Vacancy-Plagued Preston Plaza Tower Hitting the Market, Like Many Empty Dallas Office Buildings

A Far North Dallas office tower facing low occupancy is hitting the market rather than continuing to subsidize operating losses, local news outlets reported last month. It’s one of many emptying office buildings across Dallas feeling the strain on commercial office real estate.

The Preston Plaza office building, located near the southeast corner of Preston and Frankford, is a 10-story tower with retail and office space in place, and a five-story attached garage for tenants. It was built in 1985 — likely when luxury single-family neighborhoods were going up nearby — and renovated in 2015.

Tanglewood had been “covering shortfalls” at the 10-story office tower at 17950 Preston Road, according to Morningstar Credit data, but “is no longer interested in taking losses at the property, and a receiver appointed in February has hired a broker to market the 259,000-square-foot property for sale,” the Bisnow article states. 

It was 91% occupied in 2017 when Houston-based Tanglewood Property Group acquired the building, Bisnow reported. By September 2023, when the property defaulted on mortgage payments and K-Star Asset Management took over as the special servicer, the occupancy rate had fallen below 65%.

Twelve “four-star office spaces” are listed as available on Loopnet, but nothing about the building being for sale yet.

The tower is not to be confused with the boutiques and restaurants at the Plaza at Preston Center.

Plagued by Office Vacancy

Dallas was the second-most-vacant office market in the nation in Q1 among large metros, with Houston listed at No. 1 and Austin ranking No. 3, according to Moody’s Analytics. The issue worsened in the second quarter, which saw vacancy tick up 30 basis points to 26.6% quarter-over-quarter, according to a JLL report.

According to Tom Metcalfe, commercial real estate broker, Dallas has approximately 300 buildings that are sitting vacant during this episode of Dallas Dirt. Here’s a short clip:

Experts had surmised that office occupancy in some areas never fully rebounded after the COVID-19 pandemic, when the majority of the workforce was clocking in from the couch. 

However, CandysDirt.com reported in December that “companies are seeing the benefits of having workers back in the office, or at least having the option of having their employees work a hybrid schedule instead of solely in a home office, sometimes several states away.”

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What We Know About Preston Plaza

Preston Plaza was reportedly financed by a $27.7 million loan originated by Deutsche Bank and made through Wells Fargo Bank, according to the Dallas Business Journal, which noted the July 15 loan balance stood at $25.8 million. The story said the last appraisal on Preston Plaza, conducted in 2017, came in at almost $42 million. 

“Built in 1986, the building’s largest tenant is Slater Mastil,” the Bisnow article states. “The international law firm expanded its lease to 27,000 square feet in 2016. Goldman Sachs affiliate The Ayco Co. [leased] about 26,000 square feet, while smaller spaces are held by Risk Transfer Partners, CIM Commercial Trust, and Texas Health Surgery Center.”

Several of those leases expire either this year or next, leaving the property owner in a financial dilemma.