Tenants' Jitters Slow High-Tech Office Demand

The Dallas-Ft. Worth region hasn't been hit like Austin, where sublease space seems to grow larger each day due to high-tech cuts. Still, the value office or office-flex market in the state capital isn't as hard hit as class-A office, says Greg Johnson, vice president of leasing for Transwestern Commercial Services' Austin office.

Austin's market has slowed dramatically in the after-tremors from the start of the year's high-tech quake. "It is feeling the effect," Johnson tells GlobeSt.com. "The prognosis is things will smooth out by the end of the year."

In nearby San Antonio, everybody's talking about bringing new projects out of the ground, but there's been very little action, says John Turcotte, partner and industrial services director for San Antonio-based Reoc Partners Ltd. In 1999, 1.4 million sf had come on line and most of it's been absorbed, but the pipeline is practically dry right now for new supply, he says.

San Antonio's total inventory of class-A industrial space is 19.3 million for distribution and service center. Unlike Austin, it's not been a high-tech magnet, but rather a distribution area touted for its logistical positioning along the NAFTA Highway or Interstate 35. However, second-generation space is on the rise as more corporations move into build-to-suits, Turcotte says. And, there are a lot of lookers coming to San Antonio, but so far this year there have been few takers in the 20,000 sf and over user category. Overall industrial vacancy is riding at 11.8%.

Dallas-Ft. Worth again appears to be the stronghold, where users typically aren't the garden-variety dot-com, but instead high-tech providers with high-tech needs that are being primarily met in the suburban markets. The nature of the region's high-tech market consequently isn't bringing an abnormal amount of sublease space to market, says John Lancaster, vice president of TIG Real Estate Services in Dallas.

Still, there's new supply being built, lots of proposals out and some new entries to the market. But, Lancaster says, a case of the jitters still prevails as many prospective tenants flinch about signing final contracts, at least for now. For many, it's the overall US economy and consolidation considerations that are stalling the deal-cutting process.