After years of substantial growth, the North Texas commercial property market has finally showed signs of cooling off. In fact, many developers and analysts expect very little office building construction to take place throughout Dallas in 2009.
Like other types of construction, capital is at a premium, and vacancies throughout existing buildings are on the rise, reducing the need for any new office space.
New Real Estate Projects Put on Hold
Many new real estate projects are either put on hold or canceled altogether due to the current credit crunch crippling not only the Dallas region, but the country as a whole. Net leasing in 2008 was the slowest in three years, clearly signaling a slowdown of the North Texas office market.
In fact, the amount of office space being built during December 2008 was the smallest since the end of 2004, according to statistics from Cushman & Wakefield of Texas.
Current Vacancies on the Rise
The fall-off in building, for the time being, is likely a smart move, as overall vacancies in current buildings stand at 20 percent and will likely increase in the coming months.
The stagnant office market is also likely brought about by tenants simply concerned about maintaining their business, not changing spaces. Many analysts predict that the next six months will see very few businesses shopping for office space.
Landlord Issues and Concerns Mount
For landlords, this current slowdown in the office market means that preserving cash flow and out-of-pocket expenditures will take more of a priority than remodeling office spaces to fit potential tenants. Instead, they will likely remain focused on keeping remaining tenants.
Keeping a close eye on tenant credit is also on landlords’ minds, as signing a lease will mean strict credit checks to ensure their tenants will be there to pay their rent.
Light at the End of the Tunnel?
Although not good news for the moment, many analysts also predict an increase in business activity during the second half of the year, as relocation activity is expected to increase, along with corporation confidence.