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Market News and Trends
Year to date office space absorption remains positive through June; however, over 880,000 SF of space was given back during the 2nd quarter reducing the Dallas net absorption to a positive 69,000 SF.
Class A office space remains positive; however, Class B and C are both negative year to date. Las Colinas leads the Dallas market with over 525,000 SF of positive absorption and the LBJ Freeway submarket is suffering the most, losing almost 420,000 SF primarily due to the pending highway construction slated to begin early 2010.
The national unemployment rate is now at a 26 year high of 9.5% and many economists are predicting the unemployment rate to hit 10% by year-end. However, Texas bodes well compared to the national economy with a current unemployment rate of 7.5%.
According to many local Real Estate professionals, deal activity is primarily with smaller tenants, with many tenants trying to work with existing landlords to renew early and/or give back space. Landlords are placing a high priority on maintaining occupancy at their buildings, even at the expense of more aggressive economics; however, landlord's loan constraints are minimizing tenant improvement concessions.
The Federal Reserve Bank of Dallas states that job losses in Texas in 2009 might not be as bad as expected, and that next year could bring modest job growth. Since Texas has sustained less economic damages than the US as a whole, the state's recovery time will be significantly shortened.
Dana Johnson, chief economist at Comerica Inc, stated that "it's going to take two or three years for the US to recover ... the main difference in Texas is that is hasn't been sinking for nearly as long as the rest of the national economy which creates an environment where it's a lot easier for people to regain their confidence and rebuild some prosperity."
Leases
• SimplexGrinnell, LP signed a 60-month renewal at Cardinal Park in Richardson/Plano. The terms of the 69,150 SF lease were $8.45 NNN with $1.45/SF in TI and no free rent.
• GE Capital signed a 72-month, 34,826 SF new lease at 125 East John Carpenter in Las Colinas. The tenant will pay $18.60 +E effective and receive $30.00/SF in TI with 6 months free rent. |
• IKON Office Solutions signed a 60-month lease at Stone Tower in the LBJ Freeway submarket for $19.50 +E. The 17,548 SF new deal received $20.00/SF in TI.
• Wright Ginsberg Brusilow, represented by Jackson Cooksey, signed a 17,532 SF renewal/expansion at Signature Place in Far North Dallas for 94 months. Economics were $16.50 +E effective with $10.00/SF in TI and 9 months free rent.
• Southwest Consulting signed a 11,112 SF, 52-month renewal at Parkway Centre II in Far North Dallas. The tenant will pay $19.50 +E effective, receive new paint and carpet and 2 months free rent.
• Erisa signed a 10,149 SF renewal/expansion at 520 Central Parkway in Richardson/Plano. The tenant will pay $15.75 F/S on the 36-month lease with $1.00/SF in TI and no free rent.
• Grand Energy signed a 9,549 SF renewal at the Colonnade in Far North Dallas. Economics for the 64-month deal were $23.35 +E effective, $15.00/SF in TI and 4 months free rent.
• PMA signed a 9,340 SF new lease at 8150 North Central Expressway. The 88-month deal was $19.00 +E effective with $28.00/SF in TI and 4 months free rent.
• Highland Campus Health Group signed a 8,453 SF lease at Las Colinas Commons. Economics for the 66-month lease were $13.40 +E effective with $22.50/SF in TI and 6 months free rent.
• Southern Care signed a new lease for 5,941 SF of office space at Las Colinas Towers. Economics for the 63-month lease were $20.50 +E with $30.00/SF in TI and 3 months free rent.
• Diodes, Inc signed a 5,300 SF expansion at Tollway Towers South in Far North Dallas. Rumored economics for the 32-month lease were $19.00 +E effective with $13.15/SF in TI and no free rent.
• A Michelle May PC signed a 5,038 SF new lease at Two Lincoln Centre in Far North Dallas. The effective rental rate for the 127-month lease was $23.40 +E with $27.00/SF in TI and 7 months free rent.
• Surgical Notes signed a 10,000 SF lease at 3100 Monticello in Uptown. The effective rental rate for the 130-month lease was $23.88 +E with $25.00/SF in TI and 10 months free rent.
Deals in Play
• Carl Ewart with Jones Lang LaSalle is in the market with an Undisclosed Financial Services Company for a 150,000 - 180,000 SF requirement for 2011.
• Republic Group is in the market for 100,000 SF of office space in McKinney or Far North Dallas. Jeff Ellerman with CB Richard Ellis represents the tenant. |
• BCD Travel, currently located in Fenton Centre, is in the market for 25,000 SF in Las Colinas. Lee Waggoner with Grubb & Ellis is the broker.
• Cushman & Wakefield is in the market for 25,000 SF for their corporate office. They are looking in Preston Center and Uptown but may renew at their current location in Far North Dallas.
• Pizza Hut is back in the market with their 180,000 SF headquarters requirement. They have a termination notice date of December 31, 2009. They are trying to sign a new lease by the termination date but they need a new landlord to pay their $3.5 million termination fee as well as $50.00/SF in TI. Phil Puckett with CB Richard Ellis is the broker.
• Hilton, represented by Paul Whitman and Chelby Sanders with Jones Lang LaSalle, is narrowing the search for their 50,000 SF requirement. They are considering Class A and B product and hope to have a lease signed by November 2009.
• Progressive Insurance, represented by Rebecca Griffin with Newmark KF, is in the market for 25,000 SF of office space along the North Central Expressway.
• Dan Patterson with Swearingen is in the market with an Undisclosed Company for 25,000 SF of office space along the lower Tollway in Far North Dallas.
• Equifax, represented by Lee Waggoner and Cribb Altman with Grubb & Ellis, is active in Far North Dallas for 20,000 - 30,000 SF of office space.
Investment Activity
• Opus West is attempting to sell off several of its assets in an auction held August 26th in Dallas. The assets under consideration have a total of $970 million of debt with over 17 different lenders. Properties include Two Addison Circle, 121 Lakepointe Crossing and Broadstone at Galleria.
• According to the Foreclosure Listing Service, commercial property foreclosures in Dallas have increased 12% so far in 2009 with the largest gain being in the office sector (138 buildings). The majority of office foreclosures on the list were buildings that were small, old and poorly located.
Development Activity
• Contruction has begun on the 72,000 SF Forest Park Medical Office Building developed by Neal Richards Group and Staubach Realty Partners. The 4-story medical office building, which is located directly north of Forest Park Medical Center, is 72% pre-leased and scheduled to open June 2010. |
