tech-focused firm, Thryv Holdings, put 449K SF of headquarters space up for sublease late last year.
The Thryv property hitting the market is also near DFW Airport, at 2200 West Airfield Drive.
“This is a dangerous trend,” CoStar Group Director of Market Analytics in DFW Paul Hendershot said. “We will see more companies across all industries re-evaluate their existing space as employees continue to work from home for longer. Technology has enabled increased flexibility and has created working from home [as] a viable option. The office environment will realize structural changes in the next year similar to those found in retail.”
But Burns has a different perspective. Even with some firms restructuring in the wake of the pandemic and the work-from-home market shift, she said other office tenants have shown a keen interest in quality assets, particularly the new builds in Cypress Waters.
“From a leasing and a subleasing perspective, I have been stunned by the activity that we’ve had given the circumstances that we are in. We finished four spec buildings last summer in our portfolio. One of those buildings is in Plano. Three of them are at Cypress Waters. All of them were finished around the same time — the June to July time frame — and we’ve got very little space left out of all four buildings.”
UPDATED: JAN. 22, 11:00 A.M. CT: This story has been updated to include additional information and context from Billingsley Partner Lucy Burns.
