‘Diverse’ may be the most accurate way to describe the Dallas economy and that diversity extends within the tech industry. According to JLL’s U.S. Technology Outlook, Dallas is among the country’s top 10 markets for technology patent generation in the areas of computers, IT, telecom, and biotech, with established companies such as AT&T and Texas Instruments providing stability.
“Dallas is one of the most dynamic job markets in the country, with no single industry dominating the landscape,” says Jack Crews, Managing Director with JLL Capital Markets. “This also applies to the tech sector where innovation and growth come from brand new startups as well as long-standing firms.”
The combination of tech stability and growth, paired with a comparatively low barrier to entry and low cost of real estate is appealing to a wide array of investors looking to secure a yield premium. For example, basis points yield requirements are 50 to 100 points lower compared to higher cost markets and net leased square footage runs about $30 per-square-foot (p.s.f.) while traditional tech hubs may see pricing reach up to $60 p.s.f.
“In addition to the opportunity to secure higher yields, Dallas is a safe haven market due to fewer developments and consistent absorption,” says Crews.
Tech companies’ entrance or expansion in the market is driving much of its safe haven status. According to JLL, more than one million square feet has been leased by tech companies between Q3 2015 to Q2 2016. With nearly a third (32.4%) of the population holding a bachelor’s degree or higher, the talent pool supports this growth.
It’s not only about the cost of real estate: the building’s infrastructure quality is increasingly important and serves as a recruitment factor. In Dallas’ newer tech submarkets of Lower Uptown and West End, Crews notes that deals are trading and buildings are being repositioned and renovated due to the burgeoning tech atmosphere. For example, Quadrant Investment Properties recently purchased The Centrum and plans to renovate the building to include more common, collaborative space while Spear Street Capital recently acquired and redeveloped Landmark Center in Westend.
“If it’s a repositioning play, the planned upgrades are slanting towards tech,” says Crews. “Investors are taking a more targeted approach on where they place capital and a building’s infrastructure is an increasingly significant factor. When they see a property they want, they’ll compete for it.”
Managing Director, JLL Capital Markets