A recent spate of office rentals has left the developer of one of the most successful projects in the Dallas area ready to pull the trigger for further construction.
Billingsley Co. already has a ten-story office tower under construction in its mixed-use Cypress Waters estate just north of the LBJ Freeway on Belt Line Road.
The new skyscraper – the tallest to date in Cypress Waters – is attracting a lot of tire kickers.
“The number of tours we offer has been constant,” said developer Lucy Billingsley. “The variety of square meters is omnipresent – companies of all sizes are on the lookout.”
“We are in the city of Dallas seeking permits to build two more office buildings and are planning a third,” said Billingsley. “Of course we clicked on pause last year, but this year there is a lot of catching up to do.”
Office building owners and developers across North Texas are saying the same thing.
After the pandemic drought in 2020 and early 2021, they are now seeing a rising flood of new office businesses.
“I’ve never been so busy,” said contractor Bill Cawley, who has several new buildings under construction in the northern suburbs of Dallas. “That’s crazy.
“I thought it was going to start after Labor Day, but now it’s happening,” said Cawley. “I think the next two years will be like the Roaring Twenties.
“There is so much demand.”
The Dallas-Fort Worth office market has a lot of catching up to do.
In 2020, net office leasing in the D-FW area fell by a record nearly 5 million square feet as COVID-19 sent office workers home and companies reduced their footprint.
Many companies that had been working on office expansions in North Texas halted efforts while struggling to keep operations going during the pandemic.
The slowdown in office rentals continued into the first half of this year, with net rentals falling further 2.9 million square feet.
The supply of vacant office space in the area has grown to nearly 50 million square feet.
But in the past few months, office rental activity in the area has recovered, led by some large deals and dozen of smaller deals in the works.
D-FW’s largest office leases recently include the Integrity Marketing Group’s 100,000 square foot lease at Fountain Place in downtown Dallas, a 162,000 square foot Federal Deposit Insurance Corp lease from Caterpillar in Las Colinas and a 155,000 square foot lease from the Freddie Mac mortgage company in Plano.
Real estate agents say companies postponing office moves are ready to pull the switch.
“People have realized they have to do something,” said Robbie Baty, executive managing director of Cushman & Wakefield. “In real estate, there is always some kind of fourth quarter activity.
“This year it will be even more because of the backlog and the lack of activity in the year.”
Baty said companies whose leases are about to expire or have growth plans are now regrouping to review their office rental options.
“We will see an increase in activity and the delivery of new buildings, as well as the groundbreaking and the signing of leases,” he said. “No matter what breaks and reservations they had, they have come to terms with where we are and are more comfortable moving forward.”
It’s also an opportunity for businesses to take advantage of some office bargains thanks to COVID.
“While rental prices have remained stable, the concessions have increased significantly,” said Baty. “I see tenant improvement allowances that are higher than I’ve ever seen and more free rent.
“Landlords – when they have a deal in the circle – they get more aggressive,” he said. “But when the demand increases, the need for concessions will decrease.”
Since only more than 50% of the D-FW office workers are back in their buildings, employers are also challenged by the resurgence of COVID with the current wave of infections.
“Nobody knows what will happen to the Delta variant,” said Baty. “But at this point, while cautious, companies seem to be pushing their decision-making further.
“Leases always expire – good market or bad market,” he said. “They kicked the can down the street, and now they’re coming.”
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