4Q 2020 DFW Office Market Brief

Market Brief... Dallas/Fort Worth

OFFICE

4Q2020 Property Pictured Above: The Berkshire | 5950 Berkshire Lane | Dallas, Texas 75225

DFW OFFICE MARKET BRIEF 4Q 2020

TABLE OF CONTENTS 1. DALLAS/FORT WORTH OFFICE TEAM AND SUBMARKETS

1 2 3

2. OVERALL DALLAS/FORT WORTH OFFICE MARKET

A. Facts and Figures

2. SUBMARKET INTELLIGENCE

A. Dallas Central Business District

B. Central Expressway C. Far North Dallas D. Fort Worth Central Business District E. Las Colinas F. LBJ G. Mid Cities H. North Fort Worth I. Preston Center J. Richardson/Plano K. Southwest Fort Worth L. Stemmons M. Uptown/Turtle Creek

1

DFW

HLC SUBMARKET COVERAGE

2

HLC DFW OFFICE MARKET EXPERTS

MATT CARTHEY

HOLDEN LUNSFORD

JOHN DICKENSON

GEOFF SHELTON

DAVID CASON

Partner/Managing Principal - Fort Worth mcarthey@holtlunsford.com 817.710.1111

Managing Partner - Leasing Services holdenlunsford@holtlunsford.com 972.381.3218

Managing Principal - Dallas jdickenson@holtlunsford.com 972.421.1971

Managing Principal - Fort Worth gshelton@holtlunsford.com 817.710.1113

Vice President - Fort Worth dcason@holtlunsford.com 817.810.9137

DAN POND

MASON PRITCHER

JAKE NEAL

MARSHALL MAYS

JACK BEARE

AARON DRAPER

Market Director - Dallas dpond@holtlunsford.com 972.380.3641

Market Director - Dallas mpricher@holtlunsford.com 972.280.8320

Market Associate - Fort Worth jneal@holtlunsford.com 817.284.5555

Market Associate - Fort Worth mmays@holtlunsford.com 817.632.6150

Market Analyst - Dallas jbeare@holtlunsford.com 972.265.0128

Market Analyst - Dallas adraper@holtlunsford.com 972.381.3219

TYLER HOWARTH

HUNTER HEDRICK

CHIMA OGUERI

QUINN HANFORD

SAM SCHMIDT

Managing Principal Tenant Representation thowarth@holtlunsford.com 972.280.8302

Market Analyst - Dallas hhedrick@holtlunsford.com 972.421.1973

Market Analyst - Dallas cogueri@holtlunsford.com 972.381.3210

Market Analyst - Dallas qhanford@holtlunsford.com 972.265.0124

Market Analyst - Dallas sschmidt@holtlunsford.com 972.265.0129

JAMES ENGELS Market Director - Dallas jengels@holtlunsford.com 972.280.8307

3

NEW LISTING

7920 BELT LINE

7920 Belt Line: 185,372 SF Class B office building in the Richardson/Plano Submarket.

4

GRAMERCY CENTER

NEW LISTING

Gramercy Center: 256,155 SF Class B two-building office project in the Far North Dallas Submarket.

5

NEW LISTING

PROMENADE TOWER

Promenade Tower: 221,404 SF Class B office building in the Richardson/Plano Submarket.

6

REPUBLIC PLACE

NEW LISTING

Republic Place: 97,909 SF Class B office building in the Richardson/Plano Submarket.

7

HLC DFW OFFICE OVERALL MARKET

VACANCY - OVERALL DFW

CONSTRUCTION - OVERALL DFW

21.30%

25.00%

10,000,000 9,000,000

18.20%

20.00%

8,000,000

15.00%

6,000,000

10.00%

4,000,000

5.00%

2,000,000

19.8% 17.3%

7,000,000

5,000,000

3,000,000 1.50%

0.90%

1,000,000 0

0.00% 4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Direct Vacancy

2Q 19

3Q 19

4Q 19

1Q 20

2Q 20

Sublet Vacancy

3Q 20

4Q 20

4Q 17

1Q 18

2Q 18

Total Vacancy

3Q 18

4Q 18

1Q 19

2Q 19

3Q 19

Delivered Inventory

ABSORPTION - OVERALL DFW

4Q 19

1Q 20

2Q 20

3Q 20

4Q 20

Under Construction

OVERVIEW - OVERALL DFW

1,600,000 1,100,000

22.0%

3,000,000

21.0%

2,000,000

20.0%

1,000,000

19.0%

0

18.0%

(1,000,000)

17.0%

(2,000,000)

600,000 100,000 (400,000) (900,000) (1,400,000) (1,900,000) (2,400,000) (2,900,000) 4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

2Q 19

3Q 19

4Q 19

1Q 20

2Q 20

3Q 20

16.0%

4Q 20

(3,000,000) 4Q 17

Total Net Absorption

1Q 18

2Q 18

3Q 18

4Q 18

Absorption

1Q 19

2Q 19

3Q 19

4Q 19

1Q 20

2Q 20

Deliveries

3Q 20

4Q 20

Vacancy

Source: CoStar 4Q 2020 Office Report

Market

Existing Inventory

Vacancy

# Bldgs.

Total RBA

Direct SF

Central Expressway

107

12,483,094

2,114,089

Dallas CBD

87

29,410,107

7,362,305

East Dallas

203

8,521,190

1,432,715

Vac. %

YTD Net Absorption

YTD Deliveries

2,257,760

18.1%

(404,456)

58,890

30,000

$31.14

8,214,550

27.9%

(652,837)

0

284,600

$25.99

1,570,424

18.4%

(70,824)

0

851,430

$27.19

Total SF

Under Const. SF

Quoted Rates

Far North Dallas

503

54,877,218

11,572,894

12,760,285

23.3%

(697,554)

421,059

2,204,446

$31.60

Fort Worth CBD

54

8,844,255

1,651,160

1,748,114

19.8%

(425,166)

0

0

$27.20

Las Colinas

305

37,941,203

7,091,894

7,897,720

20.8%

(1,420,957)

558,281

425,877

$26.49

LBJ Freeway

169

21,593,196

4,708,041

4,890,386

22.6%

(159,389)

0

107,000

$23.71

Lewisville/Denton

186

8,121,692

1,301,706

1,307,550

16.1%

12,702

299,817

41,348

$25.36

Mid Cities

447

24,254,765

5,347,689

5,719,963

23.6%

(36,334)

301,109

235,144

$24.56

North Fort Worth

67

3,200,330

193,279

204,936

6.4%

66,028

47,067

113,800

$25.29

Northeast Fort Worth

54

3,678,380

620,405

625,262

17.0%

4,095

0

0

$20.72

Preston Center

54

5,012,971

605,970

658,550

13.1%

(20,587)

0

297,000

$40.98

Richardson/Plano

393

33,129,299

6,294,526

6,571,325

19.8%

313,252

352,091

225,811

$23.97

South Fort Worth

249

12,341,330

1,581,596

1,676,834

13.6%

(158,175)

157,138

66,788

$24.84

Southwest Dallas

91

4,130,381

601,189

603,770

14.6%

46,255

45,000

28,314

$23.36

Stemmons Freeway

123

13,242,580

3,391,997

3,439,495

26.0%

(86,524)

0

65,000

$20.19

Uptown/Turtle Creek

101

13,827,197

2,322,856

2,560,302

18.5%

(586,084)

0

1,016,688

$41.34

3,193

294,609,188

58,194,311

62,707,226

21.3%

(4,276,555)

2,240,452

5,993,246

$27.41

Totals

Source: CoStar 4Q 2020 Office Report

8

DALLAS CENTRALINTELLIGENCE BUSINESS DISTRICT SUBMARKET Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

114,654

(545,878)

22,383

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

27.9%

28.3%

25.7%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

284,600

284,600

284,600 Delivered SF Quoted Rates $25.99

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

$26.01

$25.73

VITAL STATS

20.0%

200,000

18.0%

150,000

16.0%

100,000

14.0%

50,000

12.0%

0

10.0%

(50,000)

8.0%

(100,000)

6.0%

(150,000)

4.0%

(200,000)

2.0%

(250,000)

0.0%

(300,000) 4Q 17

1Q 18

2Q 18

3Q 18

Absorption

4Q 18

1Q 19

2Q 19

3Q 19

4Q 19

1Q 20

Deliveries

2Q 20

3Q 20

4Q 20

Vacancy

Source: CoStar 4Q 2020 Office Report

CURRENT EVENTS • Uber, which signed a lease in the Epic tower last year

for more than 160K SF, has placed 116K SF of its existing space for sublease. With the technology firms’ employees mostly working from home until at least mid-2021, the company has listed the space through the remainder of their term to mid-2023. The company remains committed to its growth plans in Dallas and the new Epic Phase II project, being developed as a permanent home for the company, is still set for delivery in late 2022.

• St. Louis-based law firm Thompson Coburn LLP is

moving its Dallas office from their temporary space in Uptown to 2100 Ross Avenue in the Arts District. The firm has signed a lease for 23.1K SF after opening its Dallas office earlier this year. Along with Dallas, Thompson Coburn has locations in Chicago, Los Angeles, St. Louis, Southern Illinois, and Washington D.C.

• The First National Bank tower redevelopment, rebranded as The National, is finally open for business.

After $460M the 52-story mixed-use project has now opened its Thompson Hotel operation and half of its apartment units. The top floors of the building are still being completed which include office space and the specialty penthouse apartment units. The project is set to be complete by December.

• Quadrant Investment Properties is launching a new

flexible office leasing strategy at St. Paul Place on Ross Avenue. The building will now be offering fully furnished office spaces for 6 to 12 month leases. The suites will range in size from 2.5K to 14K SF. The 22-story office tower is across the street from the Dallas Museum of Art and is 80% leased.

TOP LEASE TRANSACTIONS • Thompson Coburn LLP has signed a 23.1K SF lease in 2100 Ross.

• Zweig White LLC has signed a 2K SF lease in Bank of America Plaza.

• TBW LLC has signed a 1.8K SF lease in Alto 211.

• Law Office of H. Guy Smith has signed a 1.2K SF lease in Founders Square Office Building.

DEALS IN THE MARKET • Bank of America Plaza – a 1,849,729 SF class A office building

• Renaissance Tower – a 1,729,294 SF class A office building

• Purse Building – a 65K SF class B office building • 208 N Market Street – a 62K SF class B office building NEW DEVELOPMENTS • 300 Pearl | 300 S Pearl Expressway – 199K SF LARGE EXISTING VACANCIES • Fountain Place | 1445 Ross Avenue – 584,895 SF • Renaissance Tower | 1201 Elm Street – 436,574 SF • Bank of America Plaza | 901 Main Street – 314,729 SF • Thanksgiving Tower | 1601 Elm Street – 240,827 SF • 1700 Pacific | 1700 Pacific Avenue – 234,441 SF • Bryan Tower | 2001 Bryan Street – 224,916 SF • One Main | 1201 Main Street – 162,809 SF

9

CENTRAL INTELLIGENCE EXPRESSWAY SUBMARKET Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(38,553)

230,871

11,702

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

18.1%

17.5%

15.8%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

70,532

88,890

30,000 Delivered SF Quoted Rates $31.14

vs. Prev. Qtr

vs. 12 Mths Ago

58,890

-

vs. Prev. Qtr

vs. 12 Mths Ago

$30.37

$30.41

VITAL STATS

20.0%

200,000

18.0%

150,000

16.0%

100,000

14.0%

50,000

12.0%

0

10.0%

(50,000)

8.0%

(100,000)

6.0%

(150,000)

4.0%

(200,000)

2.0%

(250,000)

0.0%

(300,000) 4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

Absorption

1Q 19

2Q 19

3Q 19

4Q 19

Deliveries

1Q 20

2Q 20

3Q 20

4Q 20

Vacancy Source: CoStar 4Q 2020 Office Report

CURRENT EVENTS • Walnut Hill Medical Center, which has been closed

since 2017 when the hospital lost its Medicare program agreement with the federal government, has been purchased by a Houston-based investor. The eight-story, 200K SF building is at the northeast corner of Walnut Hill and Greenville. The building was originally constructed in 1983 as an office building and was later converted for medical use.

TOP LEASE TRANSACTIONS • Sinai Urgent Care Holdings has signed a 4.3K SF lease in 7515 Greenville.

• Udashen Anton has signed a 3.7K SF lease in Campbell Centre.

• Saxon MD Facial Plastic Surgery has signed a 2.5K SF

HLC Deal

lease in The Meadows Building.

• Charity Advertising & Marketing has signed a 2.3K SF lease in Meadow Park Tower.

• Blue Star Global has signed a 2.2K SF lease in 7515 Greenville.

LARGE EXISTING VACANCIES • Eighty-Eighty Central – 101,019 SF • Two Energy Square – 98,600 SF • Cityplace Tower – 90,265 SF • The Pyramids at Park Lane – 59,070 SF • 8750 N Central Expressway – 51,517 SF

10

FAR NORTH DALLAS SUBMARKET INTELLIGENCE Absorption

VITAL STATS

vs. Prev. Qtr

vs. 12 Mths Ago

(67,972)

(12,770)

21.0%

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

20.0%

23.3%

21.6%

21.2%

19.0%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

18.0%

400,000

17.0%

200,000

(789,815)

2,204,446 Delivered SF 134,992 Quoted Rates $31.60

2,187,438

2,146,941

vs. Prev. Qtr

vs. 12 Mths Ago

171,334

86,594

vs. Prev. Qtr

vs. 12 Mths Ago

$30.87

$29.37

22.0%

1,000,000

800,000 600,000

16.0% 0 15.0% (200,000)

14.0% 13.0%

(400,000) 4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Absorption

2Q 19

3Q 19

Deliveries

4Q 19

1Q 20

2Q 20

3Q 20

4Q 20

Vacancy

Source: CoStar 4Q 2020 Office Report

CURRENT EVENTS • Stonebrook Office 1 is now being marketed for sale

in Frisco’s growth corridor. The roughly 90K SF office building is the first phase of the Stonebrook Business Park at the Tollway and Stonebrook Parkway. Plans for the project call for additional office, retail and restaurant space. The building is almost 70% leased and major Tenants include Taylor Morrison, Newport Medical, and a 30K SF Venture X co-working space.

• Florida-Based investor, TerraCap Management, has

purchased the Preston Park office campus. The 200K SF two (2) building development near Preston Road and Park Boulevard was built in 1998 and has been owned by Sunwest Real Estate Group since 2017. The project is 88% leased and major tenants include Catapult Healthcare, American Flood Research Inc., and Baylor Scott & White Arrhythmia Management.

• Cawley Partners, in partnership with Warren Buffet’s

Grandscape development, has announced plans to grow the Grandscape development further with the addition of more than 1.5M SF of office space. The already $1.5B development in The Colony stretches more than 400 acres on the south side of 121 and includes retail, hotel and residential properties as it stands. The new development will include three 500K SF, 17-story office towers.

• Oakland-based tech company, DZS Inc., announced in

March that it would relocate from California to North Texas. This week, the announcement was made that the company would place an engineering center in Legacy Place East. DZS has more than 700 employees and plans to keep some operations in California but will move a substantial portion of its workforce into the nearly 14K SF space in Plano. Build-out for the space is scheduled for completion in early 2021.

TOP LEASE TRANSACTIONS • Denbury Inc. has signed a 104K SF sublease in Legacy Union One.

• Peloton has signed a 103.7K SF expansion in Legacy Central.

• Ebby Halliday has signed a 17K SF lease in Legacy Business Park.

• DZS Inc. has signed a 14K SF lease in Legacy Place East.

• Tollplus LLC has signed a 6.6K SF lease in 4120 International.

• Capital Title of Texas has signed a 6.5K SF lease in One Stratford Park.

• Remedy RX has signed a 4K SF renewal in Preston Plaza I.

• MHI has signed a 1.3K SF lease in 16980 N Dallas Parkway.

DEALS IN THE MARKET • Emerald Plaza – a 74K SF office building • Stonebrook Office – a 90K SF office building LARGE EXISTING VACANCIES • 5400 Legacy Drive – 722,600 SF • The Campus at Legacy West – 551,430 SF • 5301 Legacy Drive – 296,433 SF • 6400 Legacy Drive – 232,619 SF • International Plaza II – 231,783 SF • 7900 Windrose Avenue – 227,500 SF • 4101 International – 205,750 SF

11

FORT WORTH CENTRAL BUSINESS DISTRICT SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(65,628)

142,228

125,497

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

16.9%

16.1%

17.2%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

$28.28

$28.01

Delivered SF Quoted Rates $28.23

VITAL STATS

20.0%

300,000

200,000

18.0%

100,000 16.0% 0 14.0% (100,000) 12.0%

(200,000)

10.0%

(300,000) 4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Absorption

2Q 19

3Q 19

Deliveries

4Q 19

1Q 20

2Q 20

3Q 20

4Q 20

Vacancy

Source: CoStar 4Q 2020 Office Report

CURRENT EVENTS

Dallas developer, Jackson-Shaw, has opened a new hotel in downtown Fort Worth. The 16-story, 252-room hotel is on West Fifth Street near Sundance Square. The hotel will be the first AC Hotel by Marriott in Tarrant County. It will be managed by Crescent Hotels & Resorts.

“The AC Hotel Fort Worth is designed for creative, welltraveled visionaries who appreciate a thoughtfully designed space,” Jackson-Shaw’s Joe Blewitt said in a statement.

The hotel features gallery-like art installations, a library, serene outdoor space, and a bar that can also function as unconventional workspaces. The new hotel also includes a fullservice bar and a first-floor coffee shop.

“Located in the heart of downtown Fort Worth, the modern lifestyle brand is a hub for guests to discover the coveted local scenes and talents, allowing them to create meaningful and authentic connections with each visit,” Blewitt said.

Fort Worth’s Sundance Square has made another management change, bringing property responsibilities for the downtown development back into the fold with the Bass family. Fine Line Group, owned by Ed and Sasha Bass, is handing control of the 35-block space to a new in-house company, Sundance Square Management, LLC. However, some familiar names will be leading the new entity with Henry S. Miller III as CEO and Bill Boecker, a longtime business partner of Bass, as the new company’s President. The majority of current on-site management and leasing staff are also staying with Sundance Management. A statement from Fine Line credited HSM with helping operate through “a very challenging time” over the last year. Several restaurants and retail stores have closed.

12

TOP LEASE TRANSACTIONS • Moncrief Properties has signed a 15,007 SF sublease in HLC Deal

Chase Bank Building.

• An undisclosed tenant has signed a 10,738 SF sublease in 777 Main.

• Lockton Companies has signed a 5,052 SF lease in

HLC Deal

Frost Tower.

DEALS IN THE MARKET • 801 Cherry Street – a 1,024,600 SF class A office building

• 307-309 W 7th Street – a 439,802 SF class B office building

• 115 W 7th Street – a 300,347 SF class B office building • 210 E 7th Street – a 82,226 SF class B office building LARGE EXISTING VACANCIES • 115 W 7th Street – a 186,684 SF class B vacancy • Bank of America Tower – a 124,604 class A vacancy • 210 E 7th Street– a 82,226 SF class B vacancy • Frost Tower – a 61,898 SF class A vacancy • 777 Main – a 54,399 SF class A vacancy • Burnett Plaza – a 54,169 SF class A vacancy • Oil & Gas | Star-Telegram Building – a 42,381 SF class B vacancy

LAS COLINAS SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

31,185

(972,811)

(125,303)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

19.3%

18.5%

17.1%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

508,281

2,087,028

vs. Prev. Qtr

vs. 12 Mths Ago

250,000

-

vs. Prev. Qtr

vs. 12 Mths Ago

$26.51

$26.15

211,281 Delivered SF 400,000 Quoted Rates $26.43

VITAL STATS

25.0%

2,000,000 1,500,000

20.0% 1,000,000 15.0%

500,000 0

10.0%

(500,000) 5.0% (1,000,000) 0.0%

(1,500,000) 4Q 17

1Q 18

2Q 18

3Q 18

Absorption

4Q 18

1Q 19

2Q 19

3Q 19

Deliveries

4Q 19

1Q 20

2Q 20

3Q 20

4Q 20

Vacancy

Source: CoStar 4Q 2020 Office Report

CURRENT EVENTS • Type Six Design & Development has received zoning

approval for the six-story Hotel Indigo in Las Colinas at 455 E John Carpenter Freeway. Set to begin construction in 2Q 2021, the 150-room hotel will include a restaurant and conference space.

• Levy Event Plaza, a $2.8M, six-acre outdoor plaza along Irving’s Lake Carolyn, is now complete. Featuring open green space, a paved pathway, shade trees, picnic tables, charging stations for digital devices, a stage, and space for vendor tents and food trucks, the plaza will serve as an anchor and gathering place in Irving’s Urban Center. The Plaza will host the city’s Fourth of July firework gatherings, the annual Laughs by the Lakes comedy show, and other community events.

TOP LEASE TRANSACTIONS

LARGE EXISTING VACANCIES • Williams Square West – 319,148 SF • Royal Tech Business Park – 296,312 SF • 6000 Connection – 293,890 SF • 1801 Valley View Lane – 208,593 SF • 3501 Olympus Boulevard – 200K SF • Horizon Way Business Park – 200K SF • 1605 Lyndon B Johnson Freeway – 170,848 SF • 1551 Corporate Drive – 167,667 SF • 3701 Regent Boulevard – 154,656 SF • 2901 Kinwest Parkway – 153,173 SF • 1555 W Walnut Hill Lane – 151,736 SF • Cottonwood Office Center – 117,222 SF • 6031 Connection Drive – 109,478 SF • 8616 Freeport Parkway – 105,778 SF • Park West 2 – 102,980 SF • Tower 1320 – 102,410 SF

• Southwestern Health Resources has signed a 154,751 SF lease in Browning Place I & II.

• Neighborly has signed a 34,767 SF lease in 500 E John Carpenter Freeway.

• ASC has signed a 12K SF lease in 6121 N State Highway 161.

• AIS Portfolio Services, LP has signed a 11,022 SF lease in 1212 Corporate Drive.

DEALS IN THE MARKET • 1551 Corporate Drive – a 167,667 SF class B office/flex • Fuller Ridge I & II – a 285K SF two building office project

NEW DEVELOPMENTS • 2999 Olympus Boulevard – a 322K SF class A office development

• 3489 State Highway 121 – a 150K SF class A office development

• 1801 Wittington Place – a 103K SF class B office development

13

LBJ SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(64,527)

(187,798)

197,768

23.5%

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

23.0%

22.6%

22.3%

21.9%

22.5%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

22.0%

107,000

-

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

22.74

22.78

107,000 Delivered SF Quoted Rates $23.71

VITAL STATS

24.0%

300,000 200,000 100,000 0 (100,000)

21.5% (200,000)

21.0%

(300,000)

20.5% 20.0%

(400,000) 4Q 17

1Q 18

2Q 18

3Q 18

Absorption

4Q 18

1Q 19

2Q 19

3Q 19

4Q 19

1Q 20

Deliveries

2Q 20

3Q 20

4Q 20

Vacancy Source: CoStar 4Q 2020 Office Report

TOP LEASE TRANSACTIONS • Korn Ferry Futurestep has signed a 60K SF renewal in 4100 Alpha.

• 99 Management has signed an 8.7K SF lease in Lake Highlands Tower

• Pacific Premier Bank has signed a 6.4K SF renewal in CBS Tower.

HLC Deal

• Time Delay Inc. has signed a 3.8K SF lease in The RGC Building.

• Valor Integrated has signed a 2.9K SF lease in

HLC Deal

Crosspoint Atrium.

14

NEW DEVELOPMENTS • No new developments are currently under construction.

However, four have been proposed:

• Park Heritage – 1.15M SF • Four Lincoln Centre – 400K SF • Park Tower at Dallas Midtown – 376,870 SF • The Inwood at Alpha West – 300K SF LARGE EXISTING VACANCIES • Crosspoint Atrium – 123,171 SF • 5525 LBJ – 111,092 SF • Pinnacle Tower – 98,412 SF • Three Galleria Tower – 88,084 SF • LBJ Tower – 80,578 SF

MIDINTELLIGENCE CITIES SUBMARKET Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(308,744)

1,276

(50,730)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

23.9%

22.5%

16.6%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

379,667

336,217

vs. Prev. Qtr

vs. 12 Mths Ago

53,518

-

382,712 Delivered SF 15,000 Quoted Rates $24.85

vs. Prev. Qtr

vs. 12 Mths Ago

$24.07

$22.46

VITAL STATS

26.0%

400,000 200,000

24.0%

0 (200,000)

22.0%

(400,000) (600,000)

20.0%

(800,000) (1,000,000)

18.0%

(1,200,000) (1,400,000)

16.0%

(1,600,000) 4Q 17

1Q 18

2Q 18

3Q 18

Absorption

4Q 18

1Q 19

2Q 19

3Q 19

Deliveries

4Q 19

1Q 20

2Q 20

3Q 20

4Q 20

Vacancy Source: CoStar 4Q 2020 Office Report

CURRENT EVENTS • Upcoming mixed-use project, District 114, is under

construction north of State Highway 114 between Cherry Lane and North Kimball Avenue. Medici Development Partners is building the 94,990 SF project which is part of the Kimball Park mixed-use development set to deliver Summer 2021. District 114 will have 25,112 SF of retail space on the lower floor and office space on the upper levels. There is a garage with more than 320 parking spaces and a fourth-floor outdoor space for tenants.

• The Vin Hotel in Grapevine, which opened in September,

recently unveiled “igloo-like” bubbles on its rooftop so people can enjoy the area year round. The waterproof bubbles fit up to six people and each comes with speakers, furniture, and heaters. There are four bubbles located at the hotel’s Rioja Rooftop Terrace, and a reservation is required.

TOP LEASE TRANSACTIONS • Sabre Holdings Corporation has signed a 265K SF lease in 3150 Sabre Drive.

• Chase Bank has signed a 16,531 SF lease in 1600 E Pioneer Parkway.

• North Star Energy has signed a 10,858 SF lease in Copeland Tower.

• Action Behavior Centers has signed a 6,499 SF lease in 230 S Nolen Drive.

DEALS IN THE MARKET • Brookhollow Riverside – a 119,078 SF class A office building

• 1351 E Bardin Road – a 115,490 SF class B office building

• 701 Highlander Boulevard – a 74,033 SF class A office building

• 3301 Airport Freeway – a 70,606 SF class B office building

• 3400 William D Tate – a 56,520 SF class B office building

NEW DEVELOPMENTS • 2102 E State Highway 114 – a 103K SF class A office development

LARGE EXISTING VACANCIES • 1 Kirkwood Boulevard – 379,898 SF • 2200 W Airfield Drive – 310,350 SF • 1500 Solana Boulevard | Building 2 – 124,735 SF • 1500 Solana Boulevard | Building 1 – 124,661 SF • 1500 Solana Boulevard | Building 5 – 123,861 SF • 950 E State Highway 114 – 66,707 SF • 1500 Solana Boulevard | Building 6 – 51,296 SF • 8555 Airport Freeway – 47,277 SF • 2208 Highway 121 – 46,052 SF • 3400 William D Tate Avenue – 40,738 SF • 1301 Solana Boulevard | Building 2 – 34,188 SF

15

NORTH FORT WORTH SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(27,093)

11,344

74,041

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

8.0%

6.7%

11.5%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

166,800

76,800

vs. Prev. Qtr

vs. 12 Mths Ago

-

200,000

vs. Prev. Qtr

vs. 12 Mths Ago

$26.11

$24.69

198,800 Delivered SF 16,000 Quoted Rates $26.45

VITAL STATS

20.0%

250,000 200,000

16.0% 150,000 12.0%

100,000 50,000

8.0%

0 4.0% (50,000) 0.0%

(100,000) 4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Absorption

2Q 19

3Q 19

4Q 19

1Q 20

2Q 20

Deliveries

3Q 20

4Q 20

Vacancy Source: CoStar 4Q 2020 Office Report

CURRENT EVENTS

VariSpace Southlake, a space-as-a-service offering by Coppell-based Vari, is open and has signed its first major tenant, a Fortune 50 company that moved in on January 1, 2021. This lease at VariSpace fills a long gap in occupancy for the building, as the former Vista at Solana sat empty for 11 years before Vari purchased it as its second VariSpace location. In the last year, it has been revitalized and now includes more than 30K SF of world-class amenities.

VariSpace did not release the name of the tenant. Microsoft also confirmed it has signed a short term lease at 1900 West Kirkwood Boulevard, the VariSpace site. The company will be utilizing the space to accommodate current growth while it continues work on the modernization project underway at the software giant’s existing Las Colinas campus.

There continues to be a lack of inventory of homes for sale in the Keller-Roanoke-Northeast Fort Worth and broader Dallas-Fort Worth areas, according to Lily Moore Realty in Westlake.

“Despite the low level of inventory, North Texas home sales were up 16% year over year,” Lily Moore said about the month of July. “A number of factors have contributed to the increase in home sales. Buyers can currently take advantage of low interest rates; many buyers are looking for more space or outdoor features, such as a pool; and builders have ramped up production from spring numbers. When you have this type of market, it’s about supply and demand. As inventory goes down, prices go up. This is a fantastic time to put your home on the market at a good price.”

16

TOP LEASE TRANSACTIONS • Behavioral Innovations has signed a 10,420 SF lease at 4541 Heritage Trace Parkway.

• An undisclosed tenant has signed a 7,157 SF lease at 2301 Eagle Parkway.

• PostNet has signed a 2,834 SF lease at 100 Plaza Place.

DEALS IN THE MARKET • 1301 Solana Boulevard – a 360,883 SF class A office building

• 2301 Eagle Parkway – a 73,747 SF class A office building

• 8224 White Settlement Road – a 27,716 SF class B office building

NEW DEVELOPMENTS • Alta Vista Road & N Beach Street – a 48K SF class A office building, set to deliver June 2021

• 3800 N Tarrant Parkway – a 29K SF class B office building, set to deliver February 2021

LARGE EXISTING VACANCIES • 5555 N Beach Street – 163,283 SF • 2601 Meacham Boulevard – 162,845 SF • 5501 Alliance Gateway Freeway – 161,336 SF

PRESTON CENTER SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(7,621)

(8,831)

(97,908)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

13.1%

13.0%

12.7%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

297,000

297,000

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

$41.62

$39.95

297,000 Delivered SF Quoted Rates $40.98

VITAL STATS

16.0%

150,000

100,000

14.0%

50,000 12.0% 0 10.0% (50,000) 8.0%

(100,000)

6.0%

(150,000) 4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Absorption

2Q 19

3Q 19

4Q 19

Deliveries

1Q 20

2Q 20

3Q 20

4Q 20

Vacancy Source: CoStar 4Q 2020 Office Report

CURRENT EVENTS • Lincoln Property Company is planning two new developments in Preston Center. The two high-rise development plans consist of a 13-story office tower and a 15-story residential tower. The buildings are slated for Douglas Avenue and will be 225K SF and 220K SF respectively. Lincoln is still finalizing plans for the number of residential units and the mix in both the office and residential towers.

TOP LEASE TRANSACTIONS • Roscoe Properties has signed an 8.5K SF lease in Preston Commons Bank Tower.

• Mackinac Holdings has signed a 1.9K SF lease in Preston Sherry Plaza.

• DT Capital has signed a 1.3K SF lease in Preston Sherry Plaza.

NEW DEVELOPMENTS • Weir’s Plaza – a 297K SF class A office building LARGE EXISTING VACANCIES • 8343 Douglas at Douglas Center – 21,337 SF • 8333 Douglas at Douglas Center – 20,046 SF • Preston Commons East Tower – 19,943 SF • Preston Commons West Tower – 19,704 SF • Bluffview Towers West – 18,203 SF

17

RICHARDSON/PLANO/ALLEN/MCKINNEY SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

149,218

(82,541)

(518,607)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

19.8%

20.3%

19.9%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

177,811

477,811

vs. Prev. Qtr

vs. 12 Mths Ago

225,811 Delivered SF Quoted Rates $23.97

300,000

-

vs. Prev. Qtr

vs. 12 Mths Ago

$23.93

$23.73

VITAL STATS

22.0%

800,000 600,000

21.0%

400,000

20.0%

200,000 19.0% 0 18.0%

(200,000)

17.0%

(400,000)

16.0%

(600,000) 4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

Absorption

1Q 19

2Q 19

3Q 19

4Q 19

1Q 20

Deliveries

2Q 20

3Q 20

4Q 20

Vacancy Source: CoStar 4Q 2020 Office Report

CURRENT EVENTS • San Francisco-based Berkeley Partners has acquired a

Richardson office and tech complex at 1501 N. Plano Road. The building, built in 1983, is 83K SF and located in the Telecom Corridor. Berkeley Partners is a privately owned CRE investment advisor with capital from pension funds, endowments, foundations, insurance companies, and family offices. The company has more than 6M SF in multiple states along the west coast, mid-west, and southeastern United States. The company has offices in San Francisco, Dallas, and Boston.

• Dallas-based Uhalt Investments has acquired 7920 Belt

TOP LEASE TRANSACTIONS • CBRE has signed a 100K SF lease in Galatyn Commons.

• Newline Interactive has signed a 40K SF expansion in 2930 Telecom.

• Kenneth G. Wincorn has signed an 8.3K SF lease in 100 NCX.

• JSJD Media has signed a 4.5K SF lease in Central 500.

• Smith Eagle has signed a 2.2K SF lease in Central 500.

• Robert Lazarus has signed a 2.1K SF renewal in

HLC Deal HLC Deal HLC Deal

Promenade Tower.

• NCAB Group USA has signed a 1.3K SF lease in

HLC Deal

Central 500.

HLC Deal

Line Road. The 11-story, 190K SF office building is at the corner of Coit and Belt Line and was previously owned

by Pillar Commercial for 13 years. Pillar has owned the building since 2007 through a series of JV partnerships and recently completed $2.3M of renovations to the building. The building is 85% leased and major tenants in the building include Akumin Corp, Anthony Travel, Interactive Communications, and Praxeo Health.

Holt Lunsford Commercial represented the buyer in the acquisition and is leasing the building for Uhalt Investments.

DEALS IN THE MARKET • 2703 Telecom – a 121,420 SF class B office building NEW DEVELOPMENTS • No new developments are currently under construction.

However, four have been proposed:

• CityLine – 2M SF • 7 CityLine – 417K SF • Legacy Central 5 – 300K SF • One Heritage Creekside – 250K SF LARGE EXISTING VACANCIES • 601 Data – 423,123 SF • 465 Independence Parkway – 251,347 SF • Legacy Central 2 – 228,230 SF • Creekview Corporate Center II – 209,600 SF • 2200 George Bush – 176,831 SF • Campbell Glenn II – 175,525 SF • Lookout Park I – 156,219 SF

18

SOUTHWESTINTELLIGENCE FORT WORTH SUBMARKET Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(102,759)

819

10,879

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

12.7%

11.5%

10.3%

U/C SF 52,531 Delivered SF 55,695 Quoted Rates $24.47

vs. Prev. Qtr

vs. 12 Mths Ago

108,226

104,100

vs. Prev. Qtr

vs. 12 Mths Ago

27,312

-

vs. Prev. Qtr

vs. 12 Mths Ago

$24.23

$24.20

VITAL STATS

14.0%

200,000

13.0%

150,000

12.0%

100,000

11.0%

50,000

10.0%

0

9.0%

(50,000)

8.0%

(100,000)

7.0%

(150,000) 4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

Absorption

1Q 19

2Q 19

3Q 19

4Q 19

1Q 20

Deliveries

2Q 20

3Q 20

4Q 20

Vacancy Source: CoStar 4Q 2020 Office Report

CURRENT EVENTS

Apart from surprise at the city’s bold move to buy the landmark Pier 1 Tower in downtown Fort Worth, reaction to the concept of the 20-story building serving as city hall has been optimistic with city officials and real estate experts calling it a “win-win” for both taxpayers and commercial real estate in the business district. City Manager David Cooke and Mayor Betsy Price announced December 2, 2020 the city’s intention to buy the iconic tower at 100 Energy Way pending City Council approval on December 15, 2020 and sale closure on February 1, 2021. A purchase price has not been made public but the property is worth $71M according to the Tarrant Appraisal District. With renovations, Cooke said the cost would come in around $100M, about half what the city had projected a new city hall would cost to build. If approved, city employees would move in by 2022. A newlybuilt city headquarters would have opened in 2028 at the earliest. City officials have promised taxes will not increase as a result of the purchase. Cooke plans to use tax notes that require a vote by City Council but do not need voter approval in a bond election.

“The tax notes are typically financed for seven to 10 years,” Cooke said. “But allow flexibility for refinancing if interest rates or other factors change.”

TOP LEASE TRANSACTIONS • An undisclosed tenant has signed a 7,559 SF lease in MAIN + BROAD.

• DFW Home Health has signed a 6,143 SF lease at 3909

HLC Deal

Hulen Street.

• LabCorp has signed a 5,848 SF lease at 1106 Alston Avenue.

DEALS IN THE MARKET • 1212 Lancaster Avenue – a 89,632 SF class B office building

• 101 Nursery Lane – a 58,051 SF class A office building • 200 Bailey Avenue – a 43,463 SF class B office building NEW DEVELOPMENTS • 1320 Hemphill Street – a 48,594 SF class A office building, set to deliver January 2022

• 4000 Bryant Irvin – a 18,194 SF class A office building, set to deliver December 2021

LARGE EXISTING VACANCIES • 4055 International Plaza – a 53,013 SF class A vacancy • One Ridgmar Centre – a 36,796 SF class A vacancy • Western Place I – a 19,871 SF class B vacancy • 1300 Summit Avenue – a 15,543 SF class B vacancy

Another hotel concept is taking shape on the vacant lots north of the Kimbell Art Museum and the Modern Art Museum of Fort Worth in the city’s Cultural District. Fort Worth’s Crescent Real Estate filed permits in December for a 200-room “Cultural District Hotel” at the corner of Camp Bowie Boulevard and Van Cliburn Way. Both sides of Van Cliburn between West 7th and Camp Bowie are grassy lots but previous developers focused hotel speculations on the western lot. Representatives for Crescent did not return a call for comment but the filing indicates the roughly 200K SF hotel will feature a conference room, ballroom, restaurant, and a rooftop event area. Costs are estimated at a little more than $53M.

19

STEMMONS SUBMARKET INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

36,738

(77,470)

(72,808)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

26.0%

26.3%

25.7%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

65,000

106,907

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

vs. Prev. Qtr

vs. 12 Mths Ago

$20.19

$17.74

65,000 Delivered SF Quoted Rates $20.19

VITAL STATS 28.0%

500,000 400,000

27.0% 300,000 26.0%

200,000 100,000

25.0%

0 24.0% (100,000) 23.0%

(200,000) 4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

1Q 19

Absorption

2Q 19

3Q 19

4Q 19

1Q 20

2Q 20

Deliveries

3Q 20

4Q 20

Vacancy

Source: CoStar 4Q 2020 Office Report

CURRENT EVENTS • Pegasus Park has landed a major tenant for the

redevelopment project. UT Southwestern Medical Center has signed a 180K SF lease in the revamped building on Stemmons Freeway near Dallas Love Field Airport. The lease is one of the largest signed in the Dallas area in the past year and will be an important step as the 18-story office tower continues to be renovated. The Technology Development office of UT Southwestern will occupy six floors and is the largest deal announced since plans for the 23-acre project were released last summer.

TOP LEASE TRANSACTIONS • UT Southwestern Medical Center has signed a 180K SF lease in Pegasus Park.

• Anthem Strong Families has signed an 11.8K SF lease in

HLC Deal

1220-1230 River Bend.

DEALS IN THE MARKET • 1600 Viceroy – a 214,341 SF class A office building • Trinity Towers – a 634,381 SF class A office building NEW DEVELOPMENTS • No new developments are currently under construction.

However, three have been proposed:

• West Love | 2345 Mockingbird Lane – 1.1M SF • The Design District Tower – 243,100 SF • 2122 W Mockingbird Lane – 158K SF LARGE EXISTING VACANCIES • 1430 & 1440 Empire Central Drive – 320K SF • 9999 Technology Boulevard W – 150,272 SF • Comerica Service Center – 142,600 SF • The Connection at 8600 – 101,530 SF

20

SUBMARKETUPTOWN INTELLIGENCE Absorption

vs. Prev. Qtr

vs. 12 Mths Ago

(130,954)

(229,307)

(41,335)

Vacancy

vs. Prev. Qtr

vs. 12 Mths Ago

18.5%

17.6%

14.3%

U/C SF

vs. Prev. Qtr

vs. 12 Mths Ago

656,774

656,774

vs. Prev. Qtr

vs. 12 Mths Ago

-

-

1,016,688 Delivered SF Quoted Rates $41.34

vs. Prev. Qtr

vs. 12 Mths Ago

$40.77

$40.46

VITAL STATS

20.0%

400,000

18.0%

300,000

16.0%

200,000

14.0%

100,000

12.0%

0

10.0% (100,000)

8.0%

(200,000)

6.0% 4.0%

(300,000)

2.0%

(400,000)

0.0%

(500,000) 4Q 17

1Q 18

2Q 18

3Q 18

4Q 18

Absorption

1Q 19

2Q 19

3Q 19

4Q 19

1Q 20

Deliveries

2Q 20

3Q 20

4Q 20

Vacancy Source: CoStar 4Q 2020 Office Report

CURRENT EVENTS • While sublease square footage being marketed has

slowed recently, total inventory is still at historical levels in Dallas (~8M SF). Near the end of June, sublease inventory began to rise sharply with 1.3M SF listed in August alone. Upper Tollway has been the leader in inventory listed with some activity coming from Uptown and CBD as well. According to a report by Transwestern, 40% of the sublease inventory has a term remaining of three years or greater.

• Cawley Partners is planning a new development on West Mockingbird Lane, just west of Dallas Love Field Airport. Current plans call for 150K SF of office space in a building at 2221 W. Mockingbird Lane. Construction of the four-story building is set to begin in early 2021.

Dallas architect, Corgan, designed the office project which has plans to include food service facilities, fitness center, and a conference center.

• Harwood International has revealed plans for its new Harwood 14 office tower. The 27-story building will be Harwood’s tallest office building to-date and is set to feature a two-story lobby, open-air “pocket gardens,” and a 17K SF rooftop garden. The ground floor will also have 16K SF of restaurants. The project will be Harwood’s ninth office tower in its Harwood district and is set to break ground this winter.

• Dallas-based company, Hunt Realty, has announced that they will seek city approval for an 11-acre redevelopment on Field Street. The plan calls for high-rises including office, residential, and hotel towers as well as retail space. The high-rises will surround a 1.5-acre central park that faces the downtown skyline. Hunt Realty has owned the site for more than two decades which is currently the Northend Apartments. The entire project is expected to be completed in phases over the next 15-20 years.

TOP LEASE TRANSACTIONS • Dorsey & Whitney has signed a 27K SF expansion in The Crescent.

• Russell Reynolds & Associates has signed a 13.8K SF expansion in The Crescent.

• Oh Zone Clinics has signed a 4.3K SF lease in Highland Park West.

• Shah Financial Group has signed a 1.6K SF lease in

HLC Deal

3500 Oak Lawn.

NEW DEVELOPMENTS • Harwood XII – a 541,640 SF office building • 2601 Victory Avenue – a 364,733 SF office building • The Link – a 292,041 SF office building LARGE EXISTING VACANCIES • 2401 Cedar Springs – 198,817 SF • Parkside Tower – 111,728 SF • 2501 Cedar Springs – 110,415 SF • The Centrum – 95,049 SF • 1919 McKinney Avenue – 62,632 SF

21

DALLAS

5950 Berkshire Lane Suite 900 Dallas, Texas 75225 T 972.241.8300 F 972.241.7955

FORT WORTH

1200 Summit Avenue Suite 300 Fort Worth, Texas 76102 T 817.710.1110 F 817.810.9017

www.holtlunsford.com

HOUSTON

11451 Katy Freeway Suite 300 Houston, Texas 77079 T 713.850.8500 F 713.850.8550