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DFW Office Absorption Strong In 2018, Yet Development Slows

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DFW Office Absorption Strong In 2018, Yet Development Slows

The DFW office market enjoyed 1.3M SF of net absorption in the fourth quarter of 2018, its 29th consecutive quarter in positive territory, according to a new report by Madison Marquette

For the year, total office absorption in the Metroplex was 3.8M SF. 

Even so, developers dialed things back in 2018. The DFW office development pipeline contracted each quarter in 2018, shrinking by 42.2% to 4.3M SF in 2018, excluding corporate-owned projects.

DFW developers appear to be hesitant to break ground on new product before getting pre-lease commitments, even in a healthy market, Madison Marquette reports.

Among the metropolitan markets with a workforce over 1 million, DFW ranked third in annual employment gains for 2018, behind Houston and New York-Newark-New Jersey. 

A soft spot: Class-A asking rents declined by $0.11 to $29.44/SF during the fourth quarter, the first quarterly loss since 2016, yet still climbed by $0.57 (2%) in 2018. Class-A rates have been at or near record levels lately and exceed the pre-recession peak in mid-2008 by 19.5%.

Madison Marquette forecasts that with a number of large high-quality availabilities diminishing and record-high rental rates, lease negotiations will remain in favor of landlords within the most desirable submarkets during the coming year.

It also said DFW building owners focusing on capital improvement programs to enhance their buildings and amenities will continue to outperform undercapitalized assets.

Related Topics: Madison Marquette, Dallas Office