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DALLAS-It was a short-lived respite that Dallas-Fort Worth posted to the black at the end of the second quarter. This quarter is sure to bring some heartache as 2.2 million sf of leased space come up for renewal and corporations continue to scale back and toss their properties onto the market, says a Grubb & Ellis Co. research team in Dallas.

Every broker in town is aware of the realities of the down market. Unfortunately, the researchers believe, it’s going to stay that way and get worse before it gets better. Alcatel’s decision to sell three buildings, totaling 701,000 sf, acres and 132 acres, all in Plano’s bounds, are the latest signs that things haven’t changed all that much around town. Every so often, though, there is a bright spot as confirmed by last week’s signing of that 106,000-sf office lease between Travelers Insurance Co. and TPMC Realty of Dallas. And no one’s forgetting that the Q2 positive reading came from JPMorgan Chase’s takeover of 406,000 sf at the JPMorgan International Center.

The one certainty is that most tenants will continue to reduce rather expand in light of the prevailing economic conditions. “The DFW office market will likely see demand for office space remain anemic throughout the remainder of 2002,” the team predicts. On the other hand, Q2 closed out on a somewhat more positive note than Q1.

What else is ahead? The Grubb & Ellis prediction is the LBJ Freeway and Richardson/Plano will continue to lead the region’s negative absorption, thanks to the High Five road project and the ongoing tech wreck. LBJ Freeway’s 21.7 million sf of product is 26.4% vacant and there’s another 213,412 sf under construction. Richardson/Plano’s 15-million-sf inventory is 27.1% empty, with another 90,330 sf under way.

The Richardson/Plano submarket, more oft referred to as the Telecom Corridor, accounts for 1.7 million sf of the 9.1 million sf of sublease space that Grubb &Ellis says exists. The region’s sublease count has been one of the more difficult to calculate, with bottom lines ranging from 8.5 million sf to as much as 10.5 million sf due to variations in brokerage houses’ data gathering methodologies.

The Grubb & Ellis Q3 call is that overall vacancy will go north of 25% although construction has slowed by DFW standards, with just 1.1 million sf now under way. At the second quarter close, vacancy was 24% or 44.1 million sf of empty office space in the 184.1-million-sf inventory. Still to come, though, are such decisions as WorldCom, a 1.5-million-sf tenant in the Telecom Corridor that could, if it so decides, push the Richardson/Plano submarket to a 33% vacancy rate, according to the researchers.

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