News
It’s no secret that the office market has seen its share of fluctuations since the COVID-19 pandemic. While some narratives have painted the sector in a dark light, Foundry tends to view the segment as far from one-dimensional. With a platform that combines both a large office operating platform across the Southeast with a sophisticated investment and development platform, Foundry looks at the segment from all sides. And from our perspective, the office sector holds opportunity.
Office + Conversion Creativity
One of the main ways the Foundry’s D&I team has found creative success with office properties that aren’t being utilized to their full potential, is through office-demo-to-industrial conversions. So far, Foundry has seen 11 of these conversions, with more coming down the pipeline.
Texas, in particular, has been a hot spot for office-to-industrial. Horizon Landing, a previously 287,000-square-foot vacant office building just outside of Dallas in Irving, Texas, was the first office-demo-to-industrial conversion completed by the Foundry team. Beyond just being the first, Horizon Landing has been a standout example of an industrial conversion for multiple reasons. Challenges can often arise with conversions, like zoning and rezoning, as well as potential push-back from surrounding residents. But with its proximity to the DFW airport, Horizon Landing didn’t face any of these issues, positioning it as a prime real estate conversion opportunity. The conversion to 336,000 square feet of Class-A industrial warehouses was completed in April of this year, and two out of three of the buildings have already leased.
Down the road in Plano, Texas, a 250,000-square-foot 1983 vintage office building was demolished to be converted into two Class-A industrial warehouses totaling 323,000 square feet. Despite tenant demand, warehouse supply has been scarce in Plano; the project will be completed in December of this year, helping fill this gap. And back in Irving, the Foundry team began demolition in September on 45,000 square feet of vintage 1981 office space to build 118,000 square feet of Class-A industrial, at 4250 Belt Line.
Texas conversions are set to remain strong heading into 2026. In the first quarter alone, several major projects will move forward. Ridgepoint in Dallas will close, with demolition beginning on 36,000 square feet of office space to make way for 100,000 square feet of industrial. Villa Creek, a 140,000-square-foot office property in the DFW MSA slated for conversion into 125,000 square feet of Class-A industrial, will also close. Meanwhile, construction will begin at Gateway Commerce Centre, transforming 125,000 square feet of 1998-vintage office space into 184,000 square feet of Class-A industrial.
Texas doesn’t stand alone though. Foundry’s second conversion project took place in South Florida, proving this strategy successful across the whole platform. Prior to demolition, Egret Point held a 126,000-square-foot medical office building, which has now been converted to 457,000 square feet of Class-A industrial. The shell for Egret Point was completed earlier this year – ahead of schedule and under budget. And a manufacturing tenant has already signed on to take 75,000 square feet.
“Conversions continue to be a popular strategy for us,” said Partner Jim Traynor, based in Foundry’s Dallas office. “They create access to more highly desirable infill locations.”
Foundry’s Development & Investments (D&I) team has also recently developed a focus on shallow-bay industrial – properties designed to service businesses, light manufacturers, and specialty distributors that support the local community within a few miles. And in Florida, the team is seeing success at Two Palms, a conversion project that will create more shallow-bay infill in East Tampa. When the project is completed, these 20 acres will hold 263,000 square feet of shallow-bay industrial space. The slab has been poured on the first building, with the other two buildings slated to be finished in 2026.
What makes this property particularly unique is that it will hold 12 spec offices throughout the three buildings on the property, an approach Foundry hasn’t taken before.
“Two Palms shows not only how needed shallow-bay is, but also how desirable it is to tenants to have spec offices built in,” said Partner David Kern. “These are trends we are continually seeing.”
Spec office has become a defining feature of today’s industrial developments. Of the last 25 Foundry industrial leases signed or in negotiation, 20 included spec office suites, and the remaining five already have plans or permits underway to build them. This overwhelming demand underscores a clear trend: far from being obsolete, office space remains a vital and highly desirable component within industrial assets—even in a post-pandemic market.
A New Strategy on Office
Just a year ago, the idea of buying any kind of office building might have seemed far-fetched. Yet today, Foundry sees a clear opportunity. “Office is experiencing a historic repricing,” said Managing Director Mark Holoman. “The asset values are readjusting at a rate we haven’t seen in a long time.”
With prices creating a unique entry point, Foundry is now seeking to acquire well-located properties at a time when the office market is entering a recovery phase. The approach is to inject new capital and reposition office assets in the market, leasing them up as a traditional office play. This approach is a natural extension of the “Foundry Advantage,” in which Services and D&I teams work hand-in-hand. Brokers on the Services side help to quickly screen and identify opportunities, while the D&I team brings the capital and execution expertise to acquire them as traditional office. In markets that are seeing leasing activity and Foundry has a presence, the depth of experience plus capital relationships will be key to unlocking new deals.
“Foundry has a strong track record in the office sector across all of our markets,” said Holoman. “It’s a strategy we’re excited to re-enter as we are seeing signs of a full-blown recovery in office. Repurposing and conversions to industrial remain critical strategies, but we are now watching the Class-A winners and paying close attention to hotspots of tenant demand.”
Tenant Demand for Office
Charlotte is one of the cities experiencing improved tenant demand in the office sector. Partner Meredith Ball cites a recent surge in larger deals, a welcome return since the slowdown stemming from COVID. Ball is seeing a flight to high-quality buildings and well-amenitized locations.
“Office tenants seem to have much more certainty around their needs and are generally focused on their employees being in the office,” she said. “They go wherever will be the best fit for their team and recruitment.”
Partner Gabe De Jesus echoed similar sentiments about Orlando; he says that return-to-office is in full swing, and where tenants end up is all about quality of both talent and physical space.
“We’re not really seeing tenants move from suburb to suburb,” he said. “We’re seeing them move from suburbs to downtown.”
De Jesus specifically cited Temenos, a tech company, that recently moved from 4,000 square feet in the suburb of Lake Mary, to 23,000 square feet in the Fulcrum building in downtown Orlando. They made the move for better reach to talent in a building that increases their efficiency.
“We just saw a law firm renew 120,000 square feet in the CBD [central business district] in Charlotte,” added Ball.
She noted that, beyond talent, Class-A quality, and accessibility, office tenants are increasingly drawn to spec suites, a trend the D&I team has also been seeing, as mentioned earlier. While convenience and quality remain top priorities for today’s occupiers, the office sector is definitely experiencing a resurgence, with demand beginning to rebound even in central business districts.
Whether through conversions, repositioning, or anticipating tenant needs in traditional leasing, Foundry Commercial’s advantage in the office sector lies in its ability to think creatively and deliver solutions that align with the evolving market.
Working together as one platform, Foundry Commercial has proven that office means one thing in today’s CRE landscape: opportunity.