Dallas Fort Worth has always been known for its low cost of living, ease of doing business and highly skilled labor pool. Its central location, great airport and low tax burden for both individuals and companies make it a very attractive place to do business. So its no wonder that so many companies have relocated or expanded in the region – Toyota, Samsung, Charles Schwab, Boeing and McKesson are just a few of the big names to do this in recent years.
The fundamentals of population and employment growth have remained stable, but the office market still has one of the highest vacancy rates in the country at 15% according to Costar, a commercial real estate research firm. Net absorption in the last 12 months was 4.4 million square feet. That’s pretty strong and would be great news if there wasn’t 10 million square feet currently under construction. Given that the new construction represents about 2.5 years of absorption, landlords should find it hard to push rental rates further.
Of course, there will be pockets of rent growth, but the overall region isn’t likely to see rent growth.
Costar says that DFW’s absorption of 4.4 million square feet of office space is the second most in the US. Even better, that leasing activity is spread throughout the downtown market and suburbs. But with the overall vacancy rate at 15%, rent growth has been steady. CoStar expects any rent growth to be due to new construction projects demanding high-end rates as well as several significant renovations doing the same for older properties.
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 that lease or buy office and warehouse properties.