The North Texas employment market has turned the corner this year, but companies are still holding back on office leasing.
Through the first nine months of 2010, net office leasing in the Dallas-Fort Worth area declined by about 700,000 square feet, according to preliminary numbers from Cushman & Wakefield of Texas.
Most of the office occupancy decreases have been in the Telecom Corridor along North Central Expressway and in Las Colinas. Consolidations and relocations by Hewlett-Packard Co. Alliance Data Systems Corp. and Fidelity Investments added to the office vacancy in some areas of the city.
Meanwhile, net office leasing has grown the most in Frisco and West Plano and on North Stemmons Freeway in northwest Dallas County and southern Denton County, the commercial real estate broker reports.
The overall decline in office occupancy in the D-FW area in 2010, while significant, is an improvement from the almost 1.8 million in negative leasing during the same period of 2009.
Many companies that would normally be adding office space are still sitting on the fence, said Robert Edge, Cushman & Wakefield vice chairman.
"There are too many question marks with the economy, unemployment and the election," Edge said. "I don't think in the balance of this year things will change that much.
"It will continue to be a tenants' market."
But by 2011, Edge sees a rebound in D-FW office leasing.
"There is probably going to be a pent-up demand for office space," he said. "Right now companies have the money to expand, but they are holding out for some positive signs.
"I think that pent-up demand will start to move next year."
Overall D-FW office vacancy is 23 percent, up from about 22 percent a year ago. Average asking office rents are almost 2 percent below where they were a year ago.
Recent office leases signed by MoneyGram International Inc., Oracle Corp ., Tribune Cos., Genband Inc., Denbury Resources Inc . and Oncor Electric Delivery Co. should add to occupancy rates in the fourth quarter, Cushman & Wakefield analysts said.
With weak demand and tight lending standards, the amount of office space under construction in North Texas remains very low. Less than 1 million square feet of building is under way, and most of that is for corporate-owned facilities in the Frisco-West Plano market and the mid-cities, including accounting giant Deloitte's new training center in Westlake.
There's virtually no speculative office space under construction, Cushman & Wakefield said.