The North Texas office market is exhibiting no signs of a slowdown. To the contrary, the region continues to expand, with 3.6 percent year-over-year employment growth. That’s 120,000 jobs added in the last 12 months, and it all points to ongoing demand for office space, say analysts at CBRE.
For the 24th consecutive quarter, the firm reports, DFW recorded positive net absorption, totaling about 1.3 million square feet for Q2 2016 and about 2.9 million square feet for the first six months of the year. Far North Dallas continues to lead the way, with 460,000 square feet of absorption for the second quarter. The LBJ Freeway and North Central Expressway corridors performed well, too. Analysts say those markets could be seeing overflow demand from tenants along the Dallas North Tollway and in Uptown, where space is dwindling and rents are rising.
Office vacancy dropped from 18.1 percent to 17.5 percent for the quarter, with about 4 percent of that in the form of sublease space. Overall, Class A rents grew by 1.1 percent to $29.33 per square foot; Class B rents grew by an impressive 4.5 percent, to $19.39 per square foot.
Building Boom Continues
Developers are doing their best to meet demand. Five Class A office projects were completed in the second quarter, totaling about 700,000 square feet. Meantime, six new projects totaling more than 900,000 square feet broke ground. This brings the market-wide total to 7.5 million square feet under construction, with about 52 percent of the space already spoken for.
Activity is especially brisk in Far North Dallas, Uptown, and Richardson, where 70 percent of all new construction is underway. Notable projects include McKinney & Olive and Park District in Uptown, along with Liberty Mutual’s twin-tower build-to-suit at Legacy West in Plano.
Although owner-occupied projects aren’t included in CBRE’s construction numbers, the firm notes that seven such projects totaling 2.7 million square feet are under way. That brings the market-wide total to 10.2 million square feet—not far off from activity in Manhattan, which had 11.4 million square feet underway at mid-year.
Top office trades for the quarter include KPMG Plaza at Hall Arts, which sold to Hanwha Life (474,000 square feet), Overton Centre, which sold to Fine Line Diversified Development (447,917 square feet), and 9400 NCX, which sold to the Dallas Independent School District (386,617 square feet).
