DALLAS—Notwithstanding the addition of about seven million square feet of new construction to the inventory, the Dallas/Fort Worth Metroplex office market is expected to see vacancies continue declining throughout the year, according to Xceligent. The vacancy rate overall has improved for the past six quarters, although of those quarters the net absorption for the three months ended June 30 was the smallest at 483,138 square feet. An even better—not to say spectacular—showing comes from the region’s industrial sector.
At the end of the second quarter, the Metroplex’s overall office vacancy rate stood at 15.7%, unchanged from Q1. Year over year, however, it’s fallen 160 basis points from the 17.3% at the end of Q2 2013.
“The market’s overall vacancy rate is expected to drop further this year, due to several additional large deals that are in the works,” according to Xceligent’s Q2 report for the Metroplex. “For example, State Farm will be moving into the first phase of its new campus at CityLine in Richardson for approximately 500,000 square feet.”
State Farm’s campus is not the only new office construction in the works for the CityLine mixed-use development. In late March, Raytheon Corp. silenced a year of rumors by confirming that it too would build there, adding three buildings for a total of 489,000 square feet. Other projects in the pipeline include the 530,000-square-foot McKinney & Olive in Dallas’ Uptown district, the 500,000-square-foot KPMG Plaza in the city’s Arts District and a $160-million, 357,214-square-foot regional headquarters for the Federal Aviation Administration in Fort Worth, which Trammell Crow Co. is developing in partnership with USAA Real Estate.
USAA is also partnering in a large-scale industrial development, teaming up with Seefried Properties on what will eventually be 2.3 million square feet in DeSoto, TX. The 1.1-million-square-foot phase one of that speculative project is under way, part of what Xceligent says is nearly 20 million square feet of new industrial space coming to the Metroplex.
“Several facilities above one million square feet are either planned or already under way,” according to Xceligent’s Q2 industrial report, which cites eight such behemoths including phase one of the USAA/Seefried project. Whether spec, or otherwise, it’s likely the demand will be there, as Xceligent’s report makes clear, especially as a number of larger facilities have already been preleased.
“The Dallas/Fort Worth industrial market continues to surge forward,” the report states. “DFW saw over 19 million square feet absorbed in ’13, 5.5 million in the first half of the year compared to over seven million in the first half of 2014.” Meanwhile, the Metroplex’s vacancy rate for industrial continues to surge downward, dropping from 10.8% a year ago to 7.6% at the end of this year’s Q2.
Much of this progress is due to major tenants “recognizing the benefit and tax incentives in Metroplex” and continuing to come here, Xceligent’s report states. “Last year, Amazon opened two new distribution centers totaling over two million square feet alone. Demand is currently higher than new construction availability.”
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