Last week I saw a headline that read “The DFW Office Market Rebound is Underway”. This made me scratch my head – listen to Jan and me discuss why on today’s podcast.
The article I quoted was a Cushman & Wakefield second quarter report and it quoted one of their tenant rep brokers as saying, “While absorption numbers were negative for the second quarter, the DFW office market rebound is underway, and activity has picked up significantly in the last 30 days”. Thus the reason for the head scratching – the article went on to say that according to the firm’s data, net absorption was negative 895,503 SF with Class B space accounting for 762,004 SF of that negative absorption. Other stats from the report:
- 1.2 million SF of new construction came on line in the second quarter with 4.6 million SF of office space still under construction
- The vacancy rate in the second quarter was 22.1%
The article followed this with a quote from one of their leasing agents: “We’ve seen a steady increase in activity since the first quarter, and we expect it to continue through the end of the year. Companies are coming back to the office in full, and those that did short-term deals are back out in the market ready for longer-term commitments. Dallas is in a very good spot right now”. I’m not so optimistic.
I normally look to CoStar for market stats. Here’s how their numbers compare to what C&W is saying:
- 5.3 million SF negative absorption in the last 12 months – 5 quarters in a row
- Total activity averaged 25.8 million SF 2017-2019 (17.8 million SF in 2020; 3 million SF in Q1, 2021 – 12 million SF pace
- Sublease space is still at 9.3 million SF – stable
- Construction 4.2 million SF delivered in last 12 months – 7.1 million SF underway
- 18% vacancy – 3% subleases available
- Rental rates fell 0.2%
OK, crystal ball time again….I don’t see the basis for a headline like DFW office market rebounding. I still think companies overall will continue to shed space. That should keep downward pressure on rental rates. We aren’t seeing them fall much, however.
Bob Gibbons is a Real Estate Advisor & Tenant Advocate (also known as a tenant rep) with REATA Commercial Realty, Inc. which is a tenant advisory firm based in Plano, Texas. Bob serves companies in Plano, Frisco, McKinney, Allen, Richardson, Addison, Dallas and the surrounding areas and specializes in companies which lease or buy office and warehouse properties.