North Texas Office Rental Rates Continue to Rise in Response to Increased Demand

The latest Cushman & Wakefield research has found that office rents for Class A space in the Dallas/Fort Worth region have increased by 3.4 percent when comparing year-to-year data. Throughout all classes of office space, rates have increased by 4.4 percent. The increase in cost is mostly attributed to the influx of companies who are interested in developing a site in the North Texas region.

Residential rental prices have been increasing throughout the country as a large number of people continue to choose to rent instead of buy. A similar phenomenon is being seen in the Dallas/Fort Worth region as Class A rental costs reached an all-time high of $27.12 per square foot during the second quarter. For all classes of office space, the average cost per square foot has reached $22.13.

While summer is typically a slower period in terms of office space rental, the current trends indicate that the demand for office space is likely to remain strong in North Texas. In recent months, several large corporations have decided to move their headquarters and other facilities to the Dallas/Fort Worth region. Among these are Toyota and State Farm, which both opened headquarters and hubs in the region.

During the second quarter, Farmer Brothers Coffee and Kubota Tractor also chose to move to the region. In addition to large corporations choosing to relocate to the Dallas/Fort Worth region, the vendors who serve these large corporations are also choosing to move to the region in order to better serve their customers.

2015 Brings a Changing Picture to North Texas

The leasing velocity in North Texas totaled 3.9 million square feet during the second quarter of 2015, which is approximately the same as it was during the second quarter last year. On the other hand, the absorption rate is ten percent higher than the ten-year second quarter average, which is calculates to be 3.6 million square feet.

Overall, the vacancy rate for office space fell by 16.4 percent in North Texas. Due to higher rates, however, Turtle Creek-Uptown and Preston Center actually experienced an increase in vacancies. Despite this increase in vacancies, the strong demand for space in those submarkets is likely to keep the rental rates elevated.

To help address the demand for office space in North Texas, 6.2 million square feet of office space is currently under construction. This includes 23 speculative office buildings offering 3.5 million square feet and nine built-to-suit spaces offering 2.7 million square feet of space. In all, approximately 3.8 million square feet of space was expected to be available by the end of the year, but heavy rains has caused delays due to flooding.

There is no doubt that North Texas is growing rapidly. As such, the rising rental costs of office space is a side effect that is to be expected. If you are interested in learning more about Dallas homes for sale, contact our team of knowledgeable and experienced real estate experts today.

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