A Dallas-based property owner is getting ready to transform two skyscrapers in downtown Dallas into hundreds of apartment units within the city's growing central business district at a time when underused office towers throughout the United States are being reimagined by their owners.
Woods Capital, the owner of Santander Tower, a 50-story, 1.4 million-square-foot skyscraper at 1601 Elm St. in downtown Dallas, in partnership with Dallas-based developer Mintwood Real Estate, has hired a general contractor to transform multiple floors of the tower's vacant office space into apartments and luxury amenity space. Woods Capital also plans to start a similar conversion project at Bryan Tower, a 40-story, 1.1 million-square-foot tower at 2001 Bryan St. in Dallas, before the end of the year.
Woods Capital's proposed office tower conversions would add 588 apartments to downtown Dallas and take roughly 800,000 square feet of vacant office space off the market, according to Jonas Woods, the company's founder, president and CEO.
For a central business district with a nearly 27% office vacancy rate, this could help alleviate a lingering issue in downtown Dallas, where hundreds of thousands of square feet of vacant office space can get absorbed through a new use of the real estate.
"About a year ago, we began analyzing the possibility of converting the space from office to luxury apartments," Woods told CoStar News. "Luxury residential in this submarket is performing better than any other asset class."
Other luxury residential apartments in downtown Dallas, both new and converted, can be rented for $2.50 to $3.75 per square foot. With an average apartment size of about 1,000 square feet, monthly rents would range between $2,500 and $3,750. Rival projects in the area report occupancy north of 90%, Woods said.
"We are following the path of what's been successful in downtown Dallas," Woods added. "The top performing asset class in the submarket is luxury apartments and with everything we are seeing, we expect we will continue to benefit from significant demand born out of the interest in Uptown and downtown Dallas as migration to this market continues."
The projects come as owners of underused office towers throughout the United States seek to bring new uses to these properties through adaptive reuse, while providing much-needed housing to areas dealing with migration patterns, and creating more vibrant and mixed-use neighborhoods.
In the past decade, advocacy group Downtown Dallas Inc. said the residential population of the central business district has grown 71% with over 13,000 residents within the inner core of the city and more than 80,000 residents within a 2-mile radius, which includes the popular Uptown Dallas neighborhood, according to the group. Rental properties in downtown Dallas report having a stabilized occupancy rate of 93%, the group said.
Dallas-Fort Worth led the state when it came to residents migrating from coastal cities, according to a report from the Dallas Federal Reserve. Residents from larger cities could have a preference to live in downtown Dallas to be near an employer in the central business district rather than commute from one of the many neighboring suburbs.
Santander Tower
Woods Capital has owned Santander Tower since 2013, and has spent $40 million in upgrades and renovations that were completed in 2017, including adding an executive fitness center. Currently, the tower is home to multiple on-site dining options, The Tower Club on floor 48 of the skyscraper, and a boutique hotel, known as The Guild.
The decision to develop luxury apartments within Santander Tower came after The Guild opened a short-term rental business in late 2020, offering 60 units of luxury apartments within part of the tower with access to the exclusive Tower Club. The Guild's business performed so well, the landlord decided to take a closer look at the possibility of offering luxury apartments, Woods said.
"The performance of The Guild informed our decision in understanding what yield you can get when you convert from office to residential," he added. "Usually a much larger, meaningful amount of space is lost or becomes unusable when you convert to a residential use."
At Santander Tower, that loss of space equates to about 30% of the tower's floor space, he said. For the roughly 300,000 square feet of office space expected to be converted to a new use, there is 90,000 square feet of space unable to be used because it isn't accessible to windows, he said. Woods Capital plans to create storage space and amenities, including entertainment kitchens, theaters, game rooms and yoga studios, which are less dependent on natural light, for that interior space.
Plans for the project include the conversion of the first floor to accommodate residents, as well as the transformation of floors 18 through 25, and 37 through 39, into 228 apartment units and space for resident amenities. The amenities are expected to include a swimming pool, fitness room, dog park, gathering spaces and a meeting space with a kitchen for entertaining. Construction on the project is expected to be complete in the fall of 2023.
Woods Capital also expects to begin construction on Bryan Tower, with the top 20 floors of the building — or roughly half a million square feet of vacant office space — being transformed into luxury residential space. Construction is expected to begin before the end of the year with completion of the apartments scheduled for early 2024.
Other conversion projects are in the works in Dallas. Dallas developer Shawn Todd, who has a history of adaptive reuse projects in downtown Dallas, and his company Todd Interests recently started the revamp of Energy Plaza, a 49-story, 1.3 million-square-foot office tower at 1601 Bryan St.
Todd plans to develop 294 apartments on the upper floors of the I.M. Pei-designed tower, while renovating the lower floors into high-end office space in downtown Dallas. The first residents could move in before the end of 2023.
For the Record
Dallas-based architect WDG designed the apartments and indoor amenity spaces for Santander Tower. Swoon provided interior design services. TBG Partners designed the exterior amenities. Adolfson & Peterson Construction will serve as the general contractor of the project.