A division of Japan-based automaker Toyota has signed one of the largest leases in the greater Dallas-Fort Worth region in years with its deal to occupy the area's first mass-timber office building.
Toyota Financial Services has signed a lease taking the seven-floor, 242,000-square-foot mass-timber building developed by Dallas-based Crow Holdings off the leasing market. The building at 4401 Cirrus Way in Frisco, Texas, a northern suburb almost 30 miles from downtown Dallas, sits in a part of the region with more than 8.1 million residents that has become a maturing office destination with a lower vacancy rate compared with the rest of North Texas, according to CoStar's latest market report.
It's the biggest new office lease to land in the Dallas-Fort Worth region in nearly two years, confirmed CoStar's Director of Market Analytics Bill Kitchens, who tracks the North Texas office market. The largest leases in recent years reflect competition among major users for the newest office spaces, Kitchens said.
Toyota Financial Services' deal for the first mass-timber office building developed in the Dallas-Fort Worth region signals demand for this kind of office space as companies seek to minimize their carbon footprint.
"When we began developing The Offices at Southstone Yards, our goal was to build a welcoming, collaborative, sustainable space for a forward-thinking tenant like Toyota Financial Services that wanted to create an elevated workplace for its team," said Cody Armbrister, a senior managing director of the office team for Crow Holdings' Development, in an email to CoStar News.
"We see Southstone Yards as emblematic of the future of what the office can be — specifically a place where people want to spend the majority of their day," Armbrister added.
Terms of the lease were undisclosed. Toyota Financial Services did not respond to requests from CoStar News seeking comment about its new office lease. The company is leasing 242,000 square feet of space in the building, where it expects to move into by year's end, according to CoStar data.
"This is one of the largest office leases to be completed in 2025" in Texas, according to Steve Triolet, a senior vice president of research and market forecasting for real estate services firm Partners, who added the mass-timber construction of the office building makes it stand out amid a challenged office environment.
Rise of timber
Mass-timber construction produces lower carbon emissions compared with concrete and steel construction, attracting big tenants — such as Walmart and Google — to these spaces. Walmart's multibillion-dollar mass timber campus in Bentonville, Arkansas, opened its doors last month.
For large, publicly traded companies, green building techniques — including mass-timber — can be looked upon favorably as these Fortune 500 companies seek to lower greenhouse emissions, Triolet said, adding every major Texas city has a mass-timber building on the ground or space available for lease. The appeal of mass-timber construction could shake up Texas cities weighed down by the steel and concrete construction of 1980s-era, he said.
"Only time will tell if mass-timber is a driver of office leasing, but it doesn't seem like there's much downside risk to it," Triolet told CoStar News. "From a political and environmental standpoint, it makes sense for new office buildings to use more environmentally friendly materials."
Howard Hughes plans to complete Bridgeland Green, the greater Houston region's first mass-timber office building, by this summer. Howard Hughes, along with an insurance company, has already leased some of the building's space. Likewise, Hines has landed several tenants for a three-story mass-timber office building that opened in 2023 in Austin. The Houston-based developer told CoStar News it hoped to replicate the mass-timber office building elsewhere.
If The Soto, a six-story, 141,453-square-foot office building, in San Antonio is any indication of leasing performance for mass-timber office buildings, Triolet said it shows what a few years can do for a mass-timber building in Texas. The building, completed in 2020, is more than 91% leased, according to CoStar data.
"All of these buildings were speculative, and it looks like they are landing leases," he added. "I think we're going to see more copycat developments in the future."
Tenant-driven move
Toyota Financial Services was seemingly the right office tenant to bet on a mass-timber office building in North Texas, with the automaker's North American headquarters in nearby Plano spanning 2 million square feet of office space across seven buildings on a sprawling 100 acres offering some insight into its desires.
The 100-acre office campus is centered on sustainability, with more than 20,000 solar panels that produce up to 33% of the hub's daily electricity needs, with the remainder of the electricity coming from nearby wind farms. The campus also harvests about 400,000 gallons of rainwater in a cistern water storage system to help irrigate the landscaping and repurposed in toilets.
Like the Toyota North America campus, the speculative mass-timber office building in Frisco was built with green space in mind, with 22% of the 45-acre tract earmarked for open green space, per city zoning regulations, and the mass-timber construction leading to a 32% smaller carbon footprint compared with typical concrete construction, the developer said. DudaPaine Architects was the design architect, with Gensler being the architect-of-record in North Texas.
Even with the rise of mass-timber office projects, it doesn't always mean there's a tenant waiting to sign a lease, with U.S. office markets still struggling with fragile demand.
In the greater Atlanta region, the office leasing results have been a little more mixed with Jamestown Properties' 619 Ponce, which combines 87,000 square feet of offices and 27,000 square feet of retail, getting off to a good start by being 70% leased after opening its doors last year.
Meanwhile, another mass-timber office building in Atlanta has struggled to find tenants, despite its high-profile location in the Atlantic Station district. Hines’ T3 West Midtown opened in 2019 with three tenants occupying about a third of the building: Interior Architects, Facebook and Haworth. About 75% of T3 remains vacant.
Despite headwinds tied to the office market, developers could build more mass-timber office projects in the future. Two years ago, Crow Holdings CEO Michael Levy told North Texas real estate executives in an invitation-only discussion with the legendary Herb Weitzman of retail services Weitzman that his team planned to lean into mass-timber projects.
He said, "A lot of corporate users have told their stakeholders they will be carbon neutral by some date and so we will develop into that theme. "
Staff Writer Andy Peters, who covers the greater Atlanta region and architecture, contributed to this article.