TEXAS SNAPSHOT, APRIL 2010

Tyler Office Market

Locally-owned financial institutions are keeping the Tyler office market moving. Underwriting guidelines are stiffer than they were before the recession, but the fact that money is still flowing in the market is a good sign.

“We’ve had a number of small buildings built, but they’re basically free-standing, one-story buildings of 10,000 square feet or less,” says Taylor Burns of Burns Commercial Properties. “Some of them are completely spec, and some of them are user buildings along with some spec space.” This activity is in the Old Jacksonville Road area near two master-planned communities being developed by Oak Properties. The development business isn’t  back, however; for that to happen, large banks would have to start lending too.

On the landlord side, leases are still being signed. According to Burns Commercial’s 2009 office report, total office occupancy sits at 86.5 percent, with slightly lower occupancy occurring downtown, and slightly higher occupancy experienced in suburban areas. Even with a large occupancy drop from the end of 2008 to the end of 2009, rental rates have remained steady — the average rate market-wide is $13.44 — and landlords have felt little pressure to make large concessions to tenants. The majority of the market’s office space falls into the Class B category, and these buildings are experiencing the lowest occupancy rates.

“There’s still deals being made with attorneys; the medical business is still good,” Burns says. “Tyler is a good, strong medical town for its size, and that sector has held up very well. Some things like insurance, real estate and those kind of services, that’s where the weakness has been.”

 For 2010, Burns anticipates seeing landlords scrambling to keep tenants in their properties. This may means that a month or two of free rent or other concessions will get put on the table in order to keep clients happy. Landlords will also renew their marketing efforts toward the medical users that are so prominent in the Tyler office market.

“The emphasis for the rest of the year from a landlord’s perspective is going to be on retention of existing tenants,” he says. “There are not likely to be many new tenants entering the market.”

— Jon Ross

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