JLL: Trophy Towers in Dallas’ Skyline Getting Top-Dollar Rents
Published on: Wednesday, June 29th, 2016
North Texas’ booming economy has driven rental rates higher in Dallas’ skyline towers and JLL researchers expect that trend to continue for the city’s well-located, sought after office towers.
All in, Dallas skyline properties reported gains of nearly 7.8 percent in the last two years, with a vacancy rate of 17.3 percent, according to JLL research. This gives skyline towers a $9 per square foot rental rate spread compared to similar Class A office buildings that don’t reach the horizon.
“Many of our skyline buildings, which represent our urban core’s top-tier assets, are in high demand by tenants as evidenced by rising rents and above average occupancy,” said Walter Bialas, JLL’s research director in Dallas-Fort Worth, in a statement.
“What is critical to understand is that while the newest buildings are seeing good leasing activity, it is not just these properties attracting tenant attention,” he added. “The last generation is seeing its share of activity as well.”
JLL recently released the firm’s 2016 JLL Skyline report for Dallas, which tracked more than 1 million square feet of new office space under construction in the city’s skyline, with rent growing nearly 1 percent and a net absorption rate of 1.9 percent in 2015.
The sough after properties in downtown are setting a new milestone for rents, getting as much as $48 to $50 per square foot for full-service rents. In the next 12 to 18 months, researchers expect rent to continue to grow.
JLL’s Brooke Armstrong said she’s seeing this reflected in the market as she has shuffle tenants around in downtown and Uptown Dallas.
“A lot of tenants are making moves based on recruiting and retention and are looking for buildings with amenities,” Armstrong told the Dallas Business Journal.“We have a lot of new product coming online and they are asking for higher rents because of increased construction costs.”
And building owners are expected to continue to push rental rates, especially landlords that put a significant investment in their properties (such as Fountain Place and Trammell Crow Center), she said.
So, how high is too high? Armstrong said everyone is waiting to see what the answer is to that question.
“Dallas is still a very appealing place to do business and it’s still a very affordable to do business, but every strong market softens a little bit,” said the JLL senior vice president.
“Everyone is talking about seeing some softening in 2018 and 2019, which correlates with a lot of new space being delivered, but we’ll have to wait and see,” she added.