Fort Worth Business Press, June 2, 2014 Vol. 26, No. 21

20 June 2 - 8, 2014 | fwbusinesspress.com photos by alyson peyton perkins cover story With the Westbrook and Commerce buildings in Sundance Square Plaza offering more space, options abound for tenants looking to lease downtown. uoffice from the cover Still, property managers battle public perception that much of downtown is leased. “Going forward for the next several quarters, you’ll see [higher] occupancy levels in the CBD, and a lot of that is predicated on lack of available space on the west side. West Fort Worth is just as tight as it can be,” Cherry said. Meanwhile, Dallas-Fort Worth’s office market reported almost 1.2 million square feet of net absorption in the first quarter, surpassing last year’s quarterly average of 649,000 square feet. In Collin County, Allen and McKinney (grouped under a single geographic heading) grew by 4.7 percent to reach 90.1 percent occupancy; Richardson, by 7.2 percent to 87.8 percent occupancy; and Plano, 1.3 percent to 80.3 percent occupancy. Dallas-Fort Worth Class A and B office space saw similar growth, at 587,994 square feet and 608,114 square feet, respectively. As with Fort Worth’s downtown office inventory, what constitutes the two office categories remains subjective. For example, CoStar Group Inc., a real estate information resource, classifies Class A office buildings in terms of age, among other criteria, yet many downtown buildings have been renovated. “They may still be listed as B product because of the age, but they have the amenities of an A product. I think it’s highly subjective,” Cherry said. In the first quarter, Dallas-Fort Worth’s construction: by the numbers • The office construction pipeline has skyrocketed by 375 percent within the past year to nearly 5.5 million square feet under construction (excluding owner-occupied projects), with 55 percent of this new space already pre-leased. • Developers delivered nearly 276,000 square feet during the quarter, with a n additional 2.4 million square feet of new space slated to come online in 2014. The largest construction delivery during the quarter was Duke Bridges VII, a 199,800 square-foot Class A office build-to-suit for Conifer Health Solutions in Frisco. • Since job growth is expected to continue at a healthy pace and Class A occupancy rates have reached a seven year high, developers have broken ground on several large Class A office buildings in recent months. • Office build-to-suit development has picked up steam with several tenants signing pre-lease commitments, which include State Farm (500,000 square feet in CityLine – fourth building), Raytheon (500,000 square feet in CityLine), Nationstar Mortgage (175,585 square feet in Cypress Waters) and Monitronics Inc. (165,000 square feet in Mercer Business Park). • The building boom has largely been concentrated in the northern Dallas suburbs but is beginning to spread to the urban core with a few new office towers starting in Uptown and the Arts District, which include Hall Financial Group’s 450,000 square-foot KPMG Plaza at Hall Arts, Hines’ 23-story 470,000 square-foot office tower in Victory Park and Crescent’s recently announced 20-story 530,000 square-foot office tower in Uptown. Source: pm realty group Class A occupancy rate rose by 60 basis points to 83.4 percent as demand kept pace with new available space. Basis points are units of measurement used to note percentage changes in interest rates, among other factors. In the past year, Class A occupancy rates have risen 170 basis points to their highest levels since late 2006, according to the report. Class B showed its own momentum, accelerating by 60 basis points to 79.9 percent occupancy rate in the quarter and 90 basis points in the past year. In Collin County, Richardson saw almost 284,000 square feet of direct net absorption in the first quarter. Enjoying the highest gains was the city’s Class B sector, as Kohl’s Corp. occupied a combined 230,061 square feet at the Waterview 190, north and south buildings, and Associa Inc. moved into a 62,000-square-foot space at Collins Center. Such growth has favored landlords, who are able to charge higher rent as companies seek to expand into new office space. Fort Worth’s Central Business District commands rents of $26.33 per square foot, up .7 percent compared with the same period last year. Rents in other parts of town vary, with South Fort Worth space going for $21.27 a square foot, up 2.5 percent, and North and Northeast Fort Worth at $16 a square foot, down 8.3 percent. Leading all area submarkets in rental See office u NEXT PAGE

Fort Worth Business Press, June 2, 2014 Vol. 26, No. 21 | Page 20