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DALLAS—Brad Hauser, regional VP of analytics for GlobeSt.com Thought Leader Xceligent, is concerned for the Dallas infrastructure. In classic good news/bad news fashion, he says that the northern submarkets of Las Colinas, Far North and Richardson/Plano are hot. The bad news is that they are so hot, and stretched so thin in terms of housing and roads for the influx of people and companies, that in a few years the two major north/south routes will be severely taxed.

"We're growing north at an exponential rate," he tells GlobeSt.com. "You can complain more about the traffic in other cities, but I see it being a much bigger problem in coming years."

Dallas of course has been a good news city since the recovery took hold, and "From Q1 through Q3, we've absorbed 3.6 million square feet of office space. Vacancy rates for Dallas are right at 15%." And it should slip lower before the year closes out.

The Fort Worth office picture is even rosier, he notes, at a slender 14% vacancy. But there's an interesting dynamic taking place in the Big D's smaller neighbor to the west. More on that a little later.

Back in Dallas, the draw of the north is largely one of rental rates. Despite its hotness, rents remain lower than other submarkets, such as The Uptown and Preston Center, which top the local list at $32.23 and $31.85, respectively. The northern markets hover around the $20 range.

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And major firms are taking note; over the last year some major names are putting down stakes there, including:

• Toyota, which is putting up roughly two million square feet in Far North as it relocates its US headquarters from Southern California; and
• 7-Eleven, which is relocating from its downtown spaces of 117,000 square feet to far more spacious digs, 325,000 square feet to be exact, again in Las Colinas. This too is new construction.

Such deals come in addition to previously announced moves that are populating the northern markets, including State Farm, which has pretty much completed its move into its four-building, 2-million-square-foot campus in Richardson/Plano; and Liberty Mutual, which is building 1.1 million in Plano as well, eyeing a probable move-in as early as late 2016 for phase one.

All told, there's nearly 8.5 million square feet of new construction throughout the DFW market, with nearly a quarter of that going for Toyota alone. And six million of that total is taking place in the northern markets, says Hauser, who adds: "Cranes are everywhere you look."

Moving to Fort Worth, Hauser underscores an odd phenomenon. The above mentioned 14% vacancy rates drops even more—to 11%—in the CBD, and it's remained there for two or three years. Nevertheless, Fort Worth has absorbed some 500,000 square feet this year, "mostly in new construction on the single-tenant side," says Hauser. While rents run around $25 in the CBD, they drop to around $15.50 in the other submarkets such as Mid-Cities and the surrounding Fort Worth area.

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The three bell-ringer deals in Fort Worth for Q3 were the FAA's new corporate campus, pacing out to 357,214 feet; Huckabee and Associates taking 45,000 feet; and GM Financial's lease of about 40,000 feet. "They're bringing in deals, but our advisory board members will attest to the fact that Fort Worth just doesn't have the volume of Dallas."

There's one other odd dynamic taking place in the DFW MSA. Hauser did an analysis of deal volume recently and discovered that over the past five years, the volume has actually decreased. "In Q1 of 2010 there were 996 deals," he says. "Over the years, we've seen it dip and rise and dip again. But it peaked in mid-2013, and there's been a steady decline since." In fact, Q3 of this year saw 641 transactions completed.

"The only rationale I can come up with is that lease terms are extending," he says. "Where once you might have a five-year lease, now it could be seven to 10."

Despite that oddity, the Dallas MSA remains what Hauser calls one of the hottest markets in the nation. "The market is not getting slower," he says. "We expect to report lease signings totaling five million square feet this year, and I don't see it slowing down in the next year to two years."