Dallas Galleria Tower Sold to WS Development

The enduring popularity of suburban Dallas office markets proves itself again with the sale of an office property in the Dallas North Tollway corridor.

Boston-based WS Development purchased the property from a fund owned by the Iowa Public Employees Retirement System. Dallas County records show that WS borrowed almost $63.4 million from Athene Annuity & Life Company to buy the property, or about $161 per square foot.

The property last changed hands in 2014 for $86 million, according to an SEC filing.

The 16-story, 395,000-square-foot office building, at 13737 Noel Road, is just north of the intersection of Interstate 635 and Dallas North Tollway. It was built in 1998, and it’s about 65 percent occupied. Several floors are vacant. Notable tenants include Insperity and Manheim Investment.

Amenities at Galleria North Tower I include a gym, a cafe and an outdoor courtyard. CBRE handles leasing at the property.

The transaction reflects investor interest in the Dallas North Tollway corridor. Asking rents in the area average $34.68 per square foot, compared to the overall average of $31.34 per square foot, according to Partners Real Estate.

In addition to the Galleria North Tower I sale, the Crossings, at 5429 Lyndon B. Johnson Freeway, recently traded. Skywalker Property Partners bought the 10-story, 233,000-square-foot building. It was 94 percent leased at the time of sale. The Crossings was built 12 years before Galleria North Tower I, but it was renovated in 2018.

Amazon also recently signed a five-year lease at the nearby Two Galleria Tower.

Despite the strong leasing and sale activity, the submarket suffers from the same bifurcation problem that seems to plague every office market. Companies’ desire for newer buildings with slick amenities has left older inventory with high vacancy rates.

In Far North Dallas, Class A properties saw 309,581 square feet of absorption, while Class B properties suffered negative absorption — that is, more move-outs than move-ins — to the tune of 173,998 square feet, according to Partners. The 29 percent total vacancy rate of Far North Dallas exceeds the rate of every DFW submarket except for the Central Business District, which chalked a 33 percent vacancy rate in the first quarter.