Office Insight - assets.recenter.tamu.edu€¦ · Office Insight Dallas | Q2 2016 163,694,286 Total inventory (s.f.) 849,737 Q2 2016 net absorption (s.f.) $25.24 Direct average asking

Construction pushing vacancies for select submarkets

Source: JLL Research

Class A & B rental rates by submarket p.s.f.


Spec construction scheduled for late 2016 delivery


Vacancy beginning to rise as new construction outpaced absorption

Net absorption was low in the first quarter, but was much stronger in the second

quarter. Through the first half of the year, there has been just over one million

square feet of net absorption. Despite this strong level of absorption, the vacancy

rate increased slightly to 19.2 percent due to new spec construction delivered to

the market. As previously noted, the vacancy rate is low by historic standards,

but it is expected to continue to move upward as a sizable amount of new

construction is delivered to the market over the next two years.

Rate pressure remains high

Despite the vacancy increase, rate pressure remains in effect for all submarkets.

Year-over-year, direct asking rates increased for Class A & B space by 7.6

percent. Rent increases ranged from 1 percent in Preston Center to 12 percent

for Uptown. In some submarkets, like Uptown, some older properties that are

well-leased are commanding rates on par, or in some cases, even higher than

similar projects currently under construction.

Construction pipeline continues to increase, higher vacancy likely

While the construction pipeline is not at record highs, it is above the long term

average and has been increasing over the past few quarters. More than half is

made up of very large built-to-suits (most of which will deliver in 2017 and early

2018), but in most cases their existing locations will need to be backfilled. In the

first half of 2016, almost 2.2 million square feet of new construction has been

completed. In the second half of the year, another 3.3 million square feet is

scheduled for completion. Of that pipeline of 3.3 million square feet, 1.8 million

square feet is not built-to-suit or preleased.

Absorption bounces back, construction grows

2,257

Office Insight

Dallas | Q2 2016

163,694,286Total inventory (s.f.)

849,737Q2 2016 net absorption (s.f.)

$25.24Direct average asking rent

11,148,693Total under construction (s.f.)

19.2%Total vacancy

1,014,672YTD net absorption (s.f.)

7.6%12-month rent growth

68% Total preleased

$10

$20

$30

$40

1.8 million s.f.(vacant spec set for second half of 2016)

23.8%

12.3% 15.8%18.3%

25.0%

13.7%10.7%

19.1%

29.2%

10.0%

20.0%

30.0%

40.0%

Current conditions – submarket Historical leasing activity (s.f.)

Source: JLL Research Source: JLL Research

Total net absorption (s.f.)


Total vacancy rate (%)


Direct average asking rent ($ p.s.f.)


1,332,182

2,314,698

-462,185

479,116

1,644,584

2,925,053 2,991,066

2,293,652

4,794,274

1,014,672

-1,000,000

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD 2016

$20.89 $21.17 $20.80 $20.34 $20.38 $20.88 $21.29

$22.73

$24.38$25.24

$14.00

$16.00

$18.00

$20.00

$22.00

$24.00

$26.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 Q2 2016

22.2%

24.1%25.2%

23.6%22.5%

21.2%

19.6% 19.4%18.7% 19.2%

10.0%

15.0%

20.0%

25.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015 Q2 2016

Land

lord

leve

rage

Tenant leverage

Peaking

market

Falling

market

Bottoming

marketRising

market

17,366,201

20,296,585

13,885,54612,657,498

5,668,265

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

2012 2013 2014 2015 YTD 2016

©2015 Jones Lang LaSalle IP, Inc. All rights reserved. For more information, contact: Steve Triolet | [email protected]

Stemmons Freeway

Dallas, Central

Far North Dallas, Las Colinas,

Richardson/Plano, Uptown

Preston Center

CBD

LBJ Freeway

Office Statistics

Dallas | Q2 2016

Class Inventory (s.f.)Total net

absorption (s.f.)

YTD total net

absorption (s.f.)

YTD total net

absorption (%

of stock)

Direct vacancy

(%)

Total vacancy

(%)

Average direct

asking rent ($

p.s.f.)

YTD

completions

(s.f.)

Under

construction

(s.f.)CBD Totals 26,883,789 -205,278 -349,896 -1.3% 23.0% 23.8% $24.74 0 261,400Uptown/Oak Lawn Totals 10,613,377 51,431 59,578 0.6% 10.7% 12.3% $37.42 141,330 1,794,225Downtown Totals 37,497,166 -153,847 -290,318 -0.8% 19.5% 20.5% $28.33 141,330 2,055,625Far North Dallas Totals 37,916,688 478,257 643,942 1.7% 14.3% 15.8% $26.52 1,124,490 7,316,368Las Colinas Totals 28,695,035 9,304 44,572 0.2% 16.8% 18.3% $24.30 466,219 981,542LBJ Freeway Totals 19,218,450 475,107 422,003 2.2% 24.3% 25.0% $21.49 0 0North Central Expressway Totals 10,687,077 206,376 402,936 3.8% 13.4% 13.7% $26.55 0 0Preston Center Totals 4,032,073 -22,701 -22,097 -0.5% 10.3% 10.7% $34.44 0 186,257Richardson/Plano Totals 17,394,262 -42,971 -96,053 -0.6% 18.7% 19.1% $22.48 459,186 608,901Stemmons Freeway Totals 8,253,535 -99,788 -90,313 -1.1% 28.6% 29.2% $17.05 0 0Suburbs Totals 126,197,120 1,003,584 1,304,990 1.0% 17.8% 18.8% $24.33 2,049,895 9,093,068

Dallas Totals 163,694,286 849,737 1,014,672 0.6% 18.2% 19.2% $25.24 2,191,225 11,148,693

CBD A 21,890,445 -187,118 -423,999 -1.9% 23.6% 24.6% $25.88 0 261,400Uptown/Oak Lawn A 8,566,220 106,730 138,460 1.6% 10.9% 11.6% $38.22 141,330 1,794,225Downtown A 30,456,665 -80,388 -285,539 -0.9% 20.0% 20.9% $29.35 141,330 2,055,625Far North Dallas A 22,494,325 422,057 462,643 2.1% 13.9% 15.5% $29.86 1,085,218 7,036,114Las Colinas A 15,932,122 -80,300 -19,955 -0.1% 16.4% 18.9% $27.13 466,219 642,183LBJ Freeway A 10,404,414 347,306 48,500 0.5% 23.7% 24.3% $24.55 0 0North Central Expressway A 7,051,855 148,178 303,774 4.3% 14.2% 14.5% $28.52 0 0Preston Center A 3,262,591 -29,735 -31,371 -1.0% 10.3% 10.7% $35.90 0 186,257Richardson/Plano A 8,766,810 -47,767 83,248 0.9% 15.4% 16.0% $24.86 459,186 550,000Stemmons Freeway A 3,684,761 30,383 31,623 0.9% 17.1% 17.1% $18.48 0 0Suburbs A 71,596,878 790,122 878,462 1.2% 16.1% 17.4% $27.43 2,010,623 8,414,554

Dallas A 102,053,543 709,734 592,923 0.6% 17.3% 18.4% $28.00 2,151,953 10,470,179

CBD B 4,993,344 -18,160 74,103 1.5% 20.2% 20.3% $19.72 0 0Uptown/Oak Lawn B 2,047,157 -55,299 -78,882 -3.9% 9.8% 15.3% $34.08 0 0Downtown B 7,040,501 -73,459 -4,779 -0.1% 17.2% 18.8% $23.90 0 0Far North Dallas B 15,422,363 56,200 181,299 1.2% 14.9% 16.2% $21.65 39,272 280,254Las Colinas B 12,762,913 89,604 64,527 0.5% 17.4% 17.6% $20.76 0 339,359LBJ Freeway B 8,814,036 127,801 373,503 4.2% 25.0% 25.7% $17.88 0 0North Central Expressway B 3,635,222 58,198 99,162 2.7% 11.8% 12.2% $22.73 0 0Preston Center B 769,482 7,034 9,274 1.2% 10.4% 10.4% $28.23 0 0Richardson/Plano B 8,627,452 4,796 -179,301 -2.1% 22.2% 22.3% $20.07 0 58,901Stemmons Freeway B 4,568,774 -130,171 -121,936 -2.7% 37.8% 38.9% $15.89 0 0Suburbs B 54,600,242 213,462 426,528 0.8% 19.9% 20.6% $20.27 39,272 678,514

Dallas B 61,640,743 140,003 421,749 0.7% 19.6% 20.4% $20.68 39,272 678,514

8343 Douglas Avenue Suite 100 Dallas, TX 75225 tel +1 214 438 6430 [email protected]

2015 Jones Lang LaSalle IP, Inc. All rights reserved.

Steve Triolet Research Manager

Class A & B rental rates by submarket p.s.f.


YTD net absorption and construction completions


Total vacancy (%) YTD by submarket


Upward pressure on rates has expanded to all submarketsThe region’s ongoing job gains and the continued tight market conditions hasresulted in significant rental rate growth over the past two years in half of Dallas’ submarkets. That upward pressure on rates has now begun to impact all submarkets, even those with higher vacancy like the Stemmons and LBJ Freeway submarkets.

Over the past quarter, all submarkets showed an increase in average asking rates, with the active submarkets seeing the larger increases (Far North Dallas, Uptown, Las Colinas). Year-over-year, rate increases for Class A and B space now average 6.3 percent, and range from 1.5 percent in Stemmons Freeway to 9.0 percent for North Central Expressway. Class A space is outpacing this slightly as some of the highest demand submarkets are realizing gains well above 8.0 percent.

Majority of net absorption has gone into newly delivered construction2015 absorption has been on a fast pace, partly driven by State Farm’s occupancy of their new, regional HQ. Even after adjusting for this impact, net absorption through Q3 has totaled 2.4 million square feet, which is a strong year. Overall, new construction has been in balance with both net absorption and new deliveries coming in at just under 4 million square feet each. The high net absorption has been driven by a mix of leasing in built-to-suit projects (State Farm, FedEx, The Richards Group, Monitronics) and lead tenants taking occupancy on some spec developments (KPMG, Polsinelli, Frost Bank).

Vacancy is stable and near historic lows, despite new spec deliveriesDallas is currently posting almost double the historic average of demand for space. The 7.7 million-square-foot construction pipeline and additional projects that may break ground suggest that vacancy may be at its low point in this cycle. We expect vacancy to begin to rise in 2016. We see this as a gradual shift because new spec construction should remain below previous cycles as a percent of total inventory and the economic outlook continues to be strong.

Shifting landscape offers opportunity for investors

2,257

23.3%

11.7% 15.0% 17.2%

26.2%18.2%

9.2%

17.2%25.1%

0.0%

10.0%

20.0%

30.0%

3.95 million s.f.YTD net absorption,

(3.94 million s.f. of completions)

$0.0$10.0$20.0$30.0$40.0

Office Insight

Dallas | Q3 2015


1,074,290Q3 2015 net absorption (s.f.)



18.7%Total vacancy



59.0% Total preleased









3,930,459

1,332,182

2,314,698

-462,185

479,116

1,644,584

2,925,053 2,991,066

2,293,652

3,954,840

-1,000,000

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015

$19.56

$20.89 $21.17 $20.80 $20.34 $20.38

$20.88$21.29

$22.73

$23.93

$16.00

$18.00

$20.00

$22.00

$24.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015

22.1% 22.2%

24.1%25.2%

23.6%22.5%

21.2%19.6% 19.4% 18.7%

10.0%

15.0%

20.0%

25.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015

Dallas, Central

Land

lord

leve

rage

Tenant leverage

Peaking market

Falling market

Bottoming market

Rising market

CBD

Far North Dallas, Las Colinas, Richardson/Plano, Uptown

Preston Center16,461,855 17,366,201

20,296,585

13,885,546

6,067,906

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

2011 2012 2013 2014 YTD 2015

LBJ Freeway


Stemmons Freeway

Office Statistics

Dallas | Q3 2015


absorption (s.f.)

YTD total net

absorption (s.f.)

YTD total net

absorption (%

of stock)

Direct vacancy

(%)

Total vacancy

(%)

Average direct

asking rent ($

p.s.f.)

YTD

completions

(s.f.)

Under

construction

(s.f.)CBD Totals 26,745,091 122,962 115,489 0.4% 22.6% 23.3% $23.28 459,383 0Uptown/Oak Lawn Totals 10,531,517 83,487 402,159 3.8% 11.2% 11.7% $35.08 417,735 671,330Downtown Totals 37,276,608 206,449 517,648 1.4% 19.4% 20.0% $26.61 877,118 671,330Far North Dallas Totals 37,116,350 593,449 1,394,519 3.8% 14.1% 15.0% $25.17 1,039,832 4,781,190Las Colinas Totals 28,339,441 338,643 231,601 0.8% 15.8% 17.2% $23.49 165,000 681,219LBJ Freeway Totals 19,253,769 122,634 153,504 0.8% 26.1% 26.2% $19.85 0 0North Central Expressway Totals 10,750,492 155,364 387,610 3.6% 17.8% 18.2% $24.30 207,041 0Preston Center Totals 3,840,324 -5,003 -41,227 -1.1% 8.7% 9.2% $34.32 0 361,583Richardson/Plano Totals 16,028,946 -331,349 1,077,083 6.7% 13.1% 17.2% $21.82 1,659,722 1,239,992Stemmons Freeway Totals 8,334,184 -5,897 234,102 2.8% 24.2% 25.1% $16.18 0 0Suburbs Totals 123,663,506 867,841 3,437,192 2.8% 17.1% 18.3% $23.12 3,071,595 7,063,984

Dallas Totals 160,940,114 1,074,290 3,954,840 2.5% 17.6% 18.7% $23.93 3,948,713 7,735,314

CBD A 21,466,723 96,761 367,290 1.7% 22.1% 22.9% $24.24 459,383 0Uptown/Oak Lawn A 8,309,047 82,561 144,705 1.7% 10.6% 11.1% $36.29 417,735 671,330Downtown A 29,775,770 179,322 511,995 1.7% 18.9% 19.6% $27.60 877,118 671,330Far North Dallas A 21,449,448 518,496 920,940 4.3% 11.9% 12.5% $28.43 698,121 4,658,136Las Colinas A 15,563,710 190,369 209,512 1.3% 14.2% 16.4% $26.42 165,000 681,219LBJ Freeway A 10,061,278 10,412 -21,174 -0.2% 23.9% 24.0% $22.28 0 0North Central Expressway A 7,052,036 56,109 289,942 4.1% 19.7% 20.0% $26.92 207,041 0Preston Center A 3,070,842 -2,922 -45,588 -1.5% 9.4% 10.0% $35.90 0 361,583Richardson/Plano A 7,201,311 -297,852 1,209,169 16.8% 6.4% 13.1% $24.30 1,659,722 1,239,992Stemmons Freeway A 3,684,656 23,904 190,103 5.2% 16.8% 18.2% $18.68 0 0Suburbs A 68,083,281 498,516 2,752,904 4.0% 14.6% 16.1% $26.28 2,729,884 6,940,930

Dallas A 97,859,051 677,838 3,264,899 3.3% 15.9% 17.2% $26.68 3,607,002 7,612,260

CBD B 5,278,368 26,201 -251,801 -4.8% 24.8% 24.8% $19.37 0 0Uptown/Oak Lawn B 2,222,470 926 257,454 11.6% 13.5% 14.0% $30.55 0 0Downtown B 7,500,838 27,127 5,653 0.1% 21.4% 21.6% $22.68 0 0Far North Dallas B 15,666,902 74,953 473,579 3.0% 17.2% 18.4% $20.70 341,711 123,054Las Colinas B 12,775,731 148,274 22,089 0.2% 17.8% 18.1% $19.92 0 0LBJ Freeway B 9,192,491 112,222 174,678 1.9% 28.4% 28.7% $17.18 0 0North Central Expressway B 3,698,456 99,255 97,668 2.6% 14.2% 14.6% $19.29 0 0Preston Center B 769,482 -2,081 4,361 0.6% 5.8% 6.0% $28.01 0 0Richardson/Plano B 8,827,635 -33,497 -132,086 -1.5% 18.5% 20.5% $19.79 0 0Stemmons Freeway B 4,649,528 -29,801 43,999 0.9% 30.0% 30.5% $14.20 0 0Suburbs B 55,580,225 369,325 684,288 1.2% 20.1% 21.0% $19.26 341,711 123,054

Dallas B 63,081,063 396,452 689,941 1.1% 20.3% 21.0% $19.66 341,711 123,054




Needle-mover relocations/consolidations/built-to-suits (SF)

2014 Santander 350K, Omnitracs/ActiveNetwork 300K

2015 State Farm 1.5M, Richards Group 250K

2016 State Farm 500K, Realpage 400K, Raytheon 490K,

2017 Toyota 2M SF, Liberty Mutual 1M, FedEx 265KSource: JLL Research

Rates and related expenses up significantly


Construction pipeline points toward rising vacancy rate


Relocations and consolidations driving near record-high absorption Dallas has been outpacing long term trends with outsized net absorption, which has been given a tremendous boost by large corporate users relocating or consolidating operations in the Dallas market. In many cases this has involved large built-to-suit projects (State Farm, Toyota, Liberty Mutual), but in others it has been less high profile backfilling of large blocks of space (Realpage, Santander). Over the past three years, the Dallas market has averaged over 2.7 million square feet of positive net absorption. Through the first half of 2015, that number has already been surpassed, partly due to State Farm taking occupancy in the first phase of its new campus. Recently signed lease transactions point to strong net absorption over the next two years.

Strong demand coupled with increased expenses pushing rates higher All of this strong demand for space has put strong upward pressure on rates. Some of that pressure is from a tighter vacancy rate, but also from an expense and labor perspective. The active construction pipeline has utilized almost all of the available labor pool for construction workers, which has resulted in large increases in base construction costs, tenant finishes and related projects. Tenant improvement costs alone have increased somewhere in the 15 to 18% range over the past two years. These higher expenses ultimately get passed on to tenants through increased rates.

Vacancy likely at low point in the cycle with new spec near completionWith over 8.5 million square feet currently underway and several more announced projects soon to break ground, the market is likely near or at the low point from a vacancy rate perspective this cycle. Most of the construction completed over the past two years has been built-to-suit projects, but this dynamic is expected to shift more toward spec development. Still with strong pre-leasing activity and a lower than average vacancy rate, the market is expected to remain landlord favorable for at least the next two years.

Near record demand pushing rates and costs up

2,257

Office Insight

Dallas | Q2 2015





18.7%Total vacancy




25.2%

23.6%22.5%

21.2%

19.6% 19.4% 19.2%

21.1% 21.3%

15.0%

17.0%

19.0%

21.0%

23.0%

25.0%

27.0%

2009 2010 2011 2012 2013 2014 2015 2016 2017

12.5%Asking rates past two years

16.5%Tenant improvement costs









3,930,459

1,332,182

2,314,698

-462,185

479,116

1,644,584

2,925,053 2,991,066

2,293,6522,880,550

-1,000,000

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015

$19.56

$20.89 $21.17 $20.80 $20.34 $20.38

$20.88$21.29

$22.73$23.45

$14.00

$16.00

$18.00

$20.00

$22.00

$24.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015

22.1% 22.2%

24.1%25.2%

23.6%22.5%

21.2%

19.6% 19.4%18.7%

10.0%

15.0%

20.0%

25.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015

Dallas, Central

Landlord leverage

Tenant leverage

Peaking market

Falling market

Bottoming market

Rising market

CBD

Far North Dallas, Las Colinas, Richardson/Plano, UptownPreston Center 16,461,855 17,366,201

20,296,585

13,885,546

6,067,906

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

2011 2012 2013 2014 YTD 2015

LBJ Freeway


Stemmons Freeway

Office Statistics

Dallas | Q2 2015


absorption (s.f.)

YTD total net

absorption (s.f.)

YTD total net

absorption (%

of stock)

Direct vacancy

(%)

Total vacancy

(%)

Average direct

asking rent ($

p.s.f.)

YTD

completions

(s.f.)

Under

construction

(s.f.)CBD Totals 26,304,414 208,683 -7,473 0.0% 21.9% 22.5% $22.73 0 450,000Uptown/Oak Lawn Totals 10,312,952 91,085 318,672 3.1% 10.8% 11.2% $33.53 250,000 847,735Downtown Totals 36,617,366 299,768 311,199 0.8% 18.8% 19.3% $25.77 250,000 1,297,735Far North Dallas Totals 36,430,017 336,243 801,070 2.2% 13.5% 15.0% $24.98 273,458 5,274,614Las Colinas Totals 28,478,584 242,516 -107,042 -0.4% 16.9% 18.3% $23.09 0 654,219LBJ Freeway Totals 19,297,022 -36,352 30,870 0.2% 26.6% 26.8% $19.67 0 0North Central Expressway Totals 10,797,895 186,808 232,246 2.2% 19.3% 19.5% $23.74 207,041 0Preston Center Totals 3,840,324 15,699 -36,224 -0.9% 8.5% 9.0% $34.14 0 190,000Richardson/Plano Totals 16,071,469 -84,312 1,408,432 8.8% 12.9% 15.1% $21.00 1,557,638 1,092,084Stemmons Freeway Totals 8,333,485 64,382 239,999 2.9% 24.1% 25.0% $15.98 0 0Suburbs Totals 123,248,796 724,984 2,569,351 2.1% 17.3% 18.5% $22.76 2,038,137 7,210,917

Dallas Totals 159,866,162 1,024,752 2,880,550 1.8% 17.7% 18.7% $23.45 2,288,137 8,508,652

CBD A 21,007,340 174,794 270,529 1.3% 21.0% 21.7% $23.55 0 450,000Uptown/Oak Lawn A 8,096,465 71,996 62,144 0.8% 9.9% 10.4% $34.35 250,000 847,735Downtown A 29,103,805 246,790 332,673 1.1% 17.9% 18.5% $25.22 250,000 1,297,735Far North Dallas A 20,903,396 48,485 402,444 1.9% 11.5% 12.7% $28.23 198,841 4,888,814Las Colinas A 15,395,312 277,295 19,143 0.1% 14.5% 16.7% $25.95 0 306,219LBJ Freeway A 10,061,278 -10,116 -31,586 -0.3% 24.0% 24.1% $22.13 0 0North Central Expressway A 7,069,940 185,273 233,833 3.3% 20.6% 20.8% $26.12 207,041 0Preston Center A 3,070,842 4,571 -42,666 -1.4% 9.2% 9.9% $35.75 0 190,000Richardson/Plano A 7,199,377 -153,463 1,507,021 20.9% 6.5% 9.0% $23.25 1,557,638 1,092,084Stemmons Freeway A 3,684,656 42,522 166,199 4.5% 17.5% 18.9% $18.53 0 0Suburbs A 67,384,801 394,567 2,254,388 3.3% 14.7% 16.0% $25.86 1,963,520 6,477,117

Dallas A 96,488,606 641,357 2,587,061 2.7% 15.7% 16.7% $25.66 2,213,520 7,774,852

CBD B 5,297,074 33,889 -278,002 -5.2% 25.6% 25.6% $19.47 0 0Uptown/Oak Lawn B 2,216,487 19,089 256,528 11.6% 13.9% 14.1% $30.53 0 0Downtown B 7,513,561 52,978 -21,474 -0.3% 22.1% 22.2% $21.52 0 0Far North Dallas B 15,526,621 287,758 398,626 2.6% 16.2% 18.0% $20.61 74,617 385,800Las Colinas B 13,083,272 -34,779 -126,185 -1.0% 19.7% 20.1% $19.73 0 348,000LBJ Freeway B 9,235,744 -26,236 62,456 0.7% 29.5% 29.8% $16.98 0 0North Central Expressway B 3,727,955 1,535 -1,587 0.0% 16.7% 17.2% $19.24 0 0Preston Center B 769,482 11,128 6,442 0.8% 5.5% 5.8% $27.71 0 0Richardson/Plano B 8,872,092 69,151 -98,589 -1.1% 18.2% 20.1% $19.18 0 0Stemmons Freeway B 4,648,829 21,860 73,800 1.6% 29.4% 29.9% $13.96 0 0Suburbs B 55,863,995 330,417 314,963 0.6% 20.5% 21.5% $19.03 74,617 733,800

Dallas B 63,377,556 383,395 293,489 0.5% 20.7% 21.6% $19.32 74,617 733,800




Job growth has accelerated over recent months, resulting in near

record- high absorption in early 2015

Like much of the country, there was a notable uptick in job growth in the early part of 2015, with Dallas recording an annual 140,800 net job gain. This job growth has been from a broad spectrum of industries and is expected to fuel strong demand for space for the foreseeable future. As a result of job growth, strong absorption moved the total vacancy rate to 19.0 percent. This vacancy rate is extremely low by historical standards. As vacancy declines, upward pressure on rates has continued, with average asking rates rising more than 5.0 percent over the past year.

First quarter job growth and absorption outpacing 2014

Source: BLS, JLL Research

Construction deliveries of large built-to-suits drive demand

A majority of the 1.9 million square feet of positive net absorption in the first quarter was driven by the completion of State Farm’s and the Richard Group’s built-to-suit projects. Neither company was a corporate relocation, which have been a positive catalyst for the Dallas market, as both companies expanded their employment and real estate footprints in Dallas. Of the current 7.2 million-square-foot construction pipeline, there are significant additional built-to-suits, including Toyota, FedEx, 7-Eleven and Raytheon. Most of these projects are in the early stages and won’t be delivered to the market until 2016 or 2017.

Pipeline expands, built-to-suit is significant component


Class A properties continue to dominate leasing activity

Despite higher rates and rate increases, tenants have been willing to lease and expand within Class A product. To date, most tenants have opted to mitigate rate increases through higher density instead of lower cost alternatives. With the robust construction pipeline underway, this concentration on Class A space is expected to continue for at least the next two years.

Despite price premium, Class A continues to pace Class B


19.0%Total vacancy





Office Insight

Dallas | Q1 2015

Built-to-suit deliveries drive strong absorption

January 2015 = 141K jobs 2014 =123K jobsAnnualized net job growth

-1,000,0000

1,000,0002,000,0003,000,0004,000,000

2011 2012 2013 2014 Q1 2015

Class A Net absorption (sf) Class B Net absorption (sf)

0

2,000,000

4,000,000

6,000,000

8,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 Q12015

Current conditions – market and submarket Historical leasing activity




Total vacancy rate




3,930,459

1,332,182

2,314,698

-462,185479,116

1,644,584

2,925,053 2,991,066

2,293,6521,855,788

-1,000,000

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1 2015

$19.56 $20.89 $21.17 $20.80 $20.34 $20.38 $20.88 $21.29

$22.73 $23.09

$10.00

$12.00

$14.00

$16.00

$18.00

$20.00

$22.00

$24.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1 2015

22.1% 22.2%24.1%

25.2%23.6%

22.5%21.2%

19.6% 19.4% 19.0%

10.0%

20.0%

30.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1 2015

Non-CBD

Landlord le

verage

Tenant leverage

Peaking market

Falling market

Bottoming market

Rising market

CBD

Dallas16,461,855 17,366,201

20,296,585

13,885,546

3,747,786

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

2011 2012 2013 2014 Q1 2015

©2015 Jones Lang LaSalle IP, Inc. All rights reserved. For more information, contact: Steve Triolet | +1 214 438 6430 | [email protected]

Office StatisticsDallas | Q1 2015

ClassTotal net

absorption (s.f.)

YTD total net

absorption (s.f.)

YTD total net

absorption (%

of stock)

Direct vacancy

(%)

Total vacancy

(%)

Average direct

asking rent ($

p.s.f.)

YTD

completions

(s.f.)

Under

construction

(s.f.)CBD Totals 26,706,979 -216,156 -216,156 -0.8% 21.8% 22.4% $22.16 0 450,000Uptown/Oak Lawn Totals 10,394,835 227,577 227,577 2.2% 11.2% 11.8% $33.27 250,000 847,735Downtown Totals 37,101,814 11,421 11,421 0.0% 18.8% 19.5% $25.27 250,000 1,297,735Far North Dallas Totals 36,320,565 464,827 464,827 1.3% 14.2% 15.8% $24.65 197,784 4,316,239Las Colinas Totals 28,131,688 -349,558 -349,558 -1.2% 17.9% 19.2% $22.85 0 631,219LBJ Freeway Totals 19,334,339 67,222 67,222 0.3% 26.4% 26.6% $19.30 0 0North Central Expressway Totals 10,590,863 45,438 45,438 0.4% 19.3% 19.7% $22.63 0 235,893Preston Center Totals 3,840,324 -51,923 -51,923 -1.4% 9.0% 9.4% $33.72 0 206,000Richardson/Plano Totals 16,496,203 1,492,744 1,492,744 9.0% 12.7% 14.2% $21.03 1,557,638 490,000Stemmons Freeway Totals 8,333,372 175,617 175,617 2.1% 24.8% 25.8% $15.89 0 0Suburbs Totals 123,047,354 1,844,367 1,844,367 1.5% 17.8% 18.9% $22.43 1,755,422 5,879,351

Dallas Totals 160,149,168 1,855,788 1,855,788 1.2% 18.0% 19.0% $23.09 2,005,422 7,177,086

CBD A 21,648,696 95,735 95,735 0.4% 22.5% 23.3% $22.81 0 450,000Uptown/Oak Lawn A 7,923,553 -9,852 -9,852 -0.1% 10.7% 11.3% $34.12 0 847,735Downtown A 29,572,249 85,883 85,883 0.3% 19.3% 20.1% $24.48 0 1,297,735Far North Dallas A 20,646,507 353,959 353,959 1.7% 11.3% 12.7% $28.35 123,167 3,883,539Las Colinas A 15,254,013 -258,152 -258,152 -1.7% 16.6% 18.7% $25.48 0 306,219LBJ Freeway A 10,061,278 -21,470 -21,470 -0.2% 23.8% 24.0% $21.38 0 0North Central Expressway A 6,862,899 48,560 48,560 0.7% 20.6% 21.1% $24.47 0 235,893Preston Center A 3,070,842 -47,237 -47,237 -1.5% 9.5% 10.0% $35.34 0 190,000Richardson/Plano A 7,624,775 1,660,484 1,660,484 21.8% 5.8% 6.5% $23.44 1,557,638 490,000Stemmons Freeway A 3,684,656 123,677 123,677 3.4% 18.6% 20.0% $18.49 0 0Suburbs A 67,204,970 1,859,821 1,859,821 2.8% 15.0% 16.2% $25.48 1,680,805 5,105,651

Dallas A 96,777,219 1,945,704 1,945,704 2.0% 16.3% 17.4% $25.18 1,680,805 6,403,386

CBD B 5,058,283 -311,891 -311,891 -6.2% 18.8% 18.8% $19.38 0 0Uptown/Oak Lawn B 2,471,282 237,429 237,429 9.6% 13.1% 13.4% $30.53 250,000 0Downtown B 7,529,565 -74,462 -74,462 -1.0% 16.9% 17.0% $22.21 250,000 0Far North Dallas B 15,674,058 110,868 110,868 0.7% 18.1% 19.9% $19.78 74,617 432,700Las Colinas B 12,877,675 -91,406 -91,406 -0.7% 19.4% 19.9% $19.73 0 325,000LBJ Freeway B 9,273,061 88,692 88,692 1.0% 29.2% 29.4% $17.04 0 0North Central Expressway B 3,727,964 -3,122 -3,122 -0.1% 16.7% 17.2% $19.25 0 0Preston Center B 769,482 -4,686 -4,686 -0.6% 7.0% 7.2% $27.23 0 16,000Richardson/Plano B 8,871,428 -167,740 -167,740 -1.9% 18.5% 20.8% $18.95 0 0Stemmons Freeway B 4,648,716 51,940 51,940 1.1% 29.8% 30.4% $13.83 0 0Suburbs B 55,842,384 -15,454 -15,454 0.0% 21.0% 22.1% $18.75 74,617 773,700

Dallas B 63,371,949 -89,916 -89,916 -0.1% 20.5% 21.5% $19.16 324,617 773,700




YTD

completion (sf) Inventory (sf)

Direct net

absorption (sf)

YTD

direct net

absorption (sf)

Total net

absorption

(sf)

YTD total net

absorption

(sf)

YTD total net

absorption

(% of stock)

Direct

vacancy (sf)

Direct

vacancy (%)

Total vacancy

(sf)

Total vacancy

(%)

Average asking

rent ($ psf)

Under

construction /

renovation (sf)

CBD

Class A 235,734 66,569,934 667,042 1,392,318 733,532 1,520,190 2.3% 9,439,528 14.2% 10,173,042 15.3% $31.41 5,115,921

Class B 0 24,891,713 94,133 449,775 88,383 463,035 1.9% 3,625,926 14.6% 4,025,617 16.2% $25.14 45,700

Totals 235,734 91,461,647 761,175 1,842,093 821,915 1,983,225 2.2% 13,065,455 14.3% 14,198,659 15.5% $29.86 5,161,621

Suurbs

Class A 6,314,854 157,298,465 847,068 4,516,956 525,730 4,118,485 2.6% 20,760,888 13.2% 23,532,174 15.0% $28.75 20,214,692

Class B 365,446 137,468,125 401,315 1,340,012 307,867 1,011,277 0.7% 24,088,736 17.5% 25,857,273 18.8% $20.19 185,297

Totals 6,680,300 294,766,590 1,248,383 5,856,968 833,597 5,129,762 1.7% 44,849,625 15.2% 49,389,447 16.8% $24.79 20,399,989

Texas totals

Class A 6,550,588 223,868,399 1,514,110 5,909,274 1,259,262 5,638,675 2.5% 30,200,416 13.5% 33,705,217 15.1% $29.58 25,330,613

Class B 365,446 162,359,838 495,448 1,789,787 396,250 1,474,312 0.9% 27,714,663 17.1% 29,882,889 18.4% $20.83 230,997

Totals 6,916,034 386,228,237 2,009,558 7,699,061 1,655,512 7,112,987 1.8% 57,915,079 15.0% 63,588,106 16.5% $25.94 25,561,610

© 2015 Jones Lang LaSalle IP, Inc. All rights reserved.

Office StatisticsTexas | Q4 2014

CBD

YTD


Direct net

absorption (sf)

YTD

direct net

absorption (sf)

Total net

absorption

(sf)

YTD total net

absorption

(sf)

YTD total net

absorption

(% of stock)

Direct

vacancy (sf)

Direct

vacancy (%)

Total vacancy

(sf)

Total vacancy

(%)

Average asking

rent ($ psf)

Under

construction /

renovation (sf)

Austin

Class A 235,734 7,059,596 149,930 418,475 159,331 425,766 6.2% 438,231 6.2% 519,537 7.4% $43.95 1,537,148

Class B 0 2,268,681 -5,324 61,681 -5,324 65,517 2.9% 86,923 3.8% 94,761 4.2% $34.51 45,700

Totals 235,734 9,328,277 144,606 480,156 154,007 491,283 5.4% 525,153 5.6% 614,299 6.6% $41.65 1,582,848

Dallas

Class A 0 29,486,059 78,454 509,486 95,451 546,310 1.9% 5,812,974 19.7% 6,022,284 20.4% $25.13 1,014,735

Class B 0 7,631,084 43,712 150,055 51,261 164,257 2.2% 1,325,542 17.4% 1,332,014 17.5% $20.59 0

Totals 0 37,117,143 122,166 659,541 146,712 710,567 1.9% 7,138,516 19.2% 7,354,298 19.8% $24.21 1,014,735

Houston

Class A 0 28,189,793 448,000 516,400 488,092 596,484 2.1% 2,957,622 10.5% 3,399,175 12.1% $42.41 2,564,038

Class B 0 11,651,502 52,860 230,216 39,561 226,251 1.9% 1,580,768 13.6% 1,961,994 16.8% $30.80 0

Totals 0 39,841,295 500,860 746,616 527,653 822,735 2.1% 4,538,390 11.4% 5,361,169 13.5% $39.01 2,564,038

San Antonio

Class A 0 1,834,486 -9,342 -52,043 -9,342 -48,370 -2.6% 230,701 12.6% 232,046 12.6% $25.08 0

Class B 0 3,340,446 2,885 7,823 2,885 7,010 0.2% 632,694 18.9% 636,847 19.1% $19.24 0

Totals 0 5,174,932 -6,457 -44,220 -6,457 -41,360 -0.8% 863,395 16.7% 868,893 16.8% $21.31 0


Texas Office Statistics - Q4 2014 • 2

Suburbs

YTD


Direct net

absorption (sf)

YTD

direct net

absorption (sf)

Total net

absorption

(sf)

YTD total net

absorption

(sf)

YTD total net

absorption

(% of stock)

Direct

vacancy (sf)

Direct

vacancy (%)

Total vacancy

(sf)

Total vacancy

(%)

Average asking

rent ($ psf)

Under

construction /

renovation (sf)

Austin

Class A 557,153 19,771,539 106,465 514,199 73,700 267,042 1.4% 2,266,118 11.5% 2,713,452 13.7% $32.84 1,781,026

Class B 0 17,662,832 73,815 29,444 71,044 -106,595 -0.6% 2,386,037 13.5% 2,616,034 14.8% $24.56 81,116

Totals 557,153 37,434,371 180,280 543,643 144,744 160,447 0.4% 4,652,155 12.4% 5,329,486 14.2% $28.93 1,862,142

Dallas

Class A 2,313,718 65,474,137 758,571 1,796,201 531,802 1,653,755 2.6% 10,255,981 15.7% 11,053,884 16.9% $25.37 4,180,461

Class B 327,446 56,108,165 35,728 245,656 -136,829 -70,670 -0.1% 11,788,731 21.0% 12,321,395 22.0% $18.69 49,964

Totals 2,641,164 121,582,302 794,299 2,041,857 394,973 1,583,085 1.3% 22,044,712 18.1% 23,375,279 19.2% $22.29 4,230,425

Houston

Class A 3,215,483 64,671,832 31,205 2,134,461 -17,784 2,152,205 3.5% 6,967,581 10.8% 8,294,867 12.8% $33.02 13,661,564

Class B 0 50,783,049 357,381 934,805 441,061 1,045,096 2.1% 8,006,221 15.8% 8,942,752 17.6% $20.99 0

Totals 3,215,483 115,454,881 388,586 3,069,266 423,277 3,197,301 2.8% 14,973,803 13.0% 17,237,619 14.9% $27.73 13,661,564

San Antonio

Class A 228,500 7,380,957 -49,173 72,095 -61,988 45,483 0.6% 1,271,208 15.9% 1,469,971 18.5% $25.31 591,641

Class B 38,000 12,914,079 -65,609 130,107 -67,409 143,446 1.1% 1,907,747 13.4% 1,977,092 14.0% $20.62 54,217

Totals 266,500 20,295,036 -114,782 202,202 -129,397 188,929 0.9% 3,178,955 14.3% 3,447,063 15.5% $22.32 645,858


Texas Office Statistics - Q4 2014 • 3

Documents

Office Insight - assets.recenter.tamu.edu€¦ · Office Insight Dallas | Q2 2016 163,694,286 Total inventory (s.f.) 849,737 Q2 2016 net absorption (s.f.) $25.24 Direct average asking