Dallas’ office sector showed some hope in the first quarter, but vacancy rates remain high as companies continue to downsize and supply exceeds demand.
The city saw 2.5 million square feet of leasing activity in the first quarter, a sign that demand is starting to recover after dipping to historic lows early in the pandemic, The Dallas Morning News reported, citing JLL.
But net absorption (leasable area minus vacant area) was down 1.1 million square feet in the first three months of the year. Overall office vacancy was 26.2%.
Four years into the pandemic, companies are still downsizing their office space as remote work takes hold: About 71 million square feet, or 30% of the total office inventory, was available in Dallas-Fort Worth at the end of 2023, according to Avison Young data.
Sublease space in Dallas grew to more than 8.6 million square feet in the first quarter, mostly due to accounting firm KPMG, which in February put 63,000 square feet up for sublease in the 19-story KPMG Plaza at 2323 Ross Avenue.
Several other large subleases came to the market in the first quarter. Mortgage servicing company Mr. Cooper is exiting and subleasing more than 200,000 square feet, according to JLL. Gainsco Auto Insurance is terminating its 107,000-square-foot lease at the 12-story Uptown building at 3333 Lee Parkway, voiding about 45% of the property. EnLink Midstream is also exiting about half of its 157,000-square-foot lease at the 24-story One Arts Plaza in the Dallas Arts District.
Although leasing activity is on the rise, supply continues to outstrip demand. More than 5 million square feet of office space is under development in the Dallas region, most of it concentrated in the Uptown-Oak Lawn and Grand Prairie-South Irving submarkets.
The 238,000 square feet of space that Bank of America is leasing at Parkside Uptown and the 104,500 square feet that Deloitte is leasing at 23 Springs are “two examples that show Uptown continues to be a preferred office submarket for financial firms.”
Dallas office projects under construction were 63.5% pre-leased as of the beginning of the year.
—Quinn Donahue
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