Dallas/Fort Worth Office Market still seeing a rental growth in Q1FY09

According to a recent Office Market trends report published by Grubb and Ellis, the Dallas/ Fort Worth metro area is one of the few places in the USA which has seen a positive growth in office market leasing in the first quarter of the year.

The report explains the market stayed generally stable and the majority of the growth in Q1FY09 was seen for Class A and B office space. The Dallas/Fort Worth office leasing market posted a positive net absorption of 516,205 sq ft. The class A and B respectively reported a positive absorption of 294,209 and 269,300 sq ft, while the Class C sector reported a negative absorption of 47,304sq ft.

Overall the vacancy rate has increased, however only the Class A sector reported a decrease of 10 points to 18.9%. For the other sectors, the vacancy levels are the highest seen since the fourth quarter of 2005 and the coming quarters forecast are showing the vacancy rate to carry on increasing.

The average rents have seen a decrease for the third consecutive quarter, more particularly for the Class A and C sectors. Landlords however, are still trying to maintain a certain control over the negotiation with tenants and get businesses to commit to long leases.

Tenant’s behaviour has changed and Grubb & Ellis are reporting most businesses to be looking only for 12 to 18 months extension and renewal of their office leases. There is clear instability in the market directly due to the recession, which has directly affected and slowed down the normal lease negotiation process.

The recession has caused several job losses, bankruptcy as well as struggles to maintain operating capital. As a direct consequence, it created a lot of uncertainty for both tenants and landlords which are predicted to continue until the beginning of 2010. The main challenge the Office Market in Dallas/Fort Worth will face this year is the lack of trust between tenants and landlords.

Written by Emily Mouquot, Marketing Director.