Tuesday, March 31, 2015

D-FW office construction up by 50 percent from 2014

Almost 9 million square feet of office space is now being built in North Texas.  (Nathan Hunsinger/The Dallas Morning News)
Almost 9 million square feet of office space is now being built in North Texas. (Nathan Hunsinger/The Dallas Morning News)
North Texas office construction has soared to the highest level since the 1980s.
More than 8.8 million square feet of office space is now being built in the Dallas-Fort Worth area – about 50 percent more construction than a year ago.
The office boom has grown to include 28 buildings – most of which are under construction in Dallas’ northern suburbs and in the Uptown area, according to a new report by Cushman & Wakefield Inc.
About a third of the office projects underway in the D-FW area are for specific corporations.
And almost 60 percent of the total office space being built in the area is already rented to tenants.
That’s different than in previously construction booms when most of the office development didn’t lease until projects were completed.
“This cycle has been a little different and we are seeing economic growth that continues to drive office use and companies continuing to look at the D-FW market,” said Cushman & Wakefield executive vice president Rick Hughes. “There is a larger demand for office space today than we saw in the past when we had overbuilding.
“I think it will be a while before we need to start worrying about that again.”
Almost half of the office space being built in North Texas is in the West Plano and Frisco market where new corporate campuses are under construction for companies including Toyota Motor, FedEx Office and the Dallas Cowboys. Developers are also putting up several multi-tenant office projects in those areas.
Construction also remains high in the Telecom Corridor where State Farm Insurance and Raytheon Corp. will have office developments underway.
And more than 1.2 million square feet of office development is in the pipeline in the downtown Dallas and Uptown area, according to Cushman & Wakefield.
Even with all the new construction, office vacancy rates in North Texas continue to fall – dropping to less than 17 percent in the first quarter.
Office leasing in the first quarter was down sharply from a year ago with only about 590,000 square feet of net leasing recorded in D-FW.
But Hughes said many large office transactions which were signed in late 2014 and 2015 won’t be counted as leases until the companies actually occupy the space later this year and into 2015.
Among the largest leases so far in 2015 were deals for companies including GE Capital, NEC Corp. of America, CEC Entertainment (Chuck E. Cheese) and Huckabee & Associates, Cushman & Wakefield said.
“There are still some very large companies out there giving thought to moving significant portions of their corporate infrastructure here,” Hughes said.
Major employers including Chase Bank, TD Ameritrade, Liberty Mutual and Verizon are said to be scouting the area for large blocks of office space to rent or build.
Downtown Dallas continues to attract large office leases. In the first quarter, net leasing downtown totaled about 260,000 square feet – second only to Las Colinas in total transactions.
“Downtown is still the value play for office tenants,” Hughes said.
Steve Brown, The Dallas Morning News