D-FW office construction surges as leasing grows

09/30/2013
By Steve Brown | Real Estate Editor
Dallas Morning News
 

Photo by Brad Loper of Dallas Morning News
The Telecom Corridor (R) is leading Dallas-Ft. Worth area office leasing this year. 
 

Dallas-Fort Worth office construction now totals five times what it did a year ago.

 

But the run-up in building activity so far isn’t outstripping the demand for office space in North Texas.

 

Almost 5.4 million square feet of office construction is underway in the D-FW area, according to a new report by commercial property firm Cushman & Wakefield of Texas Inc.

 

That’s the highest office construction volume since before the recession hit, and it’s approaching the pace of other recent building peaks.

 

“It’s been a number of years since we’ve seen something like this,” said Cushman & Wakefield executive vice president Bill McClung. “The amount of construction is not monumental, but it says something about the health of the market.”

 

Most of the office space under construction is in single-tenant corporate facilities.

 

The largest of these is the 1.5 million-square-foot, three-building State Farm Insurance campus, which is under construction in Richardson.

 

Another 2.4 million square feet of the office construction is in speculative, multi-tenant buildings.

 

“We have 17 speculative buildings; that’s a big chunk,” McClung said. “A lot of these buildings are the smaller ones.”

 

Fortunately for developers, office building leasing continues to grow in the D-FW area.

 

Cushman & Wakefield found that businesses so far this year have signed office leases for 12.3 million square feet.

 

And total occupancy in buildings has grown by about 2.3 million square feet — the greatest gain since 2006.

 

Expansions and new leases by companies including MedAssets, State Farm Insurance, Celanese, USAA Life Insurance, Vericrest Financial, Jacobs Engineering and other firms added to the office demand.

 

The net leasing gains don’t include some large rental agreements recently signed in downtown Dallas and other locations where the businesses have not yet taken occupancy of the space.

 

“A lot of those tenants haven’t moved in yet, so they are not counted,” McClung said.

 

Total net office leasing in D-FW is running about 15 percent ahead this year compared with the first nine months of 2012.

 

And overall office vacancy in North Texas has fallen to just over 18 percent — one of the lowest empty space measures in almost a decade.

 

“In some of the stronger markets like Uptown and Preston Center, we are seeing the rents move up,” McClung said.

 

Overall rents on first-class North Texas office space are now about 2 percent higher than they were a year ago, Cushman & Wakefield found.

 

Follow Steve Brown on Twitter at @SteveBrownDMN.

 

Top D-FW office leasing markets

Based on net leasing of office space during the first nine months of 2013, in square feet:

1. Telecom Corridor(R)

1,127,239

2. West Plano-Frisco

965,354

3. Las Colinas

687,236

4. Uptown-Turtle Creek

249,367

5. Preston Center

83,979

D-FW area total

2,325,404

SOURCE: Cushman & Wakefield of Texas

 
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