Dallas-Fort Worth: one of the country’s greatest stories


by Ryan McManigal

Dallas-Fort Worth’s rapid growth has been making headlines for years and has catapulted the metro to the top of the list as one of the country’s fastest growing destinations. Companies are flocking to the area to capitalize on the great cost of living, affordable housing, low taxes, nice neighborhoods, educated workforce, intricate business network and its central location to the rest of the country—and workers are following suit in droves. In fact, Dallas and Fort Worth’s populations increased 8.5% and 12.4%, respectively, since 2010—according to the Dallas News.

Most of the job gains have been—and continues to be—within the financial, education, and health services sectors, which has ignited demand for office park space. However, demand is stemming from companies of all stripes, including insurance, real estate, technology, energy and private equity firms. Heavyweights like Toyota, Liberty Mutual, JP Morgan and State Farm have all made huge commitments to Dallas in the last year or so.

Office space within the metro is being absorbed at an amazing pace and the best buildings and the strongest corridors are beating historic norms for leasing and vacancy rates. High on tenant’s list are well-located, walkable Class A buildings boasting impressive amenity packages that include conference rooms, fitness centers, ample parking above 3/1,000 ratios, efficient floorplans and connectivity. Buildings that cater to the conveniences of the work and play lifestyle are first in pecking order as tenants seek simplicity, yet still enriching experiences—which is synonymous with the Millennial generation that is flooding the Dallas-Fort Worth job market.

This increased demand for office space has put added pressure on rents which have reached record highs. In some instances, prime business districts command rents twice as much as the city average. On average, Dallas-Fort Worth rents are up between 4 and 5 percent year-over-year, according to the Dallas News.  And Jones Lang LaSalle estimates rents for top-tier buildings to have increased a whopping 17 percent in only two years. There also seems to be a trend of tenants biting off physical space to counter rent increases.

Despite the significant uptick in rents, Dallas-Fort Worth and the general North Texas market is still much more affordable than coastal regions and dense urban cores where many companies are relocating from. This has kept local fundamentals strong and thriving across all markers.

The great state of Texas has been listed as the best state do business in by CEO Magazine for 12 years in a row now and it has the best business policy. Dallas in particular is one of the greatest growth stories in the United States due to its diverse economy, friendly business environment, robust residential development pipeline, massive population growth, and employment expansion—and business leaders and investors recognize this advantage. KBS currently owns 11 properties in the Dallas-Fort Worth area totaling more than 3.7 million square feet and likes the market due to its strong performance.

 

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Ryan McManigal is a vice president and asset manager for KBS responsible for over three million square feet of office space in Dallas, Texas.  Ryan also assists in identifying and underwriting new acquisitions for KBS in the south central region of the U.S.