Wednesday, July 13, 2005

Downtown Dallas & Uptown Real Estate News

Downtown Dallas & Uptown Real Estate News

Dallas Office Demand Makes a Jump

DALLAS (DallasNews.com) - Jul. 1--After a slow start in the first quarter, demand for office space in the Dallas area has bounced back, with more than 1 million square feet of net leasing.

Of course, developers and building owners want more.

"I don't think things are as strong as they were at the end of 2004, but there are positive signs," said Matt Heidelbaugh, a director at Cushman & Wakefield of Texas Inc.

"Things are still not improving as fast as we thought they would."

Cushman & Wakefield's preliminary office market numbers for mid-2005 show about 1.2 million square feet of net leasing in the Dallas area. In the first quarter, net leasing was down about 85,000 square feet.

"We need to see more, but we will take positive absorption," said John Zogg, senior vice president of Crescent Real Estate Equities Co.

"It is consistent with what we are seeing in our buildings."

North Texas office leasing has a way to go before landlords can overcome about a 25-percent overall vacancy and raise rents, Heidelbaugh said Thursday.

"Rental concessions have dried up a bit, but it's still a tenants' market," he said.

That's especially true in places that are still losing office tenants.

The mid-cities, Arlington and even the hot Uptown and Turtle Creek office markets have lost tenants through the first half.

Other business districts that had seen big tenant consolidations and move-outs in recent years - including Las Colinas and Richardson's Telecom Corridor - came out on top of the leasing market. The Telecom Corridor alone accounted for more than half of the Dallas area's net leasing in the first half of 2005, according to Cushman & Wakefield.

The booming office districts at the north end of the Dallas North Tollway near State Highway 121 in Frisco and the Legacy business park have also had significant leasing.

"It certainly seems that way," said Greg Fuller, managing director of Granite Properties, which just broke ground for an office tower near the tollway.

"We have over 200,000 square feet of lease proposals out on our new building, which is a lot more activity than we had on our other two projects at this stage."

But businesses are taking a long time to do deals, he said.

"People aren't making choices quickly, and everybody scrutinizes their decisions."

So far in 2005, the increases in office leasing are in suburban buildings.

In the downtown market - which still has about a 30 percent vacancy rate - net leasing was down by a scant 468 square feet.

Citywide, the amount of sublease office space on the market has dramatically declined in the last year.

"Some of that space has been leased, and a lot of it has gone back into direct vacancy" as leases expired, Heidelbaugh said.