Dallas Office Rents At Record Highs
Over the past year I have seen many of my clients surprised by the recent increase in office rental rates in Dallas. Depending upon the submarket some office rental rates have increased over 5.5% in the past year. The high demand markets consisting of Preston Center and the North Dallas Tollway in Frisco and Plano have seen the highest demand pushing rental rates to their highest levels in the history of the Dallas office market.
These higher rates are forcing Dallas office tenants to consider alternate markets to relocate to when their leases expire. Even with the relocation of an office from a more expensive submarket because of the low overall office vacancy rate of 18.5% the lower rental rates that were along the LBJ corridor and Central Expressway submarket have also seen increases.
A few years ago we were able to find spaces in lower demand submarkets with heavy landlord concessions and aggressive rental rates. Today the concessions tend to be at a minimum and the rental rates are no longer the bargain that they once were.
The LBJ market was under stress because of the 635 construction but that project is finishing and unrestricted access is now available from 75 to 35. This submarket was an oasis for companies that were looking for quality building’s with lower rental raters. Unfortunately, with the rapidly approaching completion of construction upward pressure is taking hold along this once high value submarket.
Downtown Dallas is experiencing some large vacancies at this time. With Jackson Walker moving to Hall Arts the Bank of America tower is expected to be at about fifty percent occupancy. However, the downtown market is very active and the landlords are not panicking. They expect within a reasonable time these vacancies will quickly be backfilled with new tenants.
Because of the record Dallas office rental rates investors are looking intensely at underperforming office buildings that they can renovate and increase the investment’s value. One example is the recent purchase of a vacant office building in Las Colinas. 1915 Hurd Drive is a four story building that has been owned and occupied by Abbot Labs since 1996. It has recently been sold to Herd Irving Property LLC that plans to renovate the 400,000 square foot office building.
It is a safe assumption that the rental rates the property commanded in 1996 are significantly lower than the rates that the new owners will obtain when they renovate the facility.
Dallas office tenants are presently seeing strong demand for office space placing their current locations at rental rates that they didn’t think were possible five years ago. Unfortunately for tenants the reality is that as long as the demand remains at its present levels there is not any relief in site.
Avoid Dallas Office Rent Record Increase Pain
Now is the time to imply a solid rental strategy so that when the market downturn occurs your firm will not be in position where rental rates are falling but you have a lease commitment at higher rates. Working with a seasoned office broker can help you make the right decisions for your lease renewal or office space relocation. Don’t make the mistake of making these important decisions on your own.