Dallas Building Owners Keep Firm Grip on Holdings

DALLAS-There’s no fire sale activity going on with office properties in the Dallas-Ft. Worth region, say brokerage house executives. In fact, business is downright slow and has been for quite some time.

All agree that part of the problem is the chasm between what sellers want and buyers will pay. But, there’s also a “hold onto what you’ve got” attitude that is firmly rooted in the persona of the region’s chief titleholders–REITs and long-term investors. Some tradeoffs have come down the pike in class B and C properties, but the class A coming to market are few and far between.

“There’s a marked difference between what the sellers are expecting and what the buyers want to pay,” stresses Michael O’Hanlon, executive director of Insignia/ESG in Dallas. “There is a disconnect.” And, he adds, “when institutional money crosses a city off the list it also leads to a problem” in the sales arena.

“The herd is steering away from office,” Randy Baird, C&W senior director, tells GlobeSt.com. “There are a few contrary buyers, but the major players are on the sidelines.”

No trophy properties have changed hands since 1998 to the best of O’Hanlon’s recollection. That was when Canada-based TrizecHahn bought the Galleria from Houston-based Hines. Landmark titleholders like TrizecHahn, Ft. Worth-based Crescent Real Estate or Chicago-based Equity Office aren’t about to part with deeds–particularly at a time when rent is flowing and occupancy is high, concur the executives.

That doesn’t mean buyers aren’t window shopping. O’Hanlon’s team is handling the Mack-Cali disposition in North Texas. There is a lot of interest he says, expressing confidence the portfolio will be sold by year’s end. GlobeSt.com just this week had a call from a New York City broker looking to connect with the Jones Lang LaSalle broker handling the Berkshire at Preston Center property.

Jim Turano, senior vice president of Dallas-based Henry S. Miller Commercial’s office division, also sees his share of window shoppers. The problem, he says, is that there is very little available product. “Nobody wants to let go. They’re ginning out some cash and they like that,” he says of the solid rents and high occupancies.

Turano specializes in user buildings and says that sector too is starting to soften. It boils down to tenant perceptions of the market and the notion these days is that sublease space will drive down rent to the point that it’s cheaper to lease than buy. “The pride of ownership only goes so far,” says Turano.

But, advises Turano, now is the time to buy and it will only get better if the feds levy another interest rate cut. And that, he believes, would reenergize the DFW’s sales activity.