Aggressive revaluations are anticipated for Dallas-Fort Worth office properties in 2014. Demand is up, most new construction is already leased, vacancies are down, and rent is getting more expensive. It's a classic case of supply and demand driving up assessed values.
Expanding and relocating companies leased an additional 3.5 million square feet of office space in Dallas/Fort Worth last year. Most of the leasing activity was concentrated in three key areas:
Richardson's Telecom Corridor
Frisco's Legacy Business Park
Las Colinas in Irving
Net office leasing in the Metroplex was 15% higher in 2013 than the year before.
New Construction Picks Up
A construction boom is going on in North Texas with approximately 5.4 million square feet of new office space in the pipeline. This is slightly below the level of activity just prior to the onset of the recession.
There are currently 16 speculative office buildings under construction totaling about 3 million square feet. Even with the high percentage of spec building, more than half of the office space currently on the way is already pre-leased.
The overall office vacancy rate for the D/FW Metroplex fell to just under 18% in 2013, marking the lowest level in more than a decade, according to Cushman & Wakefield.
Vacancy rates are even lower in some business districts such as North Dallas, West Plano, and Frisco, where the supply of empty office space has fallen below 10%.
Dallas ranked as one of the top markets in the nation for rent growth in 2013, according to Cassidy Turley. Last year, Dallas rents climbed 5.6%.
Average quoted rents throughout the area have regained most of the declines suffered during the recession. In some business districts in North Dallas and Uptown, average rents are at record high levels of more than $30 per square foot.
Local assessors have been monitoring these trends and will likely attempt to make up lost ground in terms of office valuations this year. The best defense against increasing property tax values is an aggressive appeal strategy. With properly substantiated data and analysis, assessment increases can be successfully controlled. Minimizing your office property assessment is key to holding the line on your tax expense.