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Market News and Trends
Linda Burns, Director of Economic Development for the Dallas Regional Chamber, reports she is receiving a high volume of inquiries from companies considering relocation and/or expansion in the DFW Metroplex. Two of those prospects are Project FDR for 50,000 to 80,000 SF bringing 400 new jobs and Project Ebenezer for 80,000 to 125,000 SF bringing up to 1,000 new jobs. Both deals are very active and will be quick to close.
There was 2,073,479 SF of sublease office space available at the end of 2008. This diminished to the current amount of 2,002,491 SF. This decline is good news in light of current market conditions.
Class A product in Far North Dallas is closing leases with face rates averaging $25-$26 net of electricity with effective rates moving below the $25 +E level. Market concessions include free rent and an application of TI dollars towards rent.
Consensus in the market is that office demand declined significantly September 2008 through year end. However, since January 1st demand has increased and transactions are closing more readily.
Tenants coninue to prefer short term leases in many cases to ensure flexibility.
According to a report by the MIT Center for Real Estate, US commercial property sale prices dropped in the 4th quarter of 2008 by the largest percentage on record. Professor David Geltner, director of research for the center, said that "with the index already having fallen by 22% in the current downturn, it now seems likely that this down market will be at least as severe as that of the early 1990s for commercial property... nevertheless, a decline of 22% compares favorably to the stock market, which has lost more than 40% over the same period."
According to a report issued by McGraw-Hill Construction, Texas will experience a considerable slowdown in construction activity in 2009. Current construction spending is roughly $54.4 billion, down 13% from 2008. The report suggests nonresidential construction will pull back by approximately 24% this year.
Leases
• Advanced H2O LLC signed a 15-year, 313,000 SF lease at Dallas Logistics Hub (4800 Langdon Road). Advanced H2O plans on creating 100 jobs within the next 3 years and will invest $29 million into equipment and TI.
• Takeda Pharmaceuticals signed a 5-year lease at Las Colinas Corporate Center for $23.75 +E. The 11,000 SF new deal received $22 in TI and 2 months free rent.
• Gehan Homes, represented by Cresa, signed a 17,031 SF lease at Quorum Place in Far North Dallas for $17.00 +E. The 3-year renewal contained no free rent and $5 in TI.
• Montgomery Coscia Greilich LLP signed a new lease for 34,600 SF at Parkway Centre V in Far North Dallas for 90 months. Economics were $21.00 +E and $35 in TI. Parkway Centre V assumed the 3 years of term left on MCG's lease as well as giving them 2 months free rent.
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• Lineage Power Holdings Inc,represented by Newmark Knight Frank, signed a 190,000 SF lease to relocate their corporate headquarters, laboratory space and a total of 269 employees to Plano Office Commons (601 and 602 Shiloh Road). The property quotes $12.00 +E for the 100,000 SF of office space and 90,000 SF of laboratory space.
• Smith Barney, represented by Rebecca Griffin of Newmark Knight Frank, signed a 10-year lease at One Legacy Circle in Far North Dallas for $28.00 +E. The 15,450 SF lease had $35 in TI and 5 months of free rent.
• Interphase renewed their 22,228 SF lease at Parkway Centre I. Economics for the 5-year deal were $18.20 +E effective, $10 in TI and top of building signage. Daniel Rudd at Grubb & Ellis was the broker.
• AMR, represented by Jones Lang LaSalle, signed a new 8,427 SF lease at The Centre (4099 McEwen) for $15.75 +E. The 8-year term included 9 months of free rent and $21 in TI.
• Haas Petroleum, represented by Bruce Hecht with Swearingen, signed a new lease for 11,000 SF at 2100 Ross. The 7-year deal quoted $18.00 +E effective with $28 in TI.
• North Texas Tollway Authority, represented by Colliers International, leased 36,960 SF of office space in Frisco Center (10825 John Elliot Road).
• Nichols Jockson Dillard Hager & Smith LLP signed a 8,870 SF lease at Lincoln Plaza (500 N Akard Street) in the Dallas CBD. The average rental rate was $19.00 +E with $25 in TI.
Investment Activity
• Research In Motion (RIM) purchased Riverside Commons (460,297 SF) from Westmount Capital LLC. The telecommunications firm is headquartered at the six-building complex and has plans for expansion in the future.
• Providence Towers is being marketed for sale by CBREI. Reports suggest that several buyers have indicated an interest in acquiring the asset.
• Centura Tower is being marketed for sale by Prime Income Management for $115 million. Packages were sent out to the market on February 23rd. Centura's largest tenant, Publicis, is active in the market and considering relocation out of the building.
• Phoenix Property Company purchased Lincoln Legacy One from Lincoln Property Company for approximately $200/SF. The 207,834 SF, 8-story office building was built in 2006 and is currently 93% leased.
• Overton Centre, a 420,665 SF two tower office building in Fort Worth, is going back to the lender (GE). The asset is 85% leased, but GE was not willing to extend the loan without a significant capital contribution from the general partner and mezzanine debt holder.
• iStar is marketing for sale Lakepoint at Las Colinas in the Office Center. Scott Farber with Grubb & Ellis is representing the sale of this asset. Rumored asking price is $55/SF.
• Xochitl Inc, a Dallas-based snack products firm represented by UGL Equis, purchased a 68,800 SF office and warehouse building in Las Colinas. 6020 Colwell Boulevard will now be their new corporate headquarters.
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Deals in Play
• Brad Selner of Jones Lang LaSalle is in the market with an Undisclosed 800,000 SF prospect which is 70% office and 30% industrial.
• Pizza Hut, a new prospect for 170,000 - 200,000 SF, represented by Phil Puckett and Harlan Davis of CB Richard Ellis, is now down to 3 options for this 2010 deal.
• Project Salace (Atmos Energy), 300,000 SF represented by Cushman & Wakefield, is looking to own their own facility and are considering existing buildings and build-to-suits.
• Project Trinity (Tektronix), represented by Mike Wyatt of Cushman & Wakefield, is looking for 135,000 SF for lease in Richardson, Uptown or the Dallas CBD.
• Global Knowledge, represented by Andy Leatherman of Jones Lang LaSalle, is searching for 25,000 SF in Las Colinas.
• Jeff Ellerman with CB Richard ELlis is in the market with Project Hawkeye, 275,000 SF, in Las Colinas or Far North Dallas.
• Source Corp, represented by Warren Willey of CB Richard Ellis, is active in Uptown, North Central Expressway, and the 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.
• David Keal is representing an Undisclosed Tenant for 60,000 SF of office and call center space in Addison. The tenant has a November 2009 move-in date and requires 6-7 per 1,000 parking.
• i2 Technologies, represented by Jeff Ellerman of CB Richard Ellis, is in the market for 70,000 SF in Las Colinas/Freeport.
• Frito Lay is in the final stages of completing a deal for 120,000 SF of executive and back office space in Far North Dallas; Represented by Larry Toon and Paul Whitman with Jones Lang LaSalle.
• Interstate Batteries is back in the market for its 2010 requirement. John Amend is representing this 80,000-100,000 SF transaction. Currently at Park Central 7, 8 and 9, they are looking to relocate to Richardson or Far North Dallas.
Development Activity
• Southwest Airlines and the City of Dallas will start a $519 million capital improvement project at Love Field in June of this year. Southwest will manage the project which consists of creating a 20 gate concourse and expanding baggage facilities. Construction is scheduled to be complete in 2014 which is also when the Wright/Shelby Amendment will be lifted.
• Cadence McShane Construction Company started construction on a 4-story, 92,000 SF medical office building at 10740 North Central Expressway in North Dallas. The building is scheduled for completion in December of this year and is 100% pre-leased.
• Owners of the former Arcadia Theater on Lower Greenville plan to develop it into retail (20,000 SF) and an office building (12,000 SF). Estimated costs are $4-$6 million and will be completed in 12 months. Madison Partners LLC plans to start construction in the spring and have obtained a loan commitment contigent on 65% pre-leasing. |
