McKesson, the nation's largest wholesale drug distributor, is changing up its Texas headquarters campus only four years after relocating to the Lone Star State from the West Coast, in a move that adds an event center to its Dallas-area campus and offers one of its two buildings to a potential tenant.
The Irving, Texas-based company, which ranks No. 9 on the Fortune 500 list this year of the largest U.S. public companies by revenue, expects to begin work on a $17 million project to be completed next year that will reshape the eighth floor of its nine-story, 245,725-square-foot office building at 6555 State Highway 161. The project is to include new workstations, conference rooms, break rooms and upgrades to the bathroom finishes, according to a state work permit. The building is also expected to get a lower-level cafe, additional meeting spaces with a conferencing center and new finishes for the lobby.
The upgrades may help McKesson get its corporate offices under one roof, letting the company market its owned real estate in the adjacent building at 6535 N. State Highway 161. CBRE is marketing the space as a "full-building plug and play opportunity." The six-story, 271,778-square-foot office building was built in 2001 and is fully furnished with a grab-and-go cafe, a conference center with a breakout area, outdoor spaces and hundreds of workstations and offices.
A McKesson spokesperson told CoStar News the company doesn't have anything to add about its real estate other than what's been shared publicly with investors.
McKesson CEO Brian Tyler said in an earnings call in May that the company was "streamlining the real estate assets supporting more flexibility for our employees," and was focused on increasing its cost optimization efforts with plans to reduce its headcount or exit or downsize some of its real estate. He did not specify what real estate could be downsized in or exited from the company's portfolio.
The company isn't the only pharmacy chain or drug distributor trying to part with some of its real estate in the Dallas-Fort Worth region, the nation's fourth-largest metropolitan area with more than 7.8 million residents. Pennsylvania-based AmerisourceBergen listed its 300,000-square-foot office building, which was a build-to-suit development for the company, in the Dallas area on the sublease market. Also, Biogen hired Cushman & Wakefield to pitch a 21-story, 327,000-square-foot office tower for sublease on the heels of its acquisition of Reata Pharmaceuticals.
The two sublease offerings are part of a much bigger sublease market in Dallas-Fort Worth that has swelled in the past few years since the onset of the pandemic. Pharmaceutical companies saw a boost in business as a result of the pandemic, with McKesson specifically having some government contracts tied to COVID-19 testing kits that ended in July. The office space McKesson is marketing for lease isn't considered a sublease because the company owns the building.
This is one of the biggest plug-and-play office spaces available in the Irving area, said Steve Triolet, senior vice president of research and market forecasting for Houston-based Partners. With McKesson being its own landlord, Triolet said it could give the company a slight advantage when offering space for what could be a discount, given the state of the office market.
"They will probably have to discount it significantly for a company to take that kind of square footage," Triolet said, adding there's also newer office space available for sublease in nearby Cypress Waters. "There's a rule of thumb on these big spaces, if it is 200,000 square feet of office space or more, these tenants rarely go into second-generation space. They almost always go to new construction and want a build-to-suit."
McKesson's improvements to the office building it plans to continue occupying at its headquarters campus are expected to be completed by next September.
For the Record
CBRE's Dennis Barnes, Fletcher Cordell and Alexandra Cullins are representing McKesson in its lease offering. Gensler is the project architect working on McKesson's improvements to its office building at 6555 State Highway 161 on the campus.