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The overall vacancy throughout Dallas is 26%… Some areas obviously higher than others…


Cycles for office development typically last from 10-12 years – Peak –Peak – Trough – Trough. The last Market Trough - 1991- last Peak 1998.  Historically speaking, the current market should have bottomed out sometime around 2001-03.

The following economic & real estate facts from 2003:

  1. Negative job growth
  2. Increasing unemployment
  3. Declining consumer confidence
  4. Rising vacancies
  5. Declining rental rates
  6. Negative absorption

Implied that the real estate market at the beginning of 2004 was still declining…

The current collective thoughts are that the economic indicators have turned slightly positive, and probably the real estate indicators will bottom in early 2005; not turn positive, but stop declining. From there we believe the real estate market will begin recovering in mid 2005 with no significant progress until late 2005 and beyond.  Since real estate is dictated by supply & demand, we expect prices (both rents & values) to stay low because of excess supply and rise upwards as demand increases.

Based on existing vacancy & projected demand we don’t expect significant rent spikes to start until 2006 which is when we also project office development to begin.  Traditionally, office vacancy is considered stabilized around 10%.   Given the time it takes to complete a new office building, the development process usually starts 18-24 months before vacancy rates reach stabilization.  So the earliest new developments will start is when vacancies reach 14-15%.  Given current vacancies and normal absorption, this translates to 2006 –2007 before any new development will be justified. 

Unlike past recessions, one of the nuances so far in this downturn has been land prices have stayed firm.  Land has remained at the elevated price levels of the late 1990’s due to the fact that ownership is with patient institutions and wealthy investors.  Therefore, we don’t expect deep discounts from land sellers in this cycle. 

Build-to-Suits are occurring but with less frequency since few companies are growing and the excess supply of available space in the marketplace.  Those that do BTS though are taking advantage of low interest rates, low construction cost, and available land to meet their unique requirements.


The real estate market should bottom out in early 2005 with concessions fading in mid 2005.  Rents and values should start to improve some time in 2006 with development beginning in 2006 and 2007.   The market should peak around 2008-2010.



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