DFW's Q1 Office Market Shows Slight Promise

Julien J. Studley Inc.'s research for the DFW says the high-tech corridor's changing numbers are a direct result of a diversification bid. Greg Biggs, senior vice president and Southwest region manager, says the Q1 tally showed 675,766 sf was leased in a 22.6-million-sf submarket, where nearly 17.1 million sf are categorized as class B and C product.

Across the board, Dallas-Fort Worth's first quarter numbers, though, weren't as good as he thought they'd be. "I think there's still a lot of uncertainty...and companies aren't making long-term real estate decisions," Biggs tells GlobeSt.com. The "minor improvement" in Richardson/Plano, he adds "is really where the optimism is to be found." The wish list is in for a good 2003, but the telling factor, as everyone knows, is job growth. And more jobs simply will have to be created before there's any real change in the final numbers, he adds.

According to Studley's calculations, the Dallas CBD's 25.4-million-sf inventory is 24.5% empty, of which about 5.7 million sf is vacant direct space and 543,027 sf is available sublease space. In Fort Worth's CBD, vacancy is 8.2% in the eight million sf of office product. Of that, 546,565 sf is empty direct space and 112,259 sf, available sublease space.

The Q4 2002 darling, the class AA market continued to breed good numbers as tenants followed the 2002 lead to take advantage of the soft market and trade up. The quarter ended with 199,566 sf leased and an 11.1% vacancy in 6.6 million sf of inventory.

Most everyone just wants to cut to the quick in reading the numbers: an overall 27.5% vacancy, down just a shade from the 2002 close, in an inventory totaling about 185 million sf . At the end of the quarter, about 50.9 million sf, with 9.6 million sf of it sublease, stood empty in comparison to slightly more than 51 million sf of vacant office space at the end of 2002.

The Q1 close had three submarkets--LBJ Freeway, Far North Stemmons and Las Colinas--with vacancies above 35%, Studley's numbers show. At the other end of the spectrum, there were six submarkets as defined by Studley with vacancies below 15%: Preston Center, East Dallas, Southwest Dallas, Northeast Fort Worth, South Fort Worth and Fort Worth's CBD.

As for rent, there are few surprises with prices dropping as brokers report more and more building owners retooling direct space rates to level the playing field with sublease rates. Studley says class A product in the Dallas CBD is down to an average of $19.68 per sf and Fort Worth's, $19.25 per sf. The class AA average is now $26.97 per sf versus $27.58 per sf just three months ago. Across the board, the average rent fell 11 cents per sf to $17.70 per sf in the first quarter.