Tracker Shows Office Gains In DFW, But Delta Threatens To Stall Progress
DFW’s office market showed steady recovery relative to 12 other U.S. benchmark cities in July, though the delta variant now threatens to slow what had been mounting leasing activity.
A new monthly CBRE tracker of the nation’s largest commercial real estate markets put the Metroplex among the top five recovering markets when it came to the number of companies actively seeking office space, finalized lease agreements and sublease activity in July.
But more recently, said Dallas CBRE Managing Director Blair Oden, “we are starting to see the delta variant affect the market. The robust tenant activity we saw earlier this summer is slowing down as corporate clients are redefining their return-to-office plans.”
Oden said corporate users that can be flexible about lease timing are delaying long-term decision-making and predicted that despite an overall bullish outlook on future office demand, progress was likely to slow until Covid-19 cases and hospitalization rates decline.
Just last month, DFW got high marks in two out of three categories measured by the tracker, in which a reading of 100 equates to the pre-pandemic conditions of 2018 and 2019. The metro’s tenant-in-market index, a measure of companies actively seeking space, grew from 75 in June to 87 in July, up from its October 2020 nadir of 40. And its July sublease availability index of 156 dropped a point from June, placing it third among all 12 markets with a sublease availability index 38 points below the national average.
Although its leasing activity index grew 2 points, from 59 in June to 61 last month, that was only good enough to rank DFW seventh among the 12 metros and 11 points behind the national average of 72.
“To be sure, various factors such as the delta variant of Covid-19 have hampered both the national economic and office-market recoveries as well as companies’ plans to return to normal office occupancy,” CBRE Global Head of Occupier Research Julie Whelan said in a statement. “We might see an influence on the indexes in August or September from companies opting to delay their full return to the office.”
The most recent survey of businesses conducted by the Dallas Regional Chamber suggested few companies had plans to push back returns as of mid-August. Fifty-seven percent of employers said workers were either already fully back to the office or expected to be back by the end of October. Another 9% had targeted early 2022 for in-person return to the workplace, 9% said they were flexible and 20% responded “undecided” or “other.”
After dipping across the 10 U.S. markets monitored by office security company Kastle Systems for two straight weeks, key swipes at offices were up again nationally and in the Dallas metro last week. In-person office visits in DFW grew 1.5% to 46.8% average occupancy, the third-highest of the cities monitored, behind Austin and Houston.
CORRECTION, SEPT. 1, 9:55 A.M. ET: Blair Oden's name was misspelled in a previous version. The story has been updated.