"Tenants clearly are in the driver's seat this year and next and the drive will be a long one," says Robert Kramp, the firm's regional manager of client services for the Southern US. "The recovery is at least 12 months away." In fact, Kramp predicts it could take up to three years before the region is back to its historic level of approximately 18%, a rate that runs three times the norm of the national average.
Office, naturally, is the 2003 burden just as it was last year. Vacancy in the Dallas CBD is 28.6% while Fort Worth's CBD is 17.4%. Factor in the suburbs and vacancy overall is 24.2%. The year-end tally also shows 9.7 million sf of sublease space, of which about one million sf will expire this year, according to Kramp's calculations.
On the rent side of the equation, the Fort Worth CBD is averaging $23.21 per sf to Dallas' $22.13 per sf for class A office space and $17.68 per sf versus $16.31 per sf, respectively, for class B. Suburban rent averages $22.24 per sf for class A and $17.49 per sf for class B.
Once again, it will be a year in which industrial and retail markets lead the way economically in North Texas. The industrial vacancy is 9%, a bottom line that crept up due to the completion of 13.6 million sf of what's described as "mistimed speculative construction."
As for retail, single-tenant big boxes will lead the development charge along with grocery-anchored centers. Expansions by favorites, Wal-Mart, Lowe's and Home Depot, will account for most of the activity this year.
The investment market, though, is the telling truth of what is ahead. Value-adds and distressed properties will be hot tickets as deep-pocketed buyers target areas where they expect job growth in the next few years. And Dallas, Kramp tells GlobeSt.com, is the only Texas city where that will surface.
"The primary opportunities lie with value-add properties, but there will be secondary opportunities for investors seeking distressed properties," Kramp says. "The market won't be characterized by distressed sales, but there will be those investment sales take place where distressed properties were targeted by well-heeled institutions."
Kramp stresses the metroplex's inherent fundamentals coupled with the pro-business attitude will once again spell success when the nation's economy turns around. Deals will get done and leases will get signed this year, but the biggest challenge will be for office building owners to convince tenants to "remain on their rent rolls while remaining competitive" until job growth and demand return to the marketplace, he says.
"Will Dallas be a ghost town? Absolutely not," Kramp emphasizes. "Dallas-Fort Worth is a market that will prevail.
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