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 fallout from the pandemic and recession. Net annual absorption has drifted into negative territory, with -4.9 million SF over the last 12 months. For the first time since 2010, the market has reported four consecutive quarters of negative net absorption. Construction activity remains robust, with 3.5 million SF delivered in the last 12 months and 7.0 million SF of space currently underway. 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. Annual rent growth is negative at -0.6%. While the lion's share of the market has fallen into negative territory, Preston Center, East LBJ, and both the Dallas and Ft Worth Central Business Districts have all remained in the black, largely due to recent renovation activity and a high concentration of high-quality assets.
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 provided by a robust air transportation network 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 SF of office space. At 17.4%, the vacancy rate may appear high for many metros, but the region has averaged between 15% and 17% 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 four consecutive quarters of negative net absorption, totaling 4.9million SF. At the same time, the market had 3.2 million SF of new space delivered.
In 2020, DFW Freeport/Coppell experienced the most negative net absorption, with -862,000. Two large move-outs at the Intellicenter Royal Tech Business Park in Irving accounted for the lion's share of the move-outs. The Dallas CBD was a close second with -860,000 SF. The Bryan Tower accounted for just over 300,000 SF when Baylor Scott & White moved into its new offices in Deep Ellum. The iconic Fountain Place was dealt a blow earlier this year when Tenant Healthcare moved out for a new 400,000-SF space in Farmers Branch. On the opposite side of the spectrum, two suburban markets, Plano and Allen/McKinney account for 35% of the metro's total positive net absorption.
Based on CoStar's latest baseline forecast, the market is expected to experience 2.7 MSF of positive net absorption in 2021 and remain positive through the remainder of the forecast as the market continues to gain momentum.
In 2020 the market experienced 15.8 million SF of leasing activity. Well behind the 24.1 million SF the market had reported in 2019. The suburbs of the metroplex have performed well. Two suburban submarkets, the Upper Tollway/West Plano and Quorum Bent Tree, captured 63% of the metro's total leasing as of the end of Q3.
The largest lease signed this year was at 777 Main St., where Oncor Electric took 175,000 SF of space. The suburbs of Dallas are active; Caliber Home Loans signed a 159,000-SF lease in Billingsley's Cypress Waters Office Park. The company is expected to move in later this year. In downtown Dallas, Hilltop Securities signed a 95,500-SF lease in 717 Harwood, taking four floors of the 844,000-SF building.
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.