Tuesday, June 24, 2014

Exclusive: A sneak peek at JLL's latest Dallas office data


uptown construction

Dallas-Fort Worth's real estate market has seen some big increases in leasing activity and rental growth; in particular, the "tight" submarkets like Uptown and Preston Center.

Or that's the story from the preliminary numbers complied by JLL's research experts Walter Bialas and Steve Triolet.

"All the submarkets besides Stemmons is seeing growth and upward pressure on rents," Triolet told the Dallas Business Journal in an exclusive interview and preview of their statistics. "The key question is, 'How long will this last?' Especially with the new construction underway."

Uptown and Preston Center are bordering the invisible vacancy line of 10 percent that has developers deciding to bring new office towers to the market, he told me. For the second quarter of the year, Preston Center had an 8.3 percent vacancy rate, with Uptown's vacancy hitting 10.4 percent, according to JLL research.

Richardson and far North Dallas were following on the heels of those two submarkets with vacancy rates of 14.9 percent and 15.9 percent, respectively.
Overall, Dallas' lease rates have escalated, with an average lease rate in Dallas of $22.29 per square foot through the second quarter of 2014, according to the research. That is driven by the market's leasing activity. Year-to-date, Dallas absorbed 722,804 square feet of office space.

One of the submarkets with the highest vacancy rate is the Stemmons submarket, which took a big hit when Santander Consumer USA Inc. (NYSE: SC) decided to move its headquarters and nearly 1,400 employees into Thanksgiving Tower in downtown Dallas.

Right now, the Stemmons submarket is 27 percent vacant. That could change after the October lifting of the Wright amendment at Dallas Love Field, which sits in the submarket, Bialas said. But that may take a few years.

"The changes of the removal of the Wright amendment will bring about some big changes in the next five years, not the next year or two," Bialas told the Business Journal. "It will take longer than that."

Historically, Dallas has violated the imaginary 10 percent rule, building new buildings before a submarket has hit the threshold, Bialas said.

"We have some submarkets with historic low vacancy rates, which is why there's so much construction going on right now," he told me. "But even with new space being delivered by developers, there's not a lot of big blocks of space available for companies coming into the market."

Candace Carlisle- Dallas Business Journal