Dallas continues to make the national real estate headlines about our office construction pipeline. While the big number is always quoted – 7.7 million SF of space now under construction – there is little to no commentary about what is driving this number. I’m somewhat sensitive about this because, being in Texas, there is sometimes to leap by pundits to the impact of energy on our TX economy.
As we all know, our market has become very diverse, and while energy is a part of our make-up, it is not the driver it was back in the 1980s or 1990s. Rather, our sizable construction pipeline is made up of several diverse build-to-suits. When we think of these, Toyota clearly comes to mind, as does the newest phase for State Farm. In addition, other smaller projects round out the list, such as 7-Eleven and Raytheon. As of the beginning of the third quarter, 48% of our pipeline is accounted for in the large BTSs. The remain 10% is in spaces that have been preleased in multi-tenant buildings.
Overall, this level of “preleasing” is a solid showing and does not suggest that our market is over-heated. What’s even better, is that this economic cycle still has legs, so we expect rent gains to continue, even though vacancy may begin to drift up gradually in 2016.