It’s always sunny in…Dallas-Fort Worth? Office market still one of the brightest in the U.S.

BY MIA GOULART

Regarding the office sector, Dallas-Fort Worth maintains its position as one of the brightest real estate markets in the U.S., despite global economic headwinds. But though the two metros are often discussed as one, it’s important to note that their metrics, however slightly, do vary. The new Q4 2022 Office Insight Reports by JLL break them down.

Dallas

This market continues to lead in population and job growth due to the metro’s diverse economy. While Dallas did see a decrease in corporate relocations in 2022, the market has experienced elevated occupancy rates of flexible space as small to mid-size tenants test the market.

Dallas also recorded negative net absorption of 1.9 million square feet during the year and a yearly increase in total vacancy by 3.5%, driven largely by office-to-residential conversions in the CBD, based on the report. One of these conversions is the 60-story, 1.5 million-square-foot Comerica Bank Tower, which is expected to create a short-term increase in vacancy as tenants move-out and reductions once completed. JLL said this is a national trend that will continue in 2023.

As for the construction pipeline, Dallas’ has remained strong for the past few months, but as is the case anywhere right now, activity is expected to slow due to capital constraints and increased construction costs. While 2022 was a record low for deliveries (two million square feet, nearly 62% of the current under construction pipeline is expected to deliver in Q1 2023 alone, based on the report. Future deliveries noted include Harwood No. 14 and The Star Phase IV.

Fort Worth

Following successful return-to-office incentives from large companies, Fort Worth experienced an 18.2% decrease in available sublet space after peaking at 1.4 million square feet in Q2 2022. That said, JLL found the sublease market to still be a small portion of the market, accounting for only 15.8% of available Class B and 13.6% of available Class A. Flight-to-quality moves continue to account for most of the new demand.

As for the biggest transactions in Q4 2022, a leading aerospace company

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JLL said vacancy remained flat during this period overall. Demand for Class B has diverged, with only one positive quarter over the same time span due to an increase in flight-to-quality relocations within the market. There are still several Class A projects currently under construction in suburban markets, causing rents to continue to increase but remain below construction costs, bringing a new, even higher-class category of assets to the market.

Outlook

Last year concluded with 8.5 million square feet of sublease space on the market in Dallas, and though sublease space on the market only increased 0.1% from 2021, an increase in sublease space is expected by JLL as companies continue to rethink their office space needs. Of course, the flight-to-quality movement will also continue, as exemplified by the insatiable demand for Class A.

Vacancy in Fort Worth is expected to remain above market average until movement by those in large-block spaces experience an increase of activity, but the new assets still to be delivered will help solve the issue of lack of available space.

ASSET/PROPERTY MANAGEMENT FIRMS

CENTERPOINT PROPERTIES

945 Bunker Hill, STE 625 Houston, TX 77024

P: 832.856.4779

Website: centerpoint.com

Key Contacts: Nate Rexroth, Executive Vice President, Asset Management; nrexroth@centerpoint.com; Danielle Radtke, Senior Vice President, Asset Management; dradtke@centerpoint.com

Services Provided: CenterPoint Properties is an innovator in the investment, development, and management of industrial real estate and multimodal transportation infrastructure. CenterPoint acquires, develops, redevelops, manages, leases, and sells state-of-the-art warehouse, distribution, and manufacturing facilities near major transportation nodes. Our experts focus on port-proximate distribution infrastructure assets near America's major population centers.

Company Profile: CenterPoint Properties continuously reimagines what’s possible by creating ingenious solutions to the most complex industrial property, logistics, and supply chain problems. With an agile team, substantial access to capital, and industry-leading expertise, we give customers a competitive edge to ensure their success — no matter how great the challenge.

Brokerage Firms

FRANKEL DEVELOPMENT GROUP

5311 Kirby Drive, Suite 104

Houston, TX 77005

P: 713.661.0440

Website: Under Construction

Key Contact: Bruce W. Frankel, President, BFrankel@frankeldev.com

Services Provided: Frankel Development Group offers over 34 years of experience and expertise in the retail real estate business. Services include tenant representation, shopping center/project leasing, investment sales, land sales, and development services.

Company Profile: Headquartered in Houston, Frankel Development Group provides comprehensive brokerage services for its clients throughout Texas with an emphasis on the Houston MSA. The company represents over 25 "best-in-class" retailers and restaurants, 15 property owners, and possesses a skillset and depth of experience unmatched in the marketplace.

Notable Clients/Transactions: Notable retailers include Orangetheory Fitness, Burkes Outlet Stores, UBREAKIFIX, Escalante's Fine Tex-Mex & Tequila, Three Dog Bakery, BWW GO!, MyFitnessStore.com, The Joint, Modern Acupuncture, Fred Astaire Dance Studios, and WaveMax Laundry.

Strongtower Commercial Group

11015 Northpointe Blvd Ste. B Tomball, TX 77375

P1: 281.733.4077 | P2: 281.229.2148

Website: strongtowercommercial.com

Key Contacts: Dawn Brewer, CCIM, Principal, dawn@strongtowercommercial.com;

Terrionee Garrett-Solomon, Broker Associate, terrionee@strongtowercommercial.com

Services Provided: Strongtower Commercial is a Full-Service Commercial Brokerage that provides multi-disciplinary expertise and the highest level of service that todays educated and sophisticated client’s demand. Whether representing Owners, Buyers, Tenants, Landlords, or Sellers, our services span to all facets of the Real Estate Industry – this includes Office, Industrial, Retail, Investment, Medical, Multi-Family and Land.

Company Profile: Strongtower Commercial is an ever-evolving Real Estate Brokerage operating in the Greater Houston & Dallas Area. Our goal is to maximize value for each of our clients by utilizing our expertise to guide them through any situation that may arise during a transaction. Our Professional Advisors come from all facets of the Real Estate Industry bringing with them the knowledge and experience required in today’s fast-moving market. Our decades of experience and proven dedication to success afford our clients the luxury of always knowing where to turn.

Notable Clients: Notable Clients include: State Farm, Amegy Bank, Cina Pharmaceuticals, Urban Social, Market Street, Trendy Looks, B's Girls Foundation, Gill Aviation, Mr. Shine Powerwash, R4 Specialties, 7 Bridges Capital LLC.

CONSTRUCTION COMPANIES/GENERAL CONTRACTORS

ALSTON CONSTRUCTION COMPANY

HOU: 1300 W. Sam Houston Pkwy S Suite 225, Houston, TX 77042

DAL: 10440 North Central Expressway

Suite 720, Dallas, TX 75231

Website: alstonco.com

Key Contact: HOU: Nick Dwyer, Director of Business Development, ndwyer@alstonco.com

DAL: Brittany Schneider, Director of Business Development, bschneider@alstonco.com

Services Provided: Alston offers a diverse background of design-build experience, general contracting and construction management of industrial, commercial, healthcare, retail, and municipal projects.

Company Profile: Alston Construction’s success begins and ends with our approach to planning, scheduling, and choosing the right team. We have been adhering to an open and collaborative approach since our founding more than 35 years ago.

Notable/Recent Projects: Innovation Ridge Logistics Park, a 1.1 million SF 3 building industrial business park in Forney; 610 Business District, a 388,795 SF industrial park located in Houston; 1.2 million SF logistics facility located in Conroe.

SUMMIT DESIGN + BUILD, LLC

98 San Jacinto Blvd, 4th Floor Austin, TX 78701

P: 512.872.6698

Website: summitdb.com

Key Contacts: Adam Miller, President, amiller@summitdb.com; Doug Hayes, Project Executive, dhayes@summitdb.com; Amber Autumn, Business Development, aautumn@summitdb.com

Services Provided: Summit Design + Build, LLC is a provider of full service general contracting, construction management and design/ build construction services for the commercial, industrial, multifamily residential, office/tenant interiors, hospitality and institutional markets.

Company Profile: Located in downtown Austin and with offices in Tampa, FL, Chicago, IL and North Carolina, Summit Design + Build has been involved in the design and construction of over 400 buildings and spaces totaling more than 10 million square feet over the firm’s 18 year history.

Notable/Recently Completed Projects: Congress Lofts at St. Elmo (Multifamily), UpCampus Student Housing Tallahassee (Multifamily), WeWork (Office TI), Eli’s Cheesecake (Industrial), Lockheed Martin (Industrial), Stadium Lofts North Carolina (Multifamily).

Developers

Centerpoint Properties

945 Bunker Hill, STE 625 Houston, TX 77024

P: 832.856.4779

Website: centerpoint.com

Key Contacts: Michael Murphy, Chief Development Officer, mmurphy@centerpoint.com; Brian McKiernan, Senior Vice President, bmckiernan@centerpoint.com

Services Provided: CenterPoint Properties is an innovator in the investment, development, and management of industrial real estate and multimodal transportation infrastructure. CenterPoint acquires, develops, redevelops, manages, leases, and sells state-of-the-art warehouse, distribution, and manufacturing facilities near major transportation nodes. Our experts focus on port-proximate distribution infrastructure assets near America's major population centers.

Company Profile: CenterPoint Properties continuously reimagines what’s possible by creating ingenious solutions to the most complex industrial property, logistics, and supply chain problems. With an agile team, substantial access to capital, and industry-leading expertise, we give customers a competitive edge to ensure their success — no matter how great the challenge.