Growing Gap In DFW Office Rents Between Have And Have-Not Submarkets

HFF closed the sale of 2525 McKinnon, a 112k SF, Class-A office building in Dallas’ Uptown submarket. HFF marketed the property on behalf of the seller, Talon Private Capital, and procured the buyer, City Office REIT.
Courtesy of HFF

The gap in rent prices between the most desirable and least desirable office space in the Dallas-Fort Worth office market continues to grow and is about to cross the $20/SF mark, according to a new study out from Savills Studley.

Preston Center is at the top of the rental rate comparison, at $34.32/SF, $20 more than in East Dallas, where rents are $14.92/SF. New space is running at $29.88/SF, compared to existing space at $23.53 and sublet space at $21.06.

"The rent gap between the most sought-after locations — Uptown/Turtle Creek, as well as West Plano/Frisco — and lagging locations, such as Dallas CBD and LBJ Freeway — continue to widen," Savills Studley Executive Managing Director Frank McCafferty said in a statement. "Taking rent in the very top-tier properties is exceeding $50/SF. On the other hand, tenants can find mid-$20s/SF space in the Dallas CBD."

A broad labor pool and reasonable office rents have continued to attract companies that want to expand, such as Charles Schwab at Circle T Ranch and The Boeing Co. at Legacy West.

The Q1 report outlines other DFW highlights: Leasing is down from 3.7M SF to 3.1M SF quarter over quarter. The overall asking rent is up slightly, from $24.04 to $24.49, and remains unchanged year over year. Office property sales are down over the last two quarters, to $1.7B, which is a 34% decrease compared to the prior two quarters.

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