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Market News and Trends
Dallas submarkets absorbed 3.1 million SF of office space for 2008. This was welcomed news as the 4th quarter experienced approximately 1 million SF of positive absorption.
Trends for 2009 will include: reduced absorption and lower rental rates; shorter terms for new leases; landlords restructuring existing leases to accommodate downsizing tenants; tenants securing shorter renewal terms providing flexibility and avoiding relocation expenses; and landlords attempting to secure tenants with minimal capital investments.
According to the figures released by the U.S. Bureau of Labor Statistics on January 6th, Dallas and Houston had the highest employment rates in the nation. From November 2007 to November 2008, Dallas-Fort Worth added 35,100 private-sector jobs while Houston added 42,400.
The Texas Workforce Commission estimates that 2009 will generate more than 25,000 jobs. However in a report released by the U.S. Conference of Mayors indicated that they expect to see a rise in unemployment from 5.5% to 6.9% by the end of 2009.
According to the Foreclosure Listing Service dated December 4th, 2008, 2,000 Dallas-Fort Worth commercial properties were threatened with foreclosure, about a 30% increase from the 2007 total. The majority of foreclosures consisted of development land while only 4% of total property foreclosure was commercial (office, retail, industrial or apartments), with the smallest portion comprised of office buildings.
The five year LBJ reconstruction should begin mid-summer 2009. Proposals to rebuild eight lanes of LBJ Freeway and six new toll lanes were due January 21st.
In the "2009 Green Outlook" study by McGraw Hill, green buildings were said to be "insulated from the recession and growing in spite of the market downturn." Green construction has increased to $49 billion, from $10 billion in 2005.
Leases
• RESQdebt signed a 82,223 SF lease in the Cornerstone Crossing Corporate Office Park off of North Central Expressway and Ridgemont Drive in Allen, with plans to move in February. The 60 month lease rates were rumored to be $16.95 +E (Phase I) and $16.65 +E (Phase II). RESQdebt was represented by Jon McNeil at Jones Lang LaSalle.
• The Planet, a data center company represented by Jackson Cooksey, leased 86,000 SF of warehouse space at 1700 Summit Avenue in Southeast Plano. They are planning to spend $50 million over the next 4 years to create a co-location and web-hosting facility that will employ 100 people. Rates were rumored to be $3.50 NNN for a 10 year deal. |
• Decorator's Choice LP, represented by Banner Commercial, signed a 10 year, 45,300 SF lease at Opus West's 121 Lakepointe Crossing in Lewisville for office space, showroom and distribution space.
• Experian Information Solutions Inc renewed their 272,700 SF lease at 601 and 701 Experian Parkway in Allen for 7.5 years. The two-building facility is their regional headquarters and owned by Lexington Property Trust.
• Dimont and Associates signed a 36 month new lease at The Crossings II (5501 LBJ). Transwestern brokered the $12.92 +E transaction which included $10.00 in TI and 3 months of free rent.
• United Capital Advisors signed a new lease for 4,531 SF at Berkshire Court in Preston Center for a 63 month term with 3 months free. The $33.20 +E deal was brokered by ReMax Commercial.
• Premier Executive Suites renewed their 25,422 SF lease at 2591 Dallas Parkway for 65 months. Rent is rumored to be $24.00 +E with $10.00 in TI and 5 months free rent.
• ASD Specialty Healthcare expanded their 18,308 SF lease at 3200 Internet (Hall Office Park) in Far North Dallas. The 120 month term included $30.00 in TI with a rental rate of $19.65 +E.
• Southwest Financial Credit Union signed a 123 month lease at 7610 Stemmons for a rate of $15.04 +E. The 6,126 SF deal included $29.00 in TI and 3 months free rent.
• Calloway, Norris, Burdette & Weber, PLLC renewed 4,538 SF at Turtle Creek Center in Uptown for 63 months. Colliers brokered the $25.71 +E deal which included $8.00 in TI and 3 months free rent.
Investment Activity
• RMB Investments purchased the Bent Tree Gardens office project at the Dallas North Tollway and Quorum Drive. The 54,000 SF, two-story office building was built in 1985 and was about 60% leased at the time of purchase.
• Koll Development Company, formerly a commercial builder, has switched their focus to commercial investment. KBC will primarily invest in distressed properties at bargain prices.
Deals in Play
• Horizon Data Center Solutions represented by GVA Cawley, added a second data center in Carrollton and sees a future need for over 50,000 SF of additional co-location space. They hope to add 10,000 SF in Houston, 5,000 SF in both Austin and Oklahoma City and 25,000 SF in California and Virginia within the next year.
• Pizza Hut is a new prospect for 150,000 - 200,000 SF represented by Phil Puckett and Harlan Davis of CB Richard Ellis. Far North Dallas and Richardson are being considered for this 2010 deal. |
• Project Emanon, represented by Diana Dunlap of Cushman & Wakefield, is looking for 190,000 SF (around 950 employees) for lease, purchase or build to suit as well as an additional 35,000 SF requirement for an existing data center. The project needs a 10 year lease to commence in 2nd quarter 2010.
• Hotels.com is narrowing their search for 75,000-85,000 SF to a reduced list of options along LBJ. Mike Wyatt with Cushman & Wakefield is representing this client.
• AMHS is rumored to be in the final stages of signing a 182,000 SF lease at Point West I in Las Colinas. Bo Bond with Jones Lang LaSalle is the broker.
• Publicis is rumored to be relocating its offices for 85,000 SF to the Shops at Legacy. This deal is being represented by Bob Edge and Matt Heidelbaugh of Cushman & Wakefield.
• Jones Lang LaSalle is in the market with AON looking for 25,000 SF-50,000 SF in the Dallas CBD or North Central Expressway. AON is currently located in the Tower at Cityplace on Central Expressway.
• Source Corp, represented by Warren Willey and Jordan Buis of CB Richard Ellis, is actively looking in Uptown, North Central Expressway, and Dallas CBD for 40,000 SF of office space. Source Corp is currently located at One McKinney in Uptown with a year left on the lease.
• Jeff Ellerman with CB Richard Ellis is in the market with Med Assets looking for 40,000 SF of office space in FND.
• Micron Solutions, currently in Allen, is represented by Daniel Rudd and looking for 35,000 SF in Richardson/Plano/Allen.
• La Madeleine Restaurants is in the market for 15,000 SF of office space on North Central Expressway. Represented by Josh White with Jones Lang LaSalle.
• FedEx Kinkos will market 2 to 3 of its 9 full floors for sublease in Three Galleria Tower.
• Dresser Industries is searching for office space in Far North Dallas for its 2010 requirement. Scott Collier with Jones Lang LaSalle is representing this transaction.
Development Activity
• Currently, there is approximately 4.3 million SF of office space under construction, down from almost 6 million SF in 2007, with almost half already pre-leased.
• Both Windhaven Place One, a 200,000 SF $40 million project by Haggard Property Co, and Parkwood Centre I, a 150,000 SF $25 million development by Trammell Crow in Plano, have been suspended until a lead tenant is acquired. Lenders are now requiring developers to provide a minimum of 30%-40% of the equity on an office development (a 15%-20% jump from last year).
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