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Market News and Trends
We were pleased to see positive office space absorption in Dallas in 2009. After two quarters of negative CoStar stats, 561,000 SF was absorbed in the 4th quarter. Full year absorption totaled 601,000 SF. CoStar reports this same trend nationwide. The Dallas CBD office sub market took the biggest hit with 522,000 SF of negative absorption. It’s no surprise that Far North Dallas was the big winner with 677,000 SF of net leasing, with most of this positive absorption occurring in Legacy/North of Highway 190.
The feedback we started to receive from tenants in the 4th quarter is that they feel confident that they have completed most of their staff reductions and that they are ready to look longer term. As a result, companies are beginning to commit to longer terms (5 to 10 years) with their lease obligations. This trend has also been assisted by the fact that tenants feel the market is nearing the bottom and they are able to lock in their lease at lower rents.
From CAPSTAR Commercial’s perspective, the bottom of the market is yet to be realized. However, our firm closed over 1,025,000 SF of new leases in the 4th quarter that will result in positive absorption this year. Since the new year began, tenants of all sizes are beginning to re-enter the market. Prospect and broker calls have increased resulting in new building tours and RFPs. Proposals moving to leases have followed. Other leasing agents, space planners and general contractors report a slight increase in activity.
But even with these encouraging signs/leasing activity, the office market remains very competitive. Class A buildings located “in the fairway” are getting most of the play as long as their landlords are solvent and will be aggressive in their deal pursuit. Buildings “in the rough” are fighting fiercely for deals. And buildings located “out of bounds” are most challenged, no matter how much lipstick has been applied.
We are seeing a higher level of demand from the small to mid-sized tenants. Many have postponed a lease decision as long as possible while they assessed their industry and company’s future. Spec or lease ready suites are most popular with tenants looking for less that 3,000 SF and building owners that have spec suites should begin seeing success with their leasing efforts. While spec suites were prolific in 2009, many have been leased and the inventory has been stifled by lender constraints on tenant improvements for these expensive suites. |
Leases
• EFG signed a 126-month renewal at 122 West John Carpenter in Las Colinas. Rumored economics of the 38,000 SF lease were $16.00+E with $12.00/SF in TI and 6 months free rent
• LBJ Infrastructures represented by Nathan Orbin, signed a 42-month, 17,547 SF lease at The Centre in Far North Dallas. The tenant will pay $13.93 F/S effective and receive $12.00/SF in TI with no free rent.
• Global Knowledge signed a 15,000 SF renewal at 122 West John Carpenter in Las Colinas. The Tenant signed a 91-month lease for $17.00 + E effective with $20.00/SF in TI and 7 months free rent.
• Sedgewick CMS signed a 11,954 SF lease at Custer Court in Richardson. The effective rental rate for the 67-month lease was $17.46 + E effective with $13.92/SF in TI and 7 months free rent.
• Gramercy Insurance represented by Cresa, signed a 66-month, 6,222 SF renewal at 5000 Quorum in Far North Dallas for $15.43 +E effective with $14.66/SF in TI and 5 months free rent.
• Rummer Medical Devices represented by NAI Robert Lynn, signed a 5,500 SF lease at 1130 East Arapaho in Richardson/Plano. Rumored economics for the 65-month lease were $12.74 +E effective with $17.25/SF in TI and 5 months free rent.
• DeviceFidelity represented by Jones Lang Lasalle, signed a 5,468 SF new lease at 2201 North Central in Richardson/Plano. Economics for the 48-month lease were $14.10 F/S effective with $4.00/SF in TI and 6 months free rent.
• Botsford Group signed a 3,606 SF renewal and a 1,588 SF expansion at 2611 Internet in Hall Office Park in Far North Dallas. Rumored economics for the 22 and 36 month deal were $19.00 + E and $18.67 +E effective with $4.00/SF in TI on the expansion space only. No free rent was given.
• Morgan Keegan represented by Jones Lang LaSalle, signed a 3,900 SF lease at Granite Park III in Far North Dallas. The 126-month new deal was $25.15 + E with $42.50/SF in TI and 6 months free rent.
• Granite Advisors Holdings LP represented by Lance McIlhenny signed a 3,650 SF renewal at Sherry Lane Place in Preston Center. Economics for the 48-month deal were $32.63 + E effective with $18.00/SF in TI and 2 months free rent.
• MedAssets signed a 3,588 SF renewal at Eastside Centre in Richardson. The effective rental rate for the 60-month lease was $21.60 + E with no TI and no free rent.
• Stonebridge Acquisition signed a 3,303 SF renewal at Quorum North in Far North Dallas. Economics for the 64-month lease were $15.70 + E effective with $16.67/SF in TI and 4 months free rent. |
Deals in Play
• Met Life Bank NA represented by Steve Thelen with Jones Lang LaSalle, is in the market for 200,000-250,000 SF in Las Colinas or Far North Dallas.
• Josh White and Kelly Kackley with Jones Lang LaSalle are in the market with an Undisclosed Corporate Relocation for 200,000 SF of office space.
• Advanced Healthcare represented by Andy Leatherman with Jones Lang LaSalle, is in the market for a 90,000 SF requirement in Uptown. This prospect is currently located in Citymark.
• Global Printing represented by Grubb & Ellis, is in the market for 100,000 SF. The prospect is focused on areas west of Las Colinas.
• Protection One represented by David Cook with Stream, is in the market for 50,000 SF in Las Colinas.
• General Electric represented by Cushman & Wakefield, is in the market for 40,000 SF of call center space along the Tollway.
• INX represented by Chelby Sanders and Steve Thelen with Jones Lang LaSalle, is in the market for 40,000 SF of office space in Las Colinas or Lewisville. The timing on this headquarter relocation is June 2010.
• AHC represented by Jeff Ellerman with CB Richard Ellis, is in the market for 35,000 SF of office space in Las Colinas.
• USIG represented by Matt Heidelbaugh with Cushman & Wakefield, is in the market for 35,000 SF in Las Colinas. Timing for this prospect is 3rd quarter 2010.
• OmniPlan represented by Bill Cawley with GVA Cawley, is in the market for an 18,000 SF requirement in Uptown
Investment Activity
• The 1.58 MSF, 3-building Lincoln Centre is currently being marketed for sale. Offers are rumored to be coming in at $110 to $115/SF. It is uncertain whether the building will actually trade hands as these numbers may be lower than what the owner would like to receive for the project.
• There has been much talk lately about the possible wave of office building foreclosures coming in 2010. While there is certainly much stress in the market, most buildings are paying their bills and mortgages. Vacancy rates are holding steady and tenant bankruptcies are few, so most owners and lenders are “playing nice” for the moment as long as the landlord is paying toward their mortgage and is a good operator. |
