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Thursday, July 02, 2015
Office rents reach all-time high as companies eye DFW
Office rents for Class A space in Dallas-Fort Worth rose 3.4 percent year-over-year reaching an all-time high of $27.12 per square foot in the second quarter, according to the latest Cushman & Wakefield research.
Overall, office rents across all classes in the region rose 4.4 percent to $22.13.
The rental rates in North Texas have grown as a result of companies continuing to look at the region as part of their site selection processes, Cribb Altman, senior director of brokerage at Cushman & Wakefield's Dallas office, told the Dallas Business Journal.
"We expect demand for office space to remain strong through the end of the year," Altman said. "Summer is typically a slower period, but activity has still been very good.
"We are starting to see some of the vendors for these large corporate relocations coming into the DFW market needing space," he added.
The North Texas office market has been bolstered by decisions from Toyota and State Farm to open major headquarters and hubs. In the second quarter, the region also landed Kubota Tractor and Farmer Brothers Coffee.
Other relocations are expected in the future, he said.
The leasing velocity also increased in the second quarter totaling 3.9 million square feet of office space, which is roughly the same as the second quarter of 2014. That absorption is 10 percent higher than the 10-year second quarter average of 3.6 million square feet of space.
The North Texas vacancy rate fell to 16.4 percent. Although, three submarkets in the region reported rises in vacancies caused by higher rents, which include Turtle Creek-Uptown and Preston Center.
Even as vacancies increase, Altman said researchers don't expect rental rates to fall significantly because of the strong demand for space in those submarkets.
Currently, there is 6.2 million square feet of office space is under construction, including 23 speculative office buildings totaling 3.5 million square feet of space and nine built-to-suit projects totaling 2.7 million square feet of space.
Researchers expected nearly 3.8 million square feet of construction to be delivered by the end of the year, but heavy rains and flooding during the second quarter has delayed work on some of those projects.