Happy Holidays! Check out our ad in today’s DFW Bisnow #TogetherWeCelebrate #YoungerPartners
By Catie Dixon, Bisnow
DFW loves new.
Younger Partners Research Director Steve Triolet delved into the impact of Dallas’ huge office pipeline on the market and found that deliveries — 20.1M SF of Class-A and 3.8M SF of Class-B office has come online since 2013 — are shaping the city in a few ways.
1) Rent Explosion
The delta between Class-A and Class-B office rents is widening as new supply sets new bars for pricing. Historically, there was a $4 to $5 gap per square foot between what tenants paid for a top-tier building and a Class-B one, but that has been increasing over the past five years, Triolet said. The delta is now $8/SF.
2) New-Build Is Low-Risk, But Could Hurt Everyone Else
The best performing submarkets are typically the ones with the newest buildings, and those properties are almost guaranteed to do well. “Even in an overbuilding situation, it’s rare for the newest buildings to go into distress,” Triolet said. “The properties that struggle the most at almost any point in the business cycle are the older, outdated properties.” Even with a growing discount on pricing, these properties are more often struggling to attract tenants.
3) Time On Market Is Shrinking, Which Is Unexpected
The overall vacancy rate in DFW office has been rising for three years. Typically, the average time to lease space is directly correlated to vacancy — as competition increases, so does the amount of time it takes to fill a building. Not this time.
The average time on market has been trending downward for the past five years and particularly the last three. Basically, tenants are quickly jumping on new space, and there has been more new space to jump to recently. DFW has been absorbing a strong 5M SF per year for about five years, making it one of the most active leasing markets in the U.S.
No surprise: Time on market is much longer for older properties than new or newly renovated ones.
“The underlining message is old, unimproved space tends to languish on the market, while there continues to be a healthy appetite for higher-quality space, especially new and improved office space,” Triolet said.
All the stars aligned for both the buyer, Caddo Holdings, and the seller, Granite Properties, to get what they wanted out of the sale of the 261k SF Preston Plaza. Full article.
A new year, a new look: The vacant, 64k SF 1400 Corporate Dr in Irving has been snatched up by Triad Real Estate Consulting, which plans to upgrading the lobby and common areas, among other renovations, we learned exclusively from the seller’s rep. (This is your chance to put a bowling alley in the basement… just sayin’.)
Younger Partners’ Dustin Volz and Zane Marcell (whom we snapped over lunch) repped the seller, an out-of-state investment group. Sales price was not disclosed. Dustin says he’s continuing to see a major price recovery, especially in the Class-B and C assets over the last nine to 12 months in DFW. Things have particularly picked up since March. (Everyone got through St. Patty’s Day alive and decided to buckle down.) A few reasons: the shortage of product, a very aggressive leasing market, and out-of-state buyers back in full force, helping bump up prices.
Billingsley SVP investments and build-to-suits Marijke Lantz (far right, with Pegasus Ablon asset management VP Mark Roppolo and Younger Partners partner Moody Younger) says Billingsley’s 1,000-acre Cypress Waters project at LBJ and Belt Line opened 675 multifamily units (that were pre-leased) and has three buildings under construction, one with a HQ company, one spec, and activity is so strong that the firm is following up with another spec building. Her advice to people entering real estate world: Learn new things and learn all sides of the business to help your clients. Having a good reputation for being ethical and moral will benefit you throughout your career.