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DALLAS-The bottom line speaks for itself: 8.5 million sf of sublease space is on the Dallas office market. Of that, 2.3 million sf is controlled by pacts with near-term expirations through January 2004, according to the latest calculation by Cushman & Wakefield of Texas Inc. researchers.

Calvin Hull, C&W’s executive director in Dallas, says some, like himself, believe the mercury could be as high as 10.5 million sf. Regardless, it’s the highest level that has ever hit the Dallas market to the best of his recollection. Hull tells GlobeSt.com that inventory changes from the late 1980s real estate crash make it too difficult to compare days gone by to today’s situation. Across all classes, the inventory stands at 159.1 million sf.

The 2002 leasing activity has brought 5.4 million sf of closings, of which 919,386 sf or 17.1% were subleases, according to the C&W market watchers. And those done deals have come at significantly reduced rates. In the 16 submarkets polled, sublease rates undercut direct rates by as little as 28 cents per sf to as much as $4.69 per sf.

“Where will we end up? Who knows,” Hull says. “There is a tremendous amount of supply and very little demand.” The market also is bearing nearly 33 million sf of open direct space.

Hull is particularly concerned about the 1.6 million sf of overall negative net absorption posted to date this year. That’s just 100,000 sf short of 2001′s historic backslide, he’s quick to point out. And each day brings news of another corporate scale-back, translating into more properties coming on the market.

In all, there are 483 sublease locations available across the Dallas metroplex, with 163 accounting for that 2.3 million sf poised to remain dormant. The submarkets in the over-one-million-sf category are Las Colinas, LBJ Freeway, Far North Dallas and Far North Central Expressway or better known as the Telecom Corridor. The Dallas CBD is shouldering 824,103 sf.

More than two million sf of the 8.5 million sf is occupied by tenants who are willing to share their space or vacate it altogether should someone step forward. Hull admits there are some buyouts available, but most building owners are steering clear of that option unless there is a replacement tenant in hand and one usually deemed more creditworthy than the leaseholder.

The best advice, says the research team, is sublease hawkers need to stay nimble and exhibit a “whatever-it-takes” attitude to spur deal-making–from freebies to extremely aggressive rates.

Hull cautions not to discount Dallas’ staying power or even generalize about current conditions. After all, the 2000 record-breaking gain of 8.3 million sf is still vivid in everyone’s mind. And, he adds, “certain pockets are doing very well” despite the unease in today’s marketplace.

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