Richardson | December 2023

From the cover

CityLine changes hands amid declining oce demand

BY CONNOR PITTMAN

CityLine overview Developed area

How we got here

Plano

Undeveloped area

Under development

Future development

CityLine sold for $580 million in November 2023 compared to its initial sale price of $822 million in 2016, according to data from commercial real estate information rm CoStar. The mixed-use development has over 2.5 million square feet of oce space, and it sits on 186 acres in northern Richardson. It’s anchored by corporate tenants StateFarm and Raytheon, and includes over 2,200 luxury apartments, a hotel, and retail and restaurant space. The overall investment for CityLine was estimated to be around $1.5 billion with construction on the initial phase completed in 2016. CoStar Director of Market Analytics Bill Kitchens said market challenges, such as an increase in remote work and older buildings without desirable amenities, have led to high vacancy rates in Richardson and across North Texas that could continue climbing over the next three or four years. “There’s really a disconnect between oce-using

Plano

PGBT TOLL

STATE ST.

W . C I T Y L I N E D R .

HUNT ST.

L I

ROUTH CREEK PKWY.

N. PLANO RD.

FOXBORO DR.

Richardson

SOURCE: COSTARCOMMUNITY IMPACT

For restaurants like Jasper’s, this has reinforced the shift to reduce operating hours and costs, and maximize potential business, Foltz said. “The development doesn’t have the population that it did before COVID[-19],” Foltz said.

employment and oce demand,” Kitchens said. As of November, oce vacancy rates in Richardson are nearly 19%—up from 15.7% in 2019—compared to 18% across the North Texas, Kitchens said.

What’s next?

Some context

Digging deeper

In the event commercial values continue to decline and negatively impact Richardson rev- enues, City Manager Don Magner said there are three main streams the city could adjust: property taxes, sales taxes and franchise fees. However, before raising any taxes on residents, which is viewed as a last resort, Magner said city ocials would examine ways to reduce costs in other areas of operation. “Time will tell what future action may need to be taken dependent on market forces,” Magner said. “We continue to monitor ... activity.”

Long-term tenant StateFarm has about 13,000 employees assigned to the CityLine hub who work both in the oce and remotely, company spokesperson Angie Harrier said. She also said the company is not marketing any of its oce space for subleasing. Kitchens said he wonders whether StateFarm will renew its lease with CityLine’s new owner. As of November, some of the land in CityLine is being developed to add more housing to the more than 2,200 apartments within the mixed- use development. For example, a 58-townhome neighborhood called The Commons at Spring Creek will be located o of Red Moon Way. Allison Klingsick, a spokesperson for CityLine, said there are also plans to open up a new coee shop within the development early next year. Foltz said he hopes more retail could be brought in by the developer along State Street. “We think it would help drive foot trac outside the business buildings above us,” Foltz said.

Kitchens said oce buildings built in the 1980s and 1990s are not as desirable to buyers and could be candidates to be demolished if they are not leased again or redeveloped. That has contributed to a large portion of vacancies in the city and across North Texas, Kitchen said. High interest rates, a lack of demand and waning rent growth is bringing down oce values, he added. “By and large, the buyer prole has shifted in favor of private buyers who have access to greater equity, and such is the case with CityLine,” Kitchens said.

Richardson revenues

The city has three main revenue sources that can be adjusted to compensate for declining income.

Oce space vacancies

20%

Property taxes Sales tax Other* Franchise fees

15%

32.5%

18.9%

10%

14.9%

41.9%

Total revenue

15%

10.6%

*OTHER SOURCES INCLUDE FINES, LICENSES AND PERMITS, GENERAL AND ADMINISTRATIVE CHARGES, AND MORE.

2019

2017

2021 2023

SOURCE: CITY OF RICHARDSONCOMMUNITY IMPACT

SOURCE: COSTARCOMMUNITY IMPACT

COMMUNITYIMPACT.COM