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DALLAS-In a midyear report that’s hot off the presses, the Dallas office market has reached 28 million sf of vacancies, or 18% of the more than 155 million sf. Of that, 6-1/2 million sf are coming as sublease space and peaking at its highest level in a decade, says Cushman & Wakefield of Texas Inc.’s senior director Calvin Hull.

Hall says he isn’t a Doomsday prognosticator. “There are still a lot of opportunities out there,” he emphasizes to GlobeSt.com. “The first six months of 2001 have been extremely slow compared to the frenzy that the Dallas office market experienced over the past several years,” he says in the report. And on the positive side, leasing activity had picked up for the first two months of the second quarter, helping to offset the negative 522,000 sf that had come to market in Q1. But, it was a brief respite as the leasing market heads back into a slump, he says. He is optimistic that the temporary upswing will save the Dallas region from another negative absorption all-time high.

Admittedly, Hull’s calculations include that 14 million sf of class C space that will always impact the overall numbers for the Dallas region. Still, he’s saying what brokers across the region know–leasing activity is down, but the area’s market remains stronger than many of its sister metropolises. At year-end 2000, the sublease number had been 2.6 million sf in comparison to today’s tally. And, says Hull, it’s going to continue upward.

Building owners nationwide, says Hull, can expect more defaults from New Economy companies and telecom-type tenants. Dallas will fare better than many states, specifically California as more firms look to get out from under burdens of too little electricity and too high taxes, he says. Dallas amenities, the same that attracted the Boeing Co.’s interest, “will keep the metroplex on the short list of consideration for most corporate headquarters relocations,” he believes.

The added space on the market and the concern over defaults have building owners in certain markets dangling hefty concession carrots. Hull says he’s heard free rent, a commonplace tactic in the 1980s crash, is back into the marketplace as well as higher tenant improvement packages, free furniture, free telecommunications equipment and good lease assumption deals. Some suburban building owners have kicked in free parking garage space or lowered rates “to give their building some potential edge over the competition,” says Hull. Consequently, rent is falling or remaining flat in all office categories.

It’s not marketwide, emphasizes Hull. Particularly hard hit are Park Central and Central Expressway, as construction crews move in to start the five-level freeway, the High Five In Five. The CBD, Las Colinas/DFW Freeport, Richardson Telecom and Dallas North Tollway corridors are still meeting their pro forma rates, as well as other scattered throughout the Dallas metroplex, according to Hull.

Class B buildings are taking the brunt of the leasing downturn. It’s been a period of “quiet desperation,” says Hull. Tenants are re-evaluating lease commitments and owners are offering hardy deals. “The new mantra is that the market has switched back to being a tenant’s market again, especially if the tenant has good credit,” he says in the C&W report.

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