"There's some stability as well as sustainability that'sinherent in these numbers," Mark Fewin, senior managing director ofCB Richard Ellis, tells GlobeSt.com. "It's been gradual over a longperiod of time so it shows a level of stability."

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CBRE's Q2 report, which rolls out today, shows the metroplexisn't totally out of the woods as yet despite a market-wideabsorption of 709,314 sf or 318,054 sf more than Q1's closingtally. The 181.6-million-sf inventory is 20.36% vacant, up just0.12% from Q1, and there's 4.65 million sf under construction.Still, the across-the-board rent gains produced a 17-cent spreadthat pushed the Q2 average to $18.60 per sf.

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Marty Neilon, CBRE's research coordinator, says the readings forvacancy, absorption and average rents are "getting pretty close" to2000 and 2001 levels. Submarkets still trailing their 2001 rentlevels are Central Expressway, Far North Dallas, Las Colinas,Lewisville/Denton and Richardson/Plano.

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The region's pulse is always taken in the Dallas CBD. Itsvacancy is 24.20%, second only to Detroit in the nation.Second-quarter activity in the 26.36-million-sf Downtown whittled0.10% off the vacancy rate with 126,805 sf of absorption. There'salso 824,839 sf of sublease space on the market. Yet, the CBD'sper-sf average rent rose to $18.40 per sf from $18.13 per sf in thequarter-to-quarter analysis, marking the fourth time in two yearsfor a 27-cent jump or more. In 2001, the CBD's rent averaged $17.51per sf.

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The rent gains are the dichotomy of Q2's closing numbers in allcategories. "It's not a singular event. What was unique thisquarter was it was across the board," says Steve Triolet, seniorresearch coordinator.

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Uptown's 1.3 million sf of under-construction space once hadmarketwatchers concerned about the fallout, not only on its 8.35million sf of existing space, but the region at large. Ironically,Uptown's construction, which is 44.07% preleased, is getting mostof the credit for driving up rents border to border. "To see thatmuch square footage from an office standpoint and it's preleasedbodes well for the strength of our market now," Fewin says.

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Uptown's new space is carrying quotes of $34.50 per sf pluselectric, just a shade under the submarket's prima donna, theCrescent. "From a historical standpoint, the Crescent was the onlyone before that could quote those rates," Fewin says.

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To Uptown's credit, its vacancy is 8.5%. There is 203,971 sf ofsublease space on the market. Today's average is $25.05 per sfversus $22.50 per sf in 2001.

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"What I'm hearing, with the new construction coming on line inDowntown and Uptown with $35 and $36 rents, is it's pullingeveryone else up," says David Richards, managing director andsenior vice president of Grubb & Ellis Co.'s Dallas office."$24 [per sf] at Lincoln Centre doesn't look too bad."

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Richards says rents will have to continue to rise or cap ratesdrop, which isn't too likely, so private buyers, who paid topdollar and used high leverages to acquire the deeds, can supporttheir IRR analyses and exit plans. "I wouldn't be surprised if inthe next 12 to 18 months that we see private buyers be replaced byall-cash buyers looking at office buildings that were overpaid," hepredicts. "The rental rates will have to go up or people will havea tough time keeping their buildings."

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According to Richards' calculations, buying at a 7% cap rate inDallas and selling at an 8% cap rate means a 14.29% rent hike wouldbe needed just to achieve the original sale price. "From a nationalperspective, people are looking to Dallas to have a lot of growthover the next five years. Could we have that kind of rent growth?Sure," he says. "But, it's not a sure thing."

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Meanwhile, the "for sale" list continues to swell. The latestprize to hit the street is the 1.3-million-sf bought in mid-June2006 at 2200 Ross Ave., which was bought in mid-June 2006for a rumored $260 million by a Dallas joint venture between StreamRealty Partners LP and Highland Capital Real Estate Fund. And,Hines' 218,943-sf Citymark at 3100 McKinnon St., bought in August 2005for $27.9 million, could be next.

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