DFW Market Insights Office 3Q 2020 - Population and employment growth has been driving demand for new space in DFW. The region added 130,100 residents in 2019, more than any other metropolitan area in the country. During the same period, the region added 81,800 new jobs, leading the nation in this category as well. The region's competitive cost of living, accessibility, and highly educated workforce have made it a hotbed for corporate relocations and expansions. Uber has announced that it will open an office of at least 3,000 employees in Deep Ellum, and it plans to turn Dallas into its largest hub outside of its San Francisco headquarters. Joining Toyota, Samsung, and McKesson, which have all recently found a home in Dallas-Fort Worth, many more have announced plans or are looking to expand.
Strong economic underpinnings and a diverse economy have fostered a healthy office market. Similar to many office markets across the country, the metroplex has experienced some fallout from the pandemic and recession. Net annual absorption has drifted into negative territory, with -3.0 million SF. For the first time since 2010 the market has reported three consecutive quarters of negative net absorption. Construction activity remains robust, with 4.8 million SF delivered last year and 7.2 million SF of space currently underway. Even with the building, vacancies should remain stable due to a significant portion of new space being preleased. Several large build-to-suits accounted for the lion's share of positive absorption, including American Airlines moving into its new 1.7-million-SF headquarters in Fort Worth and Charles Schwab moving into its 580,000-SF Westlake Campus. Keurig Dr Pepper and the PGA headquarters are building new headquarters facilities in Frisco. Rent growth remained positive at 0.7%. Preston Center, East LBJ, and both the Dallas and Ft Worth Central Business Districts have led the charge, largely due to recent renovation activity.
Corporate relocations and expansions continue to drive office demand in Dallas-Fort Worth. A highly skilled labor force, low business costs relative to coastal markets, and a central location make Dallas attractive. Add in the accessibility and competitive incentive packages offered by the State of Texas and local municipalities, and the region is a hotbed for corporate expansion and relocations.
Before the pandemic, the metroplex was on solid footing. In 2019 the market absorbed 5.7 million square feet of office space. At 16.9% , the vacancy rate may appear high for many metros, but we have to keep in mind that the region averaged between 17-15 percent vacancy since 2010. As companies re-evaluate space or possibly hold off on any moves, the market is anticipated to experience a slowdown. For the first time in a decade, the metroplex has experienced three consecutive quarters of negative net absorption, totaling 3.4 million square feet. At the same time, the market had 2.9 million square feet of new space delivered.
The Westlake/Grapevine submarket experienced the most negative net absorption with just over 200,000 SF. As a result of several large move-outs in the Solana Business Park. On the opposite side of the spectrum. Plano experienced 220,000 SF of positive net absorption, with the Dallas CBD a close second at 200,000 square feet. TripActions accounted for 88,000 square feet when they moved into their space in Renaissance Tower in downtown Dallas.
Based on our latest baseline forecast, we are anticipating the market to rebound in the fourth quarter as Dallas-Ft Worth is anticipated to experience 1.7million square feet of positive net absorption and vacancies remaining stable. Absorption remains positive through the remainder of the forecast as the market continues to gain momentum.
In the first three quarters, the market experienced 10.8 million square feet of leasing activity. Well behind the 18.5 million square feet the market had reported at the same time last year. The suburbs of the metroplex have performed well. Two suburban submarkets, the Upper Tollway/West Plano and Quorum Bent Tree captured 63% of the total leasing as of the end of Q3.
The largest lease signed was at The Realm at Castle Hills, when Global Medical Response took 60,0000 SF of space. Debt settlement specialist Debt Blue signed a 30,000 SF lease in Richardson at 1125 E Campbell. The company should be moving in later this year. Software developer IntelliCentrics signed a 30,000 SF lease in May at the Lakeside International Office Center. The 122,000 square foot building is currently under construction and is expected to be delivered later this year.
The information contained herein was obtained from CoStar; however, Bradford Companies makes no guarantees, warranties, or representation as to the completeness or accuracy thereof. The presentation of this property is submitted subject to errors, omissions, change of price or conditions prior to sale or lease or withdrawal without notice.