TEXAS SNAPSHOT, JUNE 2008

Dallas Office Market

Esquivel

Presently, the Dallas office market is remaining strong in the face of the negative national economic news. Leasing activity and velocity remains steady across the majority of Dallas’ submarkets. Currently, 2.9 million square feet of office buildings are under construction, and those same buildings are 49 percent leased. Overall, net absorption for Dallas was a positive 775,697 square feet for the first quarter of 2008 following 669,651 square feet of positive net absorption for the fourth quarter of 2007. 

The range for Class A rental rates in Dallas’ office market ranges from $32.03 per square foot in the Uptown submarket to $17.73 per square foot in the Stemmons submarket for multi-tenant buildings greater than 15,000 square feet. Vacancy rates for Class A, multi-tenant buildings larger than 15,000 square feet vary from 7.97 percent in Uptown to 24.88 percent in the Far North.

Eckert

The Far North Dallas and Uptown submarkets are seeing the most new office development. New development in the Far North has followed the path of the Dallas North Tollway with expansion first to Plano and now to Frisco. Access to excellent public school systems, newer housing and an abundance of retail are all reasons families elect to live in these two cities. Uptown is Dallas’ trendiest submarket and is home to the American Airlines Center (Dallas Mavericks and Dallas Stars), high-end condominiums and apartments, five-star restaurants, The Ritz Carlton and The Crescent Office Towers and Hotel.

In Uptown, Hillwood’s Victory development will continue to have a significant impact. The proposed parking deck that will be constructed over Woodall Rogers Freeway connecting the central business district (CBD) and Uptown will have a major impact on redefining Dallas’ core. Moving outward, office development in Frisco, with such developments as Frisco Square and Hall Office Park, will continue maintaining its ranking as one of the fastest growing cities in the U.S.

Currently, there is not one major tenant occupying the majority of the city’s office space. Dallas always will be a large-tenant market and home to many corporate headquarters locations. Dallas/Fort Worth has 24 corporate headquarter locations of Fortune 500 companies, making it second only to New York City.

In the near future, pay attention to the LBJ submarket because of the pending construction that will widen the main lanes of LBJ Freeway.  It is our understanding that transportation flow is to remain consistent with current conditions as four lanes each direction are to remain open at all times during the construction period. As with the High-Five and Central Expressway construction projects in years past, the LBJ Freeway widening will bode well for the bulls-eye of DFW real estate.  Similar to the High-Five construction project expect multiple general contractors to perform the work with significant incentives to complete construction early. 

— James Esquivel and Jeff Eckert are senior vice presidents in Jones Lang LaSalle’s Dallas office.

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