Chart of the Week – Year-end Recap – Dallas Office Market

2015 turned out to be an amazing year for the Dallas office market.  With another year of more than 100,000 jobs added and some big office projects completing, we hit near record high absorption.  The take-away here is that our strong absorption has kept our Class A & B vacancy rate stable, even though we added some new projects.  In fact, most of the absorption was in the new product which is telling, in that, vacancy in Class A inched down to 17.0%.

The chart below highlights a few comparisons between year-end and where we were in 2010, along with some “averages”.  Overall, all our market fundamentals remain solid.  Rent growth has been charging ahead across almost all submarkets.  Looking at the rents, the last time we saw year-on-year growth of this magnitude was back in 2006 and 2007 when rates went up 12.9% over the 2-year period.  We also saw it way back in 1997-1998, when rates went up 18.0% in 2 years.

The difference this time is that both of those hot growth time spans were at the end of their economic cycles.  Currently, our A & B rates have increased more than 14% in the last 2 years – and that is still with a couple years of economic growth to look forward to…  Our outlook is that vacancy, while near its low point, may inch down further over the next few quarters because much of the pipeline will be coming on in 2017 and 2018.  This tightness will continue to fuel starkly high rent gains in 2016.

chart of the week

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