Torrey Littlejohn, JLL
Dallas/Fort Worth has experienced unprecedented growth over the past few years, and we have all the fundamentals in place to continue this growth.
Since 2005, we have added more than 600,000 jobs to the region. That’s a whopping increase of 21 percent! The current outlook is for growth to continue at these levels. In fact, by 2030 population in our region is expected to hit 9 million, an increase of 2.1 million new residents. From a real estate perspective, these fundamentals will fuel demand across all property types for the foreseeable future.
More importantly, DFW has evolved into one of the most balanced economies in the U.S. and has created the “perfect storm” for our continued, steady growth. In addition to our central location, key drivers include our diverse employment base, deep roots in technology, low cost of doing business, pro-growth philosophy and affordable housing.
For a comparison to the rest of the country, office absorption in Dallas has paced ahead of most U.S. markets in the last few years. In the first quarter of 2015, Dallas made up almost 30 percent of the national net absorption among the 50 largest U.S. markets JLL tracks.
While a large proportion of this share was State Farm taking occupancy in its new corporate headquarters in Richardson, it still underscores the strength of Dallas’ economic engine. Over 7.2 million square feet of space is in Dallas’ office construction pipeline. Although this may seem high, it includes several large corporate build-to-suit facilities for the likes of Toyota, FedEx, Raytheon and Liberty Mutual.
JLL is also tracking potential “future” office demand of over 19.6 million square feet of space tenants are actively exploring for relocations or expansions. In short, DFW is on fire as evidenced by the return of the “state bird,” the construction crane, as office, multifamily and industrial properties are being developed.
The recently announced relocations and/or expansions of major companies underscore the attractiveness of the Metroplex. Although this activity has benefited the entire region, there are three submarkets that stand out: Las Colinas, Far North Dallas and Richardson/Plano.
Common characteristics in all of these markets include high tenant diversity in established job centers, a diverse workforce from an economic standpoint at the submarket level, superior regional access as well as public transit to serve current and future needs in Las Colinas and Richardson/Plano, additional developable land, a wide range of housing styles and prices, and access to good schools.
Since 2011, these submarkets have experienced the most demand, with Richardson/Plano and Far North Dallas experiencing more than 3 million square feet of total net office absorption, followed by Las Colinas with 1.5 million square feet.
Going forward, population growth will continue to fuel submarket growth along existing development corridors, benefiting the northern suburbs of the Far North Dallas and Richardson/Plano submarkets, as well as infill in established areas like Las Colinas.
Las Colinas
The foundation for Las Colinas was laid in the 1980s as it became one of Dallas’ first edge cities. This submarket has the most Fortune 1,000 headquarters in the region, and as office tenants look to find space and value this market will continue to perform well.
Over the past three years, Las Colinas has been one of the most improved Dallas submarkets from a vacancy standpoint. The construction pipeline has begun to ramp up with some recent deliveries and an additional 600,000 square feet currently underway, the majority of which are various projects in the Cypress Water development. 7-Eleven and Nationstar Mortgage are new corporate tenants in the market, absorbing over 600,000 square feet collectively.
These new projects, along with easy access to DFW International Airport, Dallas Love Field and DART rail, we believe will provide long-term momentum for the submarket. The City of Irving also has a standing commitment to density and urbanization, which will contribute to the success of recruiting and retaining key corporations.
Far North Dallas
Far North Dallas is a very diverse submarket that includes long-established office hubs as well as hot new and emerging locations like Legacy and Frisco.
Its key locational feature is its above-average accessibility from the Dallas North Tollway. This major roadway — and its ongoing extensions — have positioned this submarket as an important growth corridor. The area is the fastest growing submarket and has performed well over the recent years.
In 2014, 1.9 million square feet was completed in Far North Dallas and an additional 4.3 million square feet is currently underway. More than half of the new development is made up of build-to-suit projects. The following recent relocations and announced expansions are fueling the growth in this submarket: Toyota, FedEx, Liberty Mutual and the Dallas Cowboys. These exceptional office dynamics also set the stage for additional retail, hotel, multifamily and residential development over the foreseeable future.
Richardson/Plano
Born as the “telecom corridor” in the late 1990s, Richardson/Plano continues to be in the path of Dallas’ northern suburban expansion.
The submarket has enjoyed one of the region’s most improved vacancy rates and above average office absorption as users have found good rents and proximity to ample and diverse housing options for their workers.
In the first quarter of 2015, largely due to the completion of Phase I of State Farm’s new build-to-suit campus, Richardson/Plano recorded 1.5 million square feet of positive net absorption.
Due to its solid location, the submarket continues to reinvent itself from its original telecommunications-centric focus and is now a much more diversified submarket that remains attractive to many industries.
— By Torrey Littlejohn, vice president, JLL. This article originally appeared in the June 2015 edition of Texas Real Estate Business.