This week, wall street journal He painted a desolate picture of downtown St. Louis. The paper called the region's office districts a “loop of doom” and pointed to cities like San Francisco and Chicago that are trying to protect themselves from a similar trajectory.
Anecdotally, the publication exposed a 44-story tower once anchored by AT&T Inc. that traded for $205 million in 2006. journal We reported that a now-vacant St. Louis building recently sold for $3.5 million.
It's a tough situation as cities across the country grapple with the reality of post-pandemic hybrid work defined by the haves and have-nots of the office sector.
In North Texas, new, amenity-rich offices are attracting new tenants, and existing buildings are willing to make significant investments to retain and attract small and medium-sized tenants. That is, when the funding environment is favorable.
In Dallas, we often hear about companies moving large leases from downtown to uptown.
According to a study by Partners Real Estate, the office vacancy rate in downtown Dallas is about 26.5%.
That's not the best in the nation, but it's still high, said Steve Triore, Partners' senior vice president of research.
Contributing to the rise in vacancy rates are Class B offices, which are squeezing central business districts, as well as some subleases that are directly passed on to vacancies.
“When you think about the kind of company we have here in Dallas compared to Houston or Boston from an office standpoint, we're pretty representative of the entire country,” Triore said. “This is not just a problem in downtown Dallas. All downtowns have this problem.”
He pointed to Fort Worth's 11.5% vacancy rate, which he said is much healthier.
One headwind to the office occupancy issue is that American companies are reluctant to force employees to work five days a week, opting instead for hybrid models.
However, many companies require employees to share the same office workday, making it difficult for companies to reduce square footage if they need the same amount of desks.
Mr. Triore pointed to the fact that, in contrast to other regions of the country, this region has the fastest growing immigrant population in the country. Dallas-Fort Worth's main competitors are other Texas markets such as Austin, Houston and San Antonio, but Memphis, Denver and Atlanta are also hot on the heels.
The conversion of offices into hotel space and residential units continues to be a bright spot for downtown. Not only does empty office space disappear from your books, but it also has potential.
“These represent diamonds in the rough, but they are not a cure,” Triolet says.
It is too early to count these successes, especially since many people are waiting to price their housing units.
Another wait-and-see factor is what will happen to the large office space in downtown Dallas that will need to be backfilled.
JPMorgan Chase, which recently expanded its lease in the Hunt Building, is an outlier that remained downtown when it left its namesake building several years ago.
But Deloitte, Goldman Sachs and Bank of America will leave a gaping hole in Uptown's expansion efforts for years to come.
These three companies alone represent nearly 1 million square feet of combined space.
