Office leasing in Dallas was down nearly 28% in the second quarter as rising costs prompt companies to hold off on major space decisions.

The drop is driven mostly by a pause on large-scale commitments, JLL Managing Director Torrey Littlejohn said, which should come as no surprise given the impact rising interest rates have on a company’s bottom line.

“People are being very cautious about significant capital investments,” she said. “We just in general are finding that things are taking a lot longer to execute.”

Dallas is not alone in its leasing slump. Manhattan’s overall availability hit a record high of 96.4M SF in the second quarter, and in Miami, absorption went into the red for the first time since the start of 2021, with more than 234K SF of net vacancy added in Q2.

The majority of leases being signed in Dallas right now are for less than 15K SF, per JLL’s data. Available sublease space was down slightly year-over-year but still remains elevated at 8.3M SF, with many companies putting large blocks on the market despite slim chances of finding another tenant.

“A lot of sublease space in DFW is sitting for a while,” MCS CEO Craig Torrance said of his company’s more than 60K SF offering. “I’m not super optimistic, but we have a nice space that we’re not using.”

The average asking rent for office was $34.14 per SF in the second quarter, up 3.2% year-over-year. Most landlords are still achieving those rates, Littlejohn said, but are also having to offer a host of concessions to help with the cost of construction.

“Tenant improvement allowances are higher than we’ve ever seen,” she said.

Littlejohn said she remains optimistic that leasing will pick back up. Summer is generally a slower season, she said, and economic headwinds are making matters worse. But planned relocations and expansions should buoy the market for the foreseeable future.

“We’ve just got to keep our heads down and keep grinding, retooling and trying to make sure we’re able to help our clients make the best decisions they can for their business,” Littlejohn said.