Dallas Office Market Takes Another Hit

"As Corporate America gets back on a solid ground, we're going to see our market take a back step temporarily," Rick Hughes, senior director of brokerage services for Cushman & Wakefield of Texas Inc., said at yesterday's unveiling of the numbers. His advice to clients: make up your mind and sign for the long term. Obviously, not all clients are listening or Dallas wouldn't be sitting at its highest office vacancy in a decade.

But, companies are addressing their space needs although it's not doing much for the market since many are "right sizing" offices to adjust to a smaller workforce or provide less space per employee. Though the office adjustments add to the vacancy, companies are being credited with finally making decisions, said Daryl A. Mullin, senior director.

The newest numbers on the street show direct vacancy at 23.7% or 37.7 million sf of the 158.9-million-sf inventory. Sublease space stands at 7.2 million sf versus 7.6 million sf at midyear 2002. The quarter-to-quarter analysis, though, isn't as promising, with tenants dropping another 445,000 sf onto the sublease market as they pay the tab and shop for a replacement. C&W's research director, Cynthia Jeter, calculates that 826,000 sf of the available sublease rolled to direct in the last quarter, helping to nudge the overall vacancy to 26.8% or 0.6% higher than last quarter. As for the midyear absorption, it's down 2.5 million sf--a historical level for the DFW market for a January-to-June reading.

Through it all, leasing activity has been brisk as tenants try to take advantage of the market conditions, Mullin said. The average office rent, based on quoted rates, is now $18.06 per sf in comparison to $18.21 per sf just three months ago.

Dallas, the C&W team says, isn't any worse than any other market. "At the end of the day, it's not the stock market, it's not the price of oil, it's job growth," Hughes emphasized.