Saturday, April 04, 2009

CBRE: New space could impact vacancies

The first quarter of 2009 was both positive and negative for the Dallas-Fort Worth office market, with the area recording net absorption of 1.7 million square feet as the national economy began to take its toll in North Texas, according to a new “MarketView” report from commercial real estate firm CB Richard Ellis.

In terms of net absorption, Dallas-Fort Worth outperformed expectations, CBRE said.

Net absorption measures the amount of square feet leased in a market after subtracting the amount of space vacated during the same period.

While absorption exceeded expectations according to data from Real Capital Analytics and office sales leasing totaled $1.7 billion in the past 12 months, CBRE’s report says concerns remain over the high volume of speculative real estate space under construction in the D-FW market. Specifically, with the total vacancy rate down in the first quarter, CBRE’s report comments on how the balance of more speculative space will impact the area’s overall vacancy rate.

CBRE cites the Far North Dallas submarket as an example, saying 500,000 square feet of office space is under construction in that market, less than 3 percent of which has been pre-leased.

CBRE commented on this phenomena in its report saying: “In recent quarters, the completion of vacant new office space has reduced or negated the benefits of positive net absorption.”

The submarkets that experienced the most absorption in the first quarter included Far North Dallas, the Fort Worth Central Business District, Stemmons Freeway and Las Colinas. Meanwhile, the Central Expressway submarket experienced the largest amount of negative net absorption — a situation that is attributed to AIG’s decision to leave the submarket for the Dallas Central Business District, CBRE’s report said.

During the first quarter, office rental rates also fell, with the average rate hovering around $19.18, which is 21 cents below the fourth quarter rate of $19.39.

Dallas Business Journal