Middle Market Digest: This Week in the South and Mountain Regions

As absorption is slowing, the construction cycle is picking up momentum. At the end of the third quarter, slightly more than 103 million square feet of office space was under construction, the highest level for the construction pipeline in the current cycle, according to Cushman & Wakefield. It could well be that 2017 will turn out to be the inflection point when new construction exceeds absorption and national vacancy rates bottom out. If there was any doubt, the Dallas market continues its fever pitch of activity. In a list of markets with the largest pipeline of office space, only one market is ahead of Dallas, Midtown Manhattan, with 9.5 million square feet under construction. Dallas/Fort Worth is wedged in a construction sandwich with 7.7 million square feet, flanked by Silicon Valley with 6.3 million square feet. The vacancy rate declined from the second to the third quarter in all major regions of the country (Northeast, Midwest, South and West). At the other end of the spectrum, there were large increases in vacancy during the quarter in Tulsa (+130 bps) and Houston (+110 bps) as the softness of the oil sector continued to weigh on energy-centric markets, says the C&W report.—Lisa Brown

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