Dallas/Fort Worth’s office market has experienced some of the strongest leasing activity in its history and will continue to tighten through 2013 as job sectors that demand space lead to record expansion. Additions to local office inventory should more than double this year compared with 2012.
Meanwhile, pre-leasing has been steady, and its impact on the vacancy rate is predicted to be minimal. However, vacancy may start to inch up in 2014 as developers fill the pipeline with sizable speculative projects.
Far North Dallas has become a draw for major corporate relocations, and therefore a hotbed for office development. This is due in part to the area’s relatively affordable housing and well-rated schools. Space slated for delivery this year in Far North Dallas has been largely spoken for, but the area is also home to one of the largest speculative projects underway, a 342,000-square-foot office tower scheduled to become available in late 2014.
Office development has also increased in the Fort Worth area. That being said, near-term deliveries are expected to be light and limited to buildings less than 75,000 square feet, including some properties dedicated entirely for medical uses.
Looking at both quarterly trends and monthly updates, healthy employment growth is expected in Dallas-Fort Worth in 2013 with about 98,225 jobs created, representing a 3.2 percent increase in payrolls.
Office-using sectors will increase 4.7 percent, or by 38,000 positions. Total employment in 2012 increased 3.6 percent, while the office-using segment expanded 4.2 percent. Completions will total 2.6 million square feet in 2013, up from 1.2 million square feet in 2012.
As of midyear, approximately 80 percent of 2013’s new supply had been leased. Vacancy is forecast to be 18.6 percent by the end of 2013, which is an 80-basis point reduction for the year as compared to a decline of 120 basis points in 2012. Asking rents for available office space in the Metroplex will rise 1.8 percent to $20.17 per square foot in 2013. This marks acceleration from 2012, when office rents advanced just 1 percent.
Office transactions in Dallas/Fort Worth have increased about 40 percent over the past year as a hike in listings was met with heightened buyer demand. Anticipated sales trends include institutional investors and REITs targeting performing, high-credit Class A assets, while private buyers will maintain their focus on strong value-add plays or redevelopment opportunities in close-in submarkets.
— Timothy Speck, first vice president and Dallas regional manager, Marcus & Millichap Real Estate Investment Services