Financial Momentum Fuels Leasing Surge Across DFW
Following the New York Stock Exchange’s announcement to establish a Texas branch, two notable leases were signed this quarter: NYSE Texas at Old Parkland for 18K SF and J.P. Morgan Chase at Crescent Offices West for 64K SF. These moves are part of a growing wave of financial multinationals expanding or relocating to Dallas. Leasing velocity gained even more steam this quarter as net absorption totaled more than 374K SF, pushing annual growth to over 2.1 million SF. Activity was especially notable in North Dallas and Intown Dallas. Large leases this quarter include AT&T occupying nearly half of the 14-story, 412,000 SF Class A building at 2221 Lakeside Blvd in the Richardson submarket, and business insurance provider Marsh McLennan leasing four floors totaling 92,000 SF at Three Galleria Tower in the East LBJ submarket.
Flight to Quality Drives Occupancy Gains and Stabilizes Rents
Vacancy started to declined to 18.3%. The ongoing flight to quality continues to be a key factor-buildings completed since 2010 are more than 90% occupied, compared to 83% for those delivered between 2000 and 2010. Newer space continues to attract tenants and command rental premiums. Uptown stands out as a prime example, where top- tier buildings are separating from the broader market, with existing rates as high as $65-$75/SF NNN and proposed developments exceeding $80/SF NNN. This pricing strength is supported by Uptown's density of new and recently completed projects, totaling 4.2M SF since 2015.
Lower levels of new construction, continued demand for high-quality space, and positive absorption trends are likely to support steady asking rents through the second half of the year.
Office Investment Activity Rises Despite Pricing Uncertainty
As the Dallas-Fort Worth office market finds its footing, sales volume is showing improvement. Major deals include Avalair Group’s purchase of 1201 Main St. in the CBD and De La Vega Capital’s acquisition of 3838 Oak Lawn in Uptown. With Texas being a non-disclosure state, limited deal flow has made pricing even more blurred. Owner-users have emerged as a key buyer group, now accounting for roughly 20% of transactions.
