CoStar News, Financial Firm’s Massive Dallas-Area Layoffs Comes as Sublease Space Reaches New Heights

Genpact’s OpenWealth To Lay Off Nearly 1,000 Employees in Dallas Area

OpenWealth, the financial services subsidiary of Genpact, plans to lay off 964 employees at this office building in Richardson, Texas, effective March 31. (CoStar)

By Candace Carlisle
CoStar News

January 25, 2023 | 6:16 P.M.

Financial advisory and wealth management firm OpenWealth, a subsidiary of New York City-based Genpact, plans to lay off nearly 1,000 employees in the Dallas area by the end of March after one of its clients decided it no longer needs the firm’s services.

The layoffs span a variety of positions at 3300 E. Renner Road in Richardson, Texas, about 20 miles north of downtown Dallas. The layoffs of 964 employees are expected to become effective on March 31, according to a Worker Adjustment and Retraining Notification letter the company sent to the Texas Workforce Commission. Genpact is one of Richardson’s largest employers with 2,500 employees as of 2021.

A Genpact spokeswoman declined to share the details of its “confidential client engagements” but confirmed there was “a business decision by one of our clients that affects the roles of some of our Richardson team.” According to CoStar data, the company has a lease totaling nearly 185,000 square feet of office space at the address.

“Responding to rapidly changing client needs is a standard part of Genpact’s agile operations model,” said Danielle D’Angelo, marketing and communication leader of the Americas for Genpact, in an email to CoStar News. “We’re committed to handling every transition thoughtfully and smoothly and ensuring everyone is treated fairly and respectfully. Richardson remains a strategic market for us, and we have several clients for whom we manage services in this location.”

D’Angelo did not immediately respond to a question by CoStar News asking about the real estate impacts of the layoffs.

Job cuts in the financial services industry have been ongoing with more expected as rising interest rates and difficulty in borrowing debt weigh on the industry. Some of the recent layoffs to hit North Texas are tied to mortgages as rising interest rates impact lending on homes.

There is more than 11 million square feet of sublease space on the Dallas-Fort Worth market, setting a new high watermark for the nation’s fourth-largest metropolitan area, said Andrew Matheny, Transwestern’s research manager in Dallas-Fort Worth.

“The demand for office space will slow down as the business cycle slows down and hiring slows,” Matheny told CoStar News.

Up until this month, Genpact was contributing to that mountain of sublease space with about 86,000 square feet of office space at 3101 E. President George Bush Turnpike on the sublease market. That lease has expired and is now available for tenants to lease directly from the landlord, Matheny said.

Steve Triolet, research manager for Dallas-based Younger Partners, said he expects the amount of subleased office space in Dallas-Fort Worth to meet a new threshold by mid-2023.

“We are on a trajectory to hit 12 million square feet of sublease office space being on the market by mid-2023 based on how much has been added in the last few months,” Triolet told CoStar News. “Some of that space rolls off into direct space — like in Genpact’s case — but more is coming to the market than is being converted to direct vacant space.”

Recent tech industry layoffs add another wrinkle to the office leasing story, Triolet said, with Salesforce yet to add some of its Dallas space to the sublease market like they have in San Francisco. Earlier this month, Salesforce executives told regulators the layoffs would result in a reduction in office space in “certain markets.”

Triolet told CoStar News he’s closely watching to see how those national layoffs trickle into the Dallas-Fort Worth region. If the job market softens, he said, it could once again impact the demand for office space.

“Since there’s been more clarity on hybrid work, it seems the sublease market is increasing,” he said. “There’s sublease space of every shape and size in Uptown, Far North Dallas, Las Colinas-Irving, Richardson and Plano.”

Big Spaces

Some of the office sublease market in Dallas-Fort Worth has begun to get stale, even as it has grown, but new space routinely comes to the market. Ride-hailing company Uber, which listed more than 100,000 square feet of office space on the sublease market in 2020, later scaling down its expansion plans to Dallas and forgoing millions of incentives, has only added to its sublease profile. The available space in the initial phase of The Epic expires this year, rolling for the sublease market, however, Uber has nearly 364,000 square feet of space available for sublease spanning 13 floors of the 23-story office tower, which was completed last year. CBRE is marketing the sublease to would-be tenants on behalf of Uber, according to a marketing brochure.

The newly completed office building, leased by Reata Pharmaceuticals, is available for sublease in Plano. (CoStar)

Reata Pharmaceuticals has been marketing its entire build-to-suit project — a 21-story, 327,000-square-foot office building at 6100 Legacy Drive in Plano — for sublease since last year. CBRE has been marketing the sublease to would-be tenants, which might be a few tenants rather than a single tenant, according to marketing materials. The building, completed in 2021, is still in shell condition.

Meanwhile, another Deep Ellum space is on the sublease market, with fast-growing startup Bestow listing its office space totaling more than 40,000 square feet spanning two floors, fully furnished and designed without the Dallas-based digital life insurance company ever taking occupancy of the space at The Stack Deep Ellum at 2700 Commerce St. in Dallas. Bestow’s office lease — and thus the sublease — runs through the end of January 2034. Dallas-based Altschuler and Co. is marketing the sublease on behalf of Bestow, according to marketing materials.

Triolet said he sees the most traction for subleases being between 3,000 square feet and 10,000 square feet, with office tenants actively taking down subleases in that range on a regular basis. For the bigger spaces, Triolet said it’s likely they will need to chip away at them with smaller deals.

Preparing for the Return of Headquarter Relocations to Texas

One of the unintended consequences of our sharply rising mortgage rates is the dramatic slowdown in corporate relocations. As the frenzy of commercial real estate activity cools in Texas, savvy business leaders should take this time to reassess their space needs and put thoughtful strategies in place before the market rebounds.

In the near term, C-suite executives understand that most homeowners are extremely hesitant to relocate and purchase a new home because of the higher costs. Over 80 percent of residential mortgages are currently financed at an interest rate less than 3.5 percent, which is well below the 7 percent rate for a 30-year loan today.

Before the recent interest rate hikes, Texas was a hotbed of relocations with 63 companies making a move in 2021. Although this year is not completely over, less than a third of that volume, or 17 companies to be precise, came to the state in 2022. 

History proves that the housing market will rise again, just as it did from the recession of 2008 when the recovery was slow and residential markets didn’t stabilize until 2012/2013. Although the future uptick is expected to come quicker than the last cycle, timing is still uncertain.

When companies do make the decision to relocate to Texas, almost half will choose Dallas-Fort Worth over the rest of the state. Austin did have a moment in 2021 with a slew of technology relocations, but the historic numbers favor the Dallas-Fort Worth market overall.

With fewer companies touring for potential relocations, office demand is low across Texas. Active large tenants are down roughly 40 percent compared to pre-Covid levels, which is anticipated to last another year or two. Once residential activity adjusts, relocations will be surging into Texas again.

Until that time, corporate leaders should partner with a commercial real estate advisor who can assist with some of the relocation preparations in advance, including:

  • Selecting a target submarket that will complement business needs
  • Buying land for future development, if needed
  • Understanding how major infrastructure developments in the area will affect commutes and labor pools
  • Securing economic incentives offered for corporations coming into Texas, or specifically the Dallas-Fort Worth market
  • Adjusting the corporate real estate strategy to accommodate hybrid or remote workers
  • Creating efficiencies that will reduce relocation costs.

1 Dust Group Takes Space at North Dallas Business Park

1 Dust Group leased 6,686 square feet at North Dallas Business Park, 3109 Garden Brook Dr. in Farmers Branch. Elaine Xu at Younger Partners represented the tenant.

The wholesale electronic products business, which has been providing warehouse and fulfillment services to clients in Asia since 2018, saw an opportunity to expand its existing U.S. business lines with a relocation from Mo. to Texas. North Dallas Business Park’s centralized location will enable 1 Dust Group to provide added storage solutions and quicker fulfillment for customers.

“Dallas-Fort Worth continues to be a magnet for regional, national and even international businesses like 1 Dust Group,” says Xu. “Fulfillment centers such as this benefit from our shipping infrastructure, lower operational costs, favorable tax rates and huge talent pool.”

Front Porch Pantry Delivers Fresh Meals from a 26,000-Square-Foot Food Production Facility

Front Porch Pantry was a relatively unknown contender in the prepared meal delivery business when it launched in 2016 from a small deli kitchen at the back of an Addison liquor store. The Dallas-based company now competes with the likes of Freshly and Factor and ships over 50,000 meals a month across Texas, Oklahoma, Arkansas, and Louisiana.

Founder and Managing Partner Michaelann Dykes claimed her stake in the $10.29 billion global industry with a mission to help busy people eat healthy by delivering tasty home-cooked meals to their doorstep. She began by assembling a cookbook of ‘family favorite’ recipes and started testing her meals.

“The first deli kitchen was fine for making sure my recipes could be precooked from fresh ingredients and reheated without compromise,” says Dykes. Front Porch Pantry initially had two to three customers a week and quickly expanded to a large customer base in the Dallas area. Dykes says the company has an 88% loyalty rate today.

As the menu options for Front Porch Pantry grew, so did the need for more sophisticated real estate. Within the first year, Dykes sought assistance from Tanja McAleavey of Younger Partners who located a commercial gluten-free kitchen with accommodations that were prime for clean cooking. The new facility came with a space expansion option and gave Front Porch Pantry the edge it needed to accelerate in an industry experiencing compound annual growth rate of 13.5%.

In 2019, McAleavey teamed with Jerry Averyt of Younger Partners to find an even larger floor plate that could further scale with company progress. Front Porch Pantry purchased a former office warehouse located at 4600 McEwen Road in Farmers Branch and the pandemic struck during finish-out. Supply chain issues stalled renovations, affecting everything from commercial stoves and plumbing, to build-out on the office and walk-up retail areas. This happened just as Front Porch Pantry’s business, and the prepared meal delivery industry, was skyrocketing.

“No one could have predicted a pandemic that would astronomically affect the industry. Everyone was searching for great meal delivery options, and Front Porch Pantry had them,” says Dykes. “We had difficulty getting many necessary ingredients but with our extensive catalog of recipes, we were able to write and modify recipes according to what was available.” 

The doors opened at the new facility in September 2021 and momentum remains strong for Front Porch Pantry. Dykes expects to escalate eight times the current volume as the business takes a national focus.

“Our online ratings speak for themselves. Even customers who love to cook are busy. We give them great taste, great value, and the added convenience of having fully cooked dinners delivered right to the front porch. We deliver in Texas, Oklahoma, Louisiana and Arkansas and look forward to expanding nationwide,” says Dykes.

Front Porch Pantry contact info:

(972) 925-0526
contact@frontporchpantry.com
www.frontporchpantry.com

Kathy Permenter Featured on KRLD CEO Spotlight

Younger Partners Co-Managing Partner Kathy Permenter talks about the company’s recent acquisition of Crockett Row during an interview with David Johnson, host of CEO Spotlight on KRLD 1080-AM.

>>Click here to listen to the August 16, 2022, podcast to learn about upgrades planned for the 282,000-square-foot mixed-use development in Fort Worth’s Cultural District.

Younger Partners Investments Acquires Crockett Row

FORT WORTH, Texas (August 9, 2022) – Younger Partners Investments (YPI) acquired Crockett Row, a 282,334-square-foot urban village with five blocks of pedestrian-friendly Class A retail and office space. Located at the southeast corner of University Drive and West 7th Street, the property sits within the city’s Cultural District just west of downtown Fort Worth.

Younger Partners’ Co-Managing Partners Kathy Permenter and Moody Younger, and YPI Managing Director Micah Ashford, represented YPI in the acquisition. Financing was arranged by Adam Mengacci of Hamilton Realty Finance. Mark Sloan and Jacob Dow at Holland & Knight provided legal representation. Terms of the deal, which was the third acquisition for YPI, were undisclosed.

Embedded within Fort Worth’s larger live-work-play West 7th development, Crockett Row is surrounded by world-class museums, eateries, pubs and entertainment venues, including the new state-of-the-art Dickies Arena. Developed in 2009, Crockett Row’s overall occupancy at the time of closing was 74.6 percent, presenting lucrative opportunities for new tenants to join Movie Tavern, LA Fitness, Fidelity Investments, PMG and Common Desk on the property roster. Younger Partners will handle the property management and leasing of the property.

“Crockett Row has it all,” said Ashford. “Visitors can park, walk, shop, play, dine, see a movie and have a cocktail at the property.”

YPI has plans to freshen the brand and to make improvements to enhance customer experience through the addition of gathering spaces, parking technology to help locate open spaces, improved signage and additional elevators. “We also plan to work with the City to enhance accessibility throughout the property,” said Younger.

“Crockett Row was a target investment for us because of its strong supporting demographic and iconic location in the Cultural District, next to some of Fort Worth’s most affluent neighborhoods,” said Permenter. “The amount of tenant interest in this neighborhood has already far exceeded expectations.”

Crockett Row will benefit from upcoming developments to the area, including Crescent-Fort Worth, bringing 200 luxury hotel rooms, 170,000 square feet of office, and 17 multifamily units within a block from the property in mid-2023. Directly across the street from Crockett Row, the Van Zandt will deliver 147 multifamily units, 100,000 square feet of office and 11,000 square feet of retail, along with upcoming additions Triune Centre, Burnett Lofts and Encore Panther Island.

About Younger Partners

Dallas-based Younger Partners is a full-service boutique commercial real estate firm providing investment, leasing, and management services to investors and tenants in the Dallas/Fort Worth region. They specialize in the acquisition and disposition of land, multifamily, office, industrial and retail properties. Younger Partners Investments (YPI) is a Younger Partner platform designed to acquire retail properties. Launched in July 2020, YPI targets retail properties from lifestyle to neighborhood centers throughout the DFW area. Younger Partners and YPI are also affiliated with newly formed Apricus Realty Capital.