Behind the Deal: Why Uber Chose Artsy Area of This City for Major Regional Hub

Employees are moving into Uber Technologies' urban Dallas campus in an area known as an artist and entertainment hub that executives say may help with the company's recruitment. It's the final step in a process showing how national companies are choosing key office space.

Uber began shopping for real estate around the country, including in Phoenix, earlier this year and ultimately chose the Deep Ellum neighborhood of Dallas for a regional office that will serve as the ride-hailing company's second-largest hub for space and employees outside its hometown of San Francisco. The reasons behind its site selection include proximity to the rest of the country, the growth potential of local real estate values, tax incentives, a growing base of workers to hire, and the nearby location of other company facilities.

As technology companies from Google to Apple to Amazon take more real estate across the United States, commercial property owners and investors are analyzing what most appeals to these businesses to take advantage of that growth.

For Uber, a key consideration in its decision to pick Dallas was that it received government incentives valued at about $36 million that are reliant on Uber creating at least 3,000 jobs with an average salary of $100,000 by 2025. The incentives include the largest tax abatement deal ever made by Dallas County.

Uber said that it was only considering Dallas' Deep Ellum area, where there is not a lot of available office space and rents are comparatively cheaper than the city's nearby Uptown neighborhood. That site also positions the company inside the metropolitan area that has grown more in population than any other big city in the past decade.

The company considered Dallas because it offers some of the same qualities that inspire major Fortune 500 companies like McKesson Corp. to relocate to Texas from California. Those include the region's central location where it is known as a freight mecca, as well as cheaper expenses and the city’s ability to attract top talent, said Joe Beard, president and CEO of Westdale Real Estate Investment and Management, the developer of Uber's buildings.

Uber also has other facilities nearby, a key consideration in locating a major hub. In the Dallas area, Uber Elevate, the company’s aviation division, is building a skyport in in Frisco where it plans to host the first test demonstration flights in the world for Uber Air in 2020. The test comes as Uber is gearing up to offer commercial air passenger ride-hailing services using futuristic aircraft in 2023.

And Uber has already started hiring for the new Dallas office at The Epic with positions for Uber Eats, its food-delivery arm, and Uber Freight, the truck driver version of its core business, being advertised on job sites.

The Hotel Matters

For a technology company, unique accommodations play a role for sending the right message to guests and job candidates. The Epic mixed-use site includes The Pittman Hotel, a Kimpton branded 164-room hotel that once housed the historical Knights of Pythias Temple, which was the first commercial building in Dallas built by and for African-American professionals. William Sidney Pittman, a Dallas architect, designed it in 1916. The hotel played a key role in landing Uber, said Beard.

"For Uber, or any company with a big workforce, when you have people coming to town, they want hospitality options within steps of an office," said Beard.

The company has leased 618,000 square feet in two office buildings in Deep Ellum, just east of downtown Dallas. The lease includes 168,000 square feet at Epic I at 2550 Pacific Ave., where construction recently wrapped up, and 450,000 square feet at Epic II at 2500 Pacific Ave., where construction is expected to begin in the coming weeks.

Uber’s office buildings will include private terraces, a sky lounge with an amenity deck with views of downtown Dallas as well as ground floor retail space that will soon be anchored by the second U.S. location for Komodo, a restaurant and lounge developed by nightlife guru David Grutman that is known for its "Southeast Asian cuisine with a South Florida vibe," according to its website. Since opening in Miami in late 2015, Komodo has built a reputation in its hometown and is known for celebrity sightings.

Access to transportation is important. The Uber office at the Epic, an eight-acre, $600 million mixed-use development, is located near the Dallas Farmers Market and within 400 yards of the Dallas Area Rapid Transit rail station in the neighborhood. The light rail, which is the country's longest light rail line, stretching more than 90 miles in the sprawling region, gives Uber and its employees direct access to Dallas-Fort Worth International Airport.

Once the second Epic building is completed in 2022, Dallas will become not only Uber's largest employment center outside of its hometown of San Francisco, but also the company's second-largest hub, said Uber spokesman Travis Considine.

For years, Uber's second-largest hub has been in Chicago, where it recently signed a lease for 463,000 square feet at The Old Post Office building to consolidate and shrink its footprint. Once developed, the Dallas hub will be larger by about 155,000 square feet but Uber has hinted about further growth and announcements for the Chicago area.

"They've been one of the most aggressively hiring tech companies out there," said Jesse Gundersheim, a San Francisco market economist at CoStar, in an interview. "It appears they have been unable to satisfy the need for talent in San Francisco, even though they are among the fastest-growing companies in the last five years. By having offices in Chicago and Dallas, they will have multiple markets to harness talent."

Neighborhood's Growth Potential

Meanwhile, in San Francisco, Uber is tied with Google as the third-largest user of office real estate, with both companies owning or leasing 1.6 million square feet. It's a different situation in Dallas.

Another factor in choosing the Dallas site was that the area has property value growth potential. Deep Ellum was once an industrial neighborhood that became home to early jazz and blues musicians in the 1920s. In the next century, Deep Ellum ebbed and flowed with new generations finding their groove in a part of Dallas known for its counter culture. There are only two chain shops, a 7-Eleven and a Subway, in the neighborhood.

"We felt there was a demand for office space from this new generation and more creative types," said Beard, a longtime Dallas real estate executive and native Texan.

Westdale is the largest property owner in Deep Ellum, according to Beard, and owns about 350,000 square feet of historic single-story buildings, including two music venues, The Bomb Factory and Canton Hall.

The firm has converted projects into industrial-style lofts such as the former Ford Model T manufacturing plant, built in 1914 at 2700 Canton St., which is now the Adam Hats Lofts, as well as the Continental Gin Company complex, built in 1888, into loft-style apartments at 3309 Elm St. Last year, the August Family Partnership acquired the building to transform it yet again, this time, into a three-story office building.

Westdale expects to have more than 1,000 apartments in Deep Ellum with the existing industrial-style lofts, as well as two high-rise residential towers, including The Hamilton, a 26-story, 310-unit luxury residential tower at 2525 Elm St. expected to open early next year. “To make it a real neighborhood, you have to have all of the live-work-play components,” said Beard.

For the Record:

Phil Puckett, John Ellerman and Harlan Davis of CBRE represented Uber in the deal. Dennis Barnes, Tommy Nelson and Ben Davis of CBRE represented Westdale. Perkins+Will is the architect for Westdale on the two office buildings. Corgan, a Dallas-based architecture firm, is the interior architect for Uber's offices.