Tuesday, August 02, 2005

Downtown Dallas & Uptown Real Estate News

Downtown Dallas & Uptown Real Estate News

Dallas Office Market
Readies for Job Growth

DALLAS (RealEstateJournal.com) - While many companies in the Dallas-Fort Worth area are hiring again and the area's business-friendly environment and low cost of living continue to draw companies and new residents, the region's office market remains the worst in the country and it isn't clear that will change any time soon.

The office sector's first-quarter vacancy rate, which fell slightly from last year, was still the highest of the 54 metropolitan areas surveyed by Property & Portfolio Research Inc. Office rents are expected to fall again this year, according to the Boston real-estate research company.

The fortunes of the increasingly diversified city -- hit hard by the tech bust and job losses in the telecommunications corridor north of Dallas -- appear to be improving thanks in part to a cost of living that is 2% below the national average. Job growth for the 12 months ending in March rose 1.8%, edging the national rate of 1.7%, according to consulting company Economy.com.

Among the companies moving to the area is engineering company Fluor Corp., which is relocating its corporate headquarters to Dallas from Southern California. Fluor expects to complete construction of its building in the suburb of Irving by April 2006; it plans to employ 200 people at the site.

The good news about job growth could be offset by slew of construction that will put 2.7 million square feet of office space in place this year and next with more down the road, PPR says. "We have a tendency in this market to start overbuilding before demand catches up with supply," says Daryl Mullin, senior director at Cushman & Wakefield of Texas Inc. in Dallas.

Houston-based Hines and Ross Perot Jr.'s Hillwood real-estate company plan One Victory Park, an 18-story building with approximately 350,000 square feet of office space, for the Uptown neighborhood of Dallas.

Developers counter that healthy job growth and the booming oil industry will boost demand for high-end offices in the city and suburbs. They point out that some parts of the area are doing much better than others. The vacancy rate in downtown Forth Worth is 9.4%, while in the Denton-Lewisville area to the north, the rate is 38.4%.

The Dallas central business district's vacancy rate stood at 28.3%, but that hasn't stopped two major office projects. Two Texas developers, Hines and Ross Perot Jr.'s Hillwood real-estate company, are teaming up to build One Victory Park, an 18-story building in the Victory District. The first of a two-phase, 800,000-square-foot project would be located in a 75-acre mixed-use area being developed by Hillwood near both the downtown central business district and Uptown. Already home to the $420 million American Airlines Center sports and entertainment complex, the district is slated to contain as many as 4,000 residential units and a W Hotel, a Starwood Hotels & Resorts Worldwide Inc. brand.

Further along in the development process is the $100 million One Arts Plaza, a 24-story tower, which broke ground Monday in the downtown Dallas arts district. It is to contain 425,000 square feet of office space and will house the new headquarters of 7-Eleven Inc. The complex will include luxury condos, restaurants and galleries and would be downtown Dallas's first new office building in about 18 years.

Lucy Billingsley, a partner in the Billingsley Co. which is developing One Arts Plaza, said all of the construction will revitalize downtown and boost demand rather than create a glut of space. "If there were only one developer and one office building that's interesting but it's not as significant as having multiple opportunities, multiple office buildings," she said.

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