Dallas Office, Industrial Markets Pointing North

"On a conservative basis, we think we will see some positives this year," Cynthia Jeter, C&W's research director, said at yesterday's forecast and year-end wrap-up session in Dallas. Office and industrial rents will be probably be flat, but deal-making wheels will be turning. The industrial market touched bottom at midyear 2003 followed by the office market in the third quarter, the analysis showed.

Jeter predicted the city's office market could absorb just under one million sf, across all classes, as this year plays out--if the 1.5% white-collar job growth materializes as predicted. Dallas historically absorbs about four million sf of office product, she said.

Jeter's office market prediction is based on improved numbers for three consecutive quarters. Although the market is still registering in the red, the amount of the setback has steadily shrunk, with the latest ringing up a loss of just 4,387 sf. At the Q4 close, the 160.5-million-sf inventory had close to 41 million sf sitting empty for a 26.6% vacancy and a year-to-date backslide of nearly 2.5 million sf. Sublease space dropped to seven million sf. But, Jeter cautioned, the bulk of that sublease space will roll to direct this year.

Parts of the Dallas side of the metroplex are doing quite well, reported Michael S. Wyatt, senior director. Just recently in Preston Center, four tenants were locked in a bidding war for 11,000 sf of class A space. Elsewhere, out-of-state companies, several from California, have been shopping for relocation spaces, he said. A 28,000-sf consolidation deal, headed from Chicago and Knoxville, TN, has just closed for a Plano building owner. At the crux of the stories is a positive perspective mortared by increased activity that began in November as the small business sector picked up enough steam that some executive suite operators expanded operations while others reported significant upticks in occupancies.

On the industrial side, vacancy hit 14% in an inventory of 355.7 million sf. "That's the highest that I can remember and I've been in the real estate business for 22 years," said director Gary Collett.

Five leases, each exceeding 200,000 sf, popped in the last six months of the year. The fourth quarter posted 591,131 sf of positive absorption, but it wasn't enough to put the region into the black for 2003: the 12-month reading was down 1.2 million sf. Collett says the spot to watch this year will be the Interstate 20 corridor where developers already are raising walls for build-to-suit and spec product.

Investment sales were particularly strong last year, said Elizabeth Trocchio, senior managing director and area leader. "We've seen nothing but a steady interest by owners and buyers looking to make trades, particularly in the suburban markets." And, she predicted, the "steady flow" will continue this year.