Richardson office leasing totals tip into the millions at close of Q3

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Richardson has often been the recipient of accolades for its economic success, and 2018 office leasing totals indicate a continuation of that trend.

Recent figures provided by research platform CoStar Realty Information show 1.1 million square feet of office space leased in Richardson through the third quarter of 2018, a 16.6 percent increase year-over-year.

John Jacobs, executive vice president of the Richardson Economic Development Partnership, said these figures are due in part to leases signed by Raytheon, Genpact, Associa and Steward Health Care, which earlier this year leased a 165,000-square-foot space in the Galatyn Commons development.

The city’s strategic location near the intersection of US 75 and the President George Bush Turnpike, its Dallas Area Rapid Transit rail amenities and its pool of homegrown talent emerging from institutions of higher learning all play a role in attracting and retaining large companies, Jacobs said.

But Richardson’s reputation as a boon for economic development has been hard-earned, Jacobs said, and can be tied to several significant milestones throughout the city’s history.

PAVING THE WAY FOR SUCCESS

Beginning in the late 1970s and continuing through the start of the 21st century, Richardson became home to several large corporations, many of which are still here today, including Blue Cross and Blue Shield of Texas in 1978, Fujitsu Network Communications in 1988 and Cisco Systems in 2000.

However, in 2001 the city faced the Telecom Crash, a period of time in which overbuilt telecom markets experienced a downturn, Jacobs said.

“At the time our three largest employers—all telecom equipment makers: Nortel, Alcatel and Ericsson—shed
50 percent or more of their workforce,” he said. “Unemployment in Collin County, where many of the telecom workers lived, hit double digits.”

The REDP responded by changing its recruiting tactics, Jacobs said. By broadening its outreach to include financial services, software, semiconductor and other non-telecom technologies, the city was able to correct course.

Then, in 2003, Texas Instruments Inc. announced plans for its $3 billion, 1 million-square-foot chip manufacturing plant at West Renner and Alma roads.

“To this day we have continued that diversification strategy, creating a stronger and more stable economy much less vulnerable to economic swings than it was in year 2000,” Jacobs said.

The success of that strategy is reinforced by Richardson’s annual property tax revenue, which according to Jacobs amounted to $8 billion in 2000, but today has more than doubled to
$16.8 billion.

SHOULDERING THE TAX BURDEN

In Richardson nonresidential properties pay 60 percent of the city’s property taxes, a share that is greater than the cities of Dallas, Garland and Plano.

“Without businesses, city tax rates would have to more than double to generate the same amount of revenue for the city,” Jacobs said. “Because of Richardson’s amazingly large business base for a city its size, residents enjoy much better municipal services, public facilities, and street and utility infrastructure than would otherwise be possible.”

Don Magner, Richardson’s deputy city manager, said partnerships with the business community bolster the city’s amenity and event offerings.

“We raise hundreds of thousands of dollars through partnerships to put on the Wildflower Festival, and the majority of that comes from the business community,” he said.

Businesses also contribute to the community by investing in public services, Magner said. Earlier this summer State Farm announced a $100,000 grant to help update antiquated technology in Richardson police cruisers.

“We have always been very focused on a strong community partner, and it was very clear early on with the city of Richardson that we were going to be able to strike up a really good working relationship and partnership,” said David Gwarda, State Farm assistant vice president of administrative services.

LEVERAGING DEALS

When courting a business to come to Richardson, Magner said the city employs a combination of tactics. In some cases those tactics include economic development incentives.

According to Jacobs, incentive agreements are handled on a case-by-case basis and based on an in-depth cost-benefit analysis that considers many factors, such as a company’s financial stability, growth prospects, ability to attract other similar companies, compatibility with Richardson’s existing business base, company culture and more.

Because Richardson is not a 4A or 4B city under the Development Corporation Act of 1979, a bill that authorizes cities to levy a sales tax to fund economic development corporations, Magner said incentive deals in Richardson often require a combination of strategies to rival neighboring
municipalities.

In 2015 the city of Richardson sought to incentivize software company RealPage to relocate its headquarters from Carrollton to Richardson.

By offering a 50 percent rebate on both real and personal property taxes, a 75 percent rebate on sales and use tax  sourced in Richardson, and waiving the building permit fee, Magner said the city was able negotiate a 12-year lease with RealPage for a 400,000-square-foot office space on Lakeside
Boulevard.

“None of those individually would have been significant enough in terms of the value they provided to the business,” he said. “It was the combination of those and our location and our product that stood out for RealPage.”

Since then RealPage has brought around 2,000 jobs to Richardson and is estimated to make $100 million in rent payments over the life its lease, according to city documents.

The city announced plans Oct. 8 to incentivize Texas Instruments to bring its $3.2 billion chip manufacturing facility to Richardson by approving a deal that would abate the company’s property taxes by 75 percent over the course of 10-15 years.

Richardson currently has three active abatement deals in place with Texas Instruments, Blue Cross/Blue Shield of Texas and Cisco Systems that total $52.4 million over the agreements’ lifetimes, according to city documents.

It also has $76.2 million worth of rebate deals in place with a variety of companies.

Richardson also offers superior land use and permitting processes, Magner said. An expedited building permit program and on-call inspection services for commercial businesses are often used as recruiting tactics, he said.

Still, some companies decide to do business in Richardson without an incentive, such as State Farm, which opened its 2 million-square-foot regional headquarters in CityLine in 2015. Today, State Farm is Richardson’s largest employer, with nearly 8,000 jobs added to the Richardson market thus far, Gwarda said.

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Olivia Lueckemeyer
Olivia Lueckemeyer joined Community Impact Newspaper in October 2016 and is the editor of the Richardson edition.
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