A German global investment management firm is ready to part with a high-end Dallas office tower in a move that could offer a peek at pricing in one of the top office markets in the southern United States.
Union Investment Real Estate, based in Hamburg, Germany, has decided to sell Texas Capital Center, a 21-story, 456,906-square-foot office tower at 2000 McKinney Ave. in Uptown Dallas, the company exclusively told CoStar News. The firm has hired JLL's Mike McDonald and Jonathan Napper to market the property to potential buyers.
"Union Investment has held Texas Capital Center for nearly 10 years and has successfully repositioned the property during this time to enhance its appeal and value," Union Investment Head of Investment Management Americas Matt Scholl said in an email to CoStar News. "Located in Uptown, one of the strongest office markets in the country today, we see this as a timely opportunity to capitalize on the asset’s strategic positioning."
Uptown Dallas has become a mecca for global financial and professional services firms. With 2 million square feet of office construction underway, including a massive campus for Goldman Sachs, this part of Dallas has the most office construction underway in the southern United States, following areas in Boston, New York City and Seattle, according to CoStar data.
The last Uptown Dallas office building to trade was McKinney & Olive that sold in December 2022 for nearly $400 million in a record deal to a joint venture between Highwoods Properties and Granite Properties. The mixed-use tower was designed by the late César Pelli, a world-renowned architect. The price-per-square-foot of the tower in the $700s range set a new record for the market, a CoStar market analyst said at the time of the deal.
Union Investment purchased Texas Capital Center in 2016 for nearly $500 per square foot, according to CoStar data. The building opened in 2008 and its namesake office tenant, Texas Capital Bank, expanded its headquarters in October 2022 in a long-term lease. The building is currently about 82.7% leased, according to CoStar data.
Institutional capital has shied away from investing in office assets in recent years. However, the Uptown Dallas building's proximity to major projects, including the new Bank of America Tower at Parkside and the new 800,000-square-foot Goldman Sachs campus, could bring that kind of capital back to the market, said Bill Kitchens, CoStar's director of market analytics for the Dallas-Fort Worth region's office market.
"We've seen office deals steadily rise over recent quarters, and it would certainly be symbolic for the market," Kitchens said, with the Uptown Dallas area seeing a thinning supply of trophy office space as big leases take some of the new construction off the market.
Union Investment's Scholl said the firm's decision to sell Texas Capital Center "reflects current favorable market conditions," but it is also "part of our larger investment strategy in the United States" to diversify its holdings. The investment firm told CoStar News it is changing up its strategy to focus on multifamily and food-anchored retail properties in the United States.
"As we continually assess and optimize our portfolio, we aim to align our assets in the U.S. with evolving market dynamics all while further diversifying our portfolio here," Scholl said.
Union Investment owns three other office properties in Texas, including 5600 Granite Parkway in Plano, Texas; 1000 Main St. in downtown Houston; and Research Park Plaza III & IV in Austin, Texas, according to the company's website.
Tenant demand for the Uptown Dallas area has helped it become the top office market for leasing in the southern United States, said Creighton Stark, who leads office investments for Weitzman. Recent big leases include deals from Deloitte, Sidley Austin and Bank OZK.
Uptown Dallas is inherently a "good-selling market," Stark added. And he's not the only broker who is bullish on this part of Dallas.
"The market is as good as it's been since pre-COVID to trade trophy office buildings," said Evan Stone, founder and managing partner of Dallas-based Goodwin Advisors. Stone said Union Investment probably hasn't lost faith in Texas Capital Center or Uptown Dallas, "but they may have other portfolio issues where they need to generate cash.
"It's a great building and it should trade at a premium," said Stone, who is not involved with the listing but is an office capital markets broker with decades of experience.