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.
By Steve Brown
A new 2014 forecast predicts that the Dallas-Fort Worth area will be one of the top leasing markets in the country this year.
Marcus & Millichap Real Estate Investment Services says that the D-FW area will see close to 8 million square feet of net office leasing this year. Only Houston and New York are expected to see higher office space demand in 2014.
Only about 3.5 million in net office leasing was recorded in the D-FW area in 2013.
“Markets in Texas, with their exceptional forecast employment growth, will dominate the office demand index,” researchers with the commercial real estate firm say. “Expanding service industries such as Associa, Kohl’s and State Farm have boosted the Dallas-Fort Worth regional performance.”
Marcus & Millichap predicts that overall office vacancy rates in North Texas will fall to 17 percent this year, even though about 4 million square feet of new office space will hit the market.