Businesses are paying a bigger tab for the newest D-FW office digs
By Steve Brown
North Texas businesses are paying a lot more for the newest office digs.
With the recent building boom, costs for the newest, first-class buildings are at an all-time high.
And the gap between what companies are paying for the top-of-the-market space is growing compared to older, so-called Class B buildings, a new study by real estate company Younger Partners found.
“The spread is definitely getting wider,” Younger Partners’ Steve Triolet said. “Office rental rates are at an all-time peak – well above where we were in the ’90s and the 2000s.
Historically the difference in average asking office rents between Class A and Class B buildings in D-FW runs just over $5 per square foot. Currently, the difference is more than $8 per square foot, Triolet said.
That shouldn’t come as a surprise with most of the newer buildings quoting rents in the $30s and $40s per square foot. Average asking rents for all types of buildings are more than $25 per square foot.
Tenants who don’t want to pay the extra rate for the shiniest new offices are finding more options.
“We are seeing an increase in Class B space availability because you have had a lot of new construction and that has pulled tenants to new buildings,” Triolet said.
While the rate of office rent growth is slowing in North Texas, Younger Partners’ founder Moody Younger said he’s not seeing a lot of giveaways yet to attract tenants.
“If there are some concessions creeping back in, it’s building specific,” Younger said. “But I do think that concessions are something to be aware of.
“Where we are seeing concession increases is in the tenant improvement packages which are continuing to escalate.”
Rather than give free rent, some new building owners are sweetening the deal with fancier interiors for their new tenants.
That should come as no surprise to those of us who live in the area and see the steady stream of new residents and businesses and growth in many of the long-standing businesses that call DFW home.
Austin led the list with a population growth of 2.5 percent, followed by Raleigh, N.C., and Phoenix, Ariz. Houston ranked No. 10 on the list, with a population growth rate of 1.82 percent and San Antonio fell in at No. 20.