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Why Dallas’ Lower Tollway Won’t Suffer From Recent Move-Outs

DFW Market Consolidations from Fannie Mae and JP Morgan Chase Have Left Big Holes Along the Tollway
April 5, 2018
Pictured: International Plaza II at 14221 Dallas Pky. in Farmers Branch, TX.

Some of Dallas-Fort Worth’s biggest move-outs in the first quarter of the year landed in Dallas’ Lower Tollway corridor, with Fannie Mae and JP Morgan Chase leaving nearly 1 million square feet of existing office space vacant as they consolidate further northward on the Dallas North Tollway.

But those big vacancies aren’t expected to be open long, said Dan Harris, a managing director with Cushman & Wakefield’s Dallas office, who represents office tenants.

"There are buildings that will see some vacancy, but there’s been so much activity at the Galleria and Pinnacle Tower, I think we’ll see activity shoot up the Tollway," Harris told CoStar News. "I don’t expect we’ll see a lag in activity."

By the end of the first quarter, Fannie Mae moved out of a total of 561,552 square feet in International Plaza II at 14221 Dallas Pky. in Farmers Branch and The Princeton at 14651 Dallas Pky. in Dallas.

Meanwhile, JP Morgan vacated 351,000 square feet of office space at International Plaza I at 14201 Dallas Pky. in Farmers Branch.

Each of these buildings is well-positioned to capture big office tenants shopping for space in the Lower Tollway submarket, Harris said. The Lower Tollway submarket is particularly attractive to office tenants shopping the region for space because of its proximity in the region and its comparative cost savings to submarkets such as Legacy-Frisco, Uptown or Preston Center submarkets, he added.

The LBJ Freeway submarket, which includes some of the Lower Tollway, at $24.29 per square foot for office space sits at a nearly 9 percent discount to other Dallas suburban submarkets, and a more than 20 percent discount to downtown rents, according to Cushman & Wakefield’s preliminary office research.

With rental rates in Dallas-Fort Worth continuing to rise, Harris said he expects this part of the region to continue to see tenant interest. Other sought-after submarkets in North Texas include Uptown, Far North Dallas - namely Legacy-Frisco - and Las Colinas, he said.

"With all this new development, we are still seeing a lot of activity," Harris said. "We’ve seen demand taper off a bit, but it is still a very active and hot market with relocations and expansions."

Craig Wilson, an executive managing director in Cushman & Wakefield's Dallas office, said he's still seeing "solid relocation activity" in the market from companies outside Dallas-Fort Worth, and expansions in the market.

"Organic growth still seems to be positive," Wilson said, adding that companies are seeking to become more efficient with their real estate in the face of rising rental rates.

"There are some local businesses, in particular, that have been shocked by the increase in rental rates," said Wilson, adding companies that are coming up from renewal five, seven and 10 years ago are surprised to see how much the market has changed.

"It's causing a lot of companies to consider how to get more efficient and also look at alternative markets and relocation alternatives within the region," he added.

Candace Carlisle, Dallas-Fort Worth Reporter  CoStar Group   
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