Even with demand and new construction driving up rents, urban Dallas continues to be a bargain compared to most major U.S. markets. For the first quarter of 2015, lease rates averaged $29.94 per square foot for trophy assets in Uptown and downtown Dallas, with non-trophy assets coming in at $21.68 per square foot. Meantime, average national rents have hit a record high of $42.30 per square foot, up 20.1 percent since bottoming in 2010.
This data comes from JLL’s signature “Skyline Report,” which analyzes conditions in urban buildings that meet the following criteria: greater than 200,000 total square feet (multitenant building), built after 1985 (or have had significant recent renovations to stay competitive), high-profile location, and recognized-tenant profile and/or architectural significance.
The vacancy rate at smaller urban properties in Dallas has dropped from 18 percent to 12 percent in just two years. Larger tenants are finding the space they need in the central business district. Examples include Santander relocating to Thanksgiving Tower and Omnitracs leasing space at the former KPMG building.
The Dallas Arts District and Klyde Warren Park have helped bridge the gap between Uptown and downtown Dallas, says Jeff Eckert, managing director of JLL’s agency leasing and property management group: “It’s now seen as a seamless submarket that provides a highly desirable urban environment that meets the area’s multigenerational needs.”
During the past year, overall downtown vacancy has dropped by three percentage points, says Walt Bialas, research director for JLL. “The DFW economy is booming, and it’s creating a vibrant urban core that now stretches between the central business district and Uptown submarkets, he says.“We are predicting the area will go through a recalibrating phase where capital improvements at vintage buildings can bridge the gap between Class A and trophy assets.”