The completed LBJ Express features six toll lanes and eight free lanes.
The LBJ Freeway Office submarket is poised for a strong comeback in 2016 after a decade of lackluster performance. Completion of the LBJ Express project has spurred the development of new mixed use projects and resulted in building owners investing millions of dollars to improve existing buildings.
LBJ Construction Completion
Construction of the LBJ Express was completed in September of 2015, highlighted by the opening of managed toll lanes that facilitate a drive from I-35 to Central Expressway in about 6 minutes. While the finished project is excellent, the lengthy construction project was very damaging to the occupancy ofLBJ office buildings. From 2006 – 2010, tenants fled the LBJ submarket in anticipation of the nightmarish traffic. Then, during the actual construction from 2011 – 2015, the flight from LBJ continued at an even greater pace. Many companies moved up the Dallas North Tollway to Addison, Plano and Frisco, while other tenants gravitated toward Central Expressway.
Post construction, investors and companies are “rediscovering” the LBJ submarket. Now that traffic is no longer a reason to avoid the area, LBJ’s prime location in the center of Dallas and surrounding communities is putting the submarket back on relocating companies’ radars.
Midtown: A New Anchor for LBJ
Midtown will have a pedestrian friendly main street with a large park.
A massive mixed-use development taking place on the site of the old Valley View Mall (between Preston and Noel, on the north side of LBJ), will bring new office buildings, apartments and retail to the area, as well as an impressive city park and European style esplanade (modeled after the Champs-Elysees in Paris crossed with the Spanish Steps in Rome). The Midtown development is being spearheaded by Beck in partnership with Crescent. Other developers, including KDC, Matthews Southwest and Hillwood are involved in new developments to the Midtown area.
The impact of Midtown will be far reaching and serve as Central Dallas’ answer to the popular Legacy development in Plano. It will reinvigorate the area and serve as a new anchor for LBJ to attract people and companies to the area.
Reinvestment in Existing Buildings
Another trend in the LBJ submarket is the renovation of older, 1980’s vintage buildings through reinvestment. Investors were able to buy the buildings inexpensively, and are spending money to completely renovate the buildings. Within the last two years, 25 buildings along LBJ have sold to new owners, including the following: Occidental Tower (Encore), Galleria Towers (CBRE Investors), 4851 LBJ (Champion), Two HillcrestTower (Champion), Hillcrest Oaks (Quadrant), and Galleria North Tower 2 (Deutsche).
These building owners recognize the opportunity to buy the buildings at a low price in order to capitalize on the increasing rental rates in a rebounding market.
Best Value In Dallas
With the recent improvements in the LBJ Submarket, the area provides excellent value for companies looking for office space. The rental rates in the area have been slow to rebound, but they are beginning to increase. Average rental rates along LBJ ($21.45/SF) are $2.70/SF below the DFW average rental rates ($24.15/SF). Vacancy rates in LBJ office buildings (23.9%) are still above the DFW overall vacancy rate (16.3%).
We predict that LBJ will be the DFW market with the greatest improvement in 2016. With the completion of the LBJ Express construction, the progress of significant new mixed use developments, and building owners investing millions in the office buildings, the future of this area is extremely bright.
Robbie Baty and Grant Pruitt
The Dallas Office Brokers