Dallas office leasing agents wait out slump : STEVE BROWN
By: Health Insurance
Submitted: 2009-08-23 21:45:16 | Word Count: 781
Excuse Bob Edge if he doesn't sound panicky about the state of the Dallas office market
After 35 years of pursuing local lease deals, Edge is probably Dallas' most experienced office broker and has survived all kinds of markets
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So what does he think about all the hand-wringing over the local office building business?
"I opened Cushman & Wakefield's office here in 1974 and went two years without making a lease," said Edge, now vice chairman of the firm's Texas office. "Everyone was just sitting on their hands.
"Finally there was a pent-up business demand for office space, and good things started happening in the market."
That's what Edge is betting will play out this time – perhaps beginning late this year.
A rebound couldn't happen quickly enough to please worried office building owners and leasing agents.
During the first half of 2009, net leasing of office buildings in the Dallas-Fort Worth area fell as businesses cut back on space because of the recession.
The almost 200,000-square-foot drop in occupancy – though modest – is the first such decline in five years. And analysts warn there's probably more to come.
"I would expect office absorption to continue to decline, given the current environment," said D'Ann Petersen, a business economist with the Federal Reserve Bank of Dallas.
But there are early signs that the economy is starting to level out, she said.
"Our office market remains much healthier than many other areas of the country and should be poised to improve when the economy does begin to turn around," Petersen said.
Markets including New York, Chicago and Washington, D.C., have seen much sharper office tenant losses.
"The office market in Dallas and, for that matter, all the others in Texas will not suffer to the same degree as in the last recession because we are not losing as many high-tech jobs," said North Texas real estate economist Jeanette Rice. "And while the financial sector is huge in Dallas, we have not been hit as bad as I would have thought" by contractions in that industry.
But Rice expects more office market contraction here through the second half of 2009 and into the first half of 2010.
Cushioning the fall
Unlike in previous downturns, the area hasn't been in a building boom.
"While office development did occur in the D-FW area during the past 10 years, it did not get as overbuilt as it did in the mid-1980s," said Paul Whitman, president of Jones Lang LaSalle's Dallas-Fort Worth office.
Also, the underlying economy here – though declining – is better than in most other major metro areas, Whitman said.
"Both employment and a more reasonable amount of space being added to the office inventory is helping to cushion the fall," Whitman said.
D-FW office construction is running at about a third of its level in early 2008. It's expected to fall further this year.
"One positive byproduct of the credit crunch was that financing for new office buildings dried up over a year ago, so the new-supply pipeline was shut off in Texas before the economy turned south," said Mark Dotzour, chief economist at the Real Estate Center at Texas A&M University.
Only a handful of major office buildings are still under construction in North Texas.
One of the largest is 17 Seventeen McKinney tower in Uptown. The 19-story high-rise, being built by Granite Properties, won't open until next year. In the meantime, Granite leasing agents are pounding the pavement to find tenants.
"We always thought we'd be in this position, with the largest block of new space that would be available for lease," said Granite chief operating officer Greg Fuller. "Obviously, we wish the economy was in better shape that would allow us to take advantage of that situation."
A few blocks away is Saint Ann Court, the other office tower still in development in Uptown. It's about 70 percent leased and opens next month.
Preleased pro
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