Arlington’s Office Market In A Word: Stable
Arlington does not have any skyscrapers under construction or any 1M SF corporate relocations. Most headlines about the city’s real estate revolve around Texas Live! or the new Rangers stadium. But brokers say the office submarket is blissfully stable.
“The Arlington office market has been underappreciated and under-noticed for quite some time,” TXRE Properties founding partner Justin Smith said. “Employers can draw well-qualified staff from Dallas, Fort Worth and the mid-cities markets, but pay $10/SF less in rent — or $20/SF less compared to Uptown or Legacy.”
Smith and TXRE Leasing Director Kolby Dickerson have been leasing up a 135K SF office at 2401 East Randol Mill Road near Texas Live! since TXRE purchased the property in July 2016. After a multimillion-dollar renovation of the lobby, common areas, restrooms, shower facilities, elevators, security, gym, tenant lounge and more, TXRE took occupancy from 9% to 83%.
The total Arlington office market spans 7.5M SF and has an occupancy of just more than 85% as of Q4 2016, according to JLL research.
JLL Managing Director Pat McDowell has seen the city evolve over his 35-year career.
“Arlington is probably the least expensive rent in the Metroplex besides maybe Stemmons and HEB (Hurst, Euless and Bedford). That market offers some good economics,” he said.
Because most of the office product in the area was built in the booming 1980s cycle, much of the Class-A product has been renovated, like TXRE’s 2401 East Randol Mill Road project. Class-A rents average $21 and Class-B rents average $19/SF in Arlington.
Besides D.R. Horton’s new 200K SF corporate headquarters on Interstate 30, few tenants of significant size have relocated to Arlington in recent years. McDowell said most deals he sees in the submarket are for small users.
“Arlington has struggled to attract and retain larger users because the city lacked the total package,” Dickerson said. “People would drive in for the Cowboys or Rangers games, then leave and go spend their income in Dallas or Fort Worth.”
Texas Live! will give the entertainment district more walkability to become a true live-work-play destination, Dickerson said.
McDowell is less sure what impact the increased entertaining options will have on the office market.
“Arlington is already an entertainment district for the Metroplex. One of its major draws is tourism. Since the Cowboys' [AT&T Stadium] opened, there hasn’t been significant office growth,” McDowell said.
McDowell, Smith and Dickerson agree that even amidst the healthy DFW market, Arlington’s future looks steady.
“If you want to be in the center of Metroplex and you want an economic deal, Arlington should be on your radar,” McDowell said.
“It’s not a boom-and-bust market, but it always gets a little bit better every year,” Dickerson said.