Amid a struggling office market in Richardson and across North Texas, the CityLine development along US 75 in the city’s northern portion sold for nearly $250 million less in November than it did in 2016.

Robert Foltz, director of operations for Abacus-Jasper’s Restaurant Group, which has operated Jasper’s in the development since 2016, said he is concerned about what a new developer will do to bring vitality back to CityLine.

“We’re hopeful that CityLine will turn back into the business development envisioned in 2016,” Foltz said.

Initially, the restaurant served both lunch and dinner, Foltz said. However, a declining presence of office workers in the nearby offices resulted in Jasper’s ending its lunch service, which led to a $500,000 reduction in annual revenue, and reducing its staff, who are now focused on one dinner shift during operating hours.

“We had a few good shifts ... but could never hit the guest counts needed to break even,” Foltz said.

How we got here

CityLine sold for $580 million in November 2023 compared to its initial sale price of $822 million in 2016, according to data from commercial real estate information firm CoStar. The mixed-use development has over 2.5 million square feet of office space, and it sits on 186 acres in northern Richardson. It’s anchored by corporate tenants StateFarm and Raytheon, and includes over 2,200 luxury apartments, a hotel, and retail and restaurant space.

The overall investment for CityLine was estimated to be around $1.5 billion with construction on the initial phase completed in 2016.

CoStar Director of Market Analytics Bill Kitchens said market challenges, such as an increase in remote work and older buildings without desirable amenities, have led to high vacancy rates in Richardson and across North Texas that could continue climbing over the next three or four years.

“There’s really a disconnect between office-using employment and office demand,” Kitchens said.

As of November, office vacancy rates in Richardson are nearly 19%—up from 15.7% in 2019—compared to 18% across the North Texas, Kitchens said.

For restaurants like Jasper’s, this has reinforced the shift to reduce operating hours and costs, and maximize potential business, Foltz said.

“The development doesn’t have the population that it did before COVID[-19],” Foltz said.

Some context

In the event commercial values continue to decline and negatively impact Richardson revenues, City Manager Don Magner said there are three main streams the city could adjust: property taxes, sales taxes and franchise fees.

However, before raising any taxes on residents, which is viewed as a last resort, Magner said city officials would examine ways to reduce costs in other areas of operation.

“Time will tell what future action may need to be taken dependent on market forces,” Magner said. “We continue to monitor ... activity.”

Digging deeper

Kitchens said office buildings built in the 1980s and 1990s are not as desirable to buyers and could be candidates to be demolished if they are not leased again or redeveloped.

That has contributed to a large portion of vacancies in the city and across North Texas, Kitchen said. High interest rates, a lack of demand and waning rent growth is bringing down office values, he added.

“By and large, the buyer profile has shifted in favor of private buyers who have access to greater equity, and such is the case with CityLine,” Kitchens said.

What’s next?

Long-term tenant StateFarm has about 13,000 employees assigned to the CityLine hub who work both in the office and remotely, company spokesperson Angie Harrier said. She also said the company is not marketing any of its office space for subleasing.

Kitchens said he wonders whether StateFarm will renew its lease with CityLine’s new owner.

As of November, some of the land in CityLine is being developed to add more housing to the more than 2,200 apartments within the mixed-use development. For example, a 58-townhome neighborhood called The Commons at Spring Creek will be located off of Red Moon Way.

Allison Klingsick, a spokesperson for CityLine, said there are also plans to open up a new coffee shop within the development early next year. Foltz said he hopes more retail could be brought in by the developer along State Street.

“We think it would help drive foot traffic outside the business buildings above us,” Foltz said.