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Higher D/FW Office Values on the Horizon

by Scott Buie, Dallas, February 2013

 

There's a new sense of momentum in the Dallas/Fort Worth office market. Net office leasing almost doubled last year, thanks to a surge of transactions in the final months of 2012. For the year, leasing activity reached its highest level since 2008.

 

Office owners and managers should be aware that local appraisal authorities will view this surge in demand as an opportunity to increase assessed values in 2013.

 

Boost in Occupancy

 

Expanding and relocating tenants occupied more than 3 million square feet of additional office space in the D/FW Metropex in 2012, according to estimates by Cushman & Wakefield of Texas Inc. About a third of the net office leasing occurred in the fourth quarter alone.

 

Leasing hot spots included:

 

  • Far North Dallas (995,743 sq. ft. leased)

  • Uptown-Turtle Creek (552,608 sq. ft.)

  • Far North Central (527,974 sq. ft.)

 

Only five submarkets suffered absorption losses in 2012, compared to 11 in 2011, and last year's losses were not considered substantial.

 

Other Signs of a Rebound

 

With increased demand, construction of new office projects is ramping up. The number of North Texas office buildings under construction increased by 168% in 2012.

 

The improvement in year-over-year office vacancies was also impressive.

 

 

Direct Vacancy

Overall Vacancy (including sublease space)

2012

18.2%

19.1%

2011

20.5%

21.4%

 

What This Means to You

 

Just because office demand is increasing, vacancies are declining, and new construction is making a comeback in the local market as a whole, it doesn't mean that all office properties are increasing in value. There are a myriad of variables to consider, not the least of which include: design functionality, location, age, obsolescence, and competitive factors within each submarket.

 

A comprehensive valuation analysis encompassing all of these variables can determine whether your proposed 2013 taxable value has room for improvement. A properly supported appeal position can result in substantial tax savings, and give your property an edge on the competition.