Dallas-Fort Worth office building construction has fallen to the lowest point in five years and is likely to go even lower.

Currently just over 1 million square feet of office construction is under way in North Texas, according to a study released Wednesday by Cushman & Wakefield of Texas. That’s down from almost 6 million square feet of building in 2007 and is only about a quarter of the construction total a year ago.

The sharp decline isn’t a surprise. The credit crunch and recession have killed all but a handful of local office building deals.

“Developers did not break ground on any speculative office projects over 100,000 square feet during 2009,” Cynthia Jeter, Cushman & Wakefield’s managing director of research said in the report.

All of the remaining construction is in two markets – Uptown and the Mid-Cities. In Uptown, developer Granite Properties is finishing work on its 17 Seventeen McKinney office tower, which has about 350,000 square feet of space and will open in the first half of 2010.

And in Westlake, accounting firm Deloitte is building a 750,000-square-foot corporate training campus.

Less than a third of the office space still under way in the D-FW area is speculative, with no tenants lined up.

With the slowdown in office leasing this year, it’s probably a good thing developers aren't building new projects.

Cushman & Wakefield estimates that net office occupancy in the D-FW area declined by almost 2 million square feet this year as companies consolidated or went out of business.

That’s the biggest decline in net office leasing in the area since 2002.

Overall leasing in the area was down more than 43 percent from 2008.

“Tenant demand decreased sharply during 2009,” Jeter said. “Leasing activity in the Dallas office market was the lowest on record dating back to 1990."

The largest declines in office occupancy were along LBJ Freeway, which was down 890,208 square feet, and in downtown Dallas, which lost 727,098 square feet of tenants. Most of the downtown loss was businesses moving to newer buildings in Uptown.

The greatest net office gain was in West Plano and Frisco, where tenants occupied an additional 671,324 square feet.

Overall office vacancies have now pushed past 22 percent – up from 20.7 percent a year ago, according to Cushman & Wakefield.

And while quoted rental rates were basically flat, “concessions continued to increase as landlords offered free rent, building signage, free parking, leasehold flexibility and generous tenant improvement allowances in order to secure occupancy in their buildings,” Jeter said.

Adding to the pressure on the office market this year has been an almost 8 percent increase in available sublease space. Businesses including Bank of America, Blockbuster, Centex, Comtel, HKS, Horizon Healthcare, i2 Technologies, Nexen Petroleum and TXU all added surplus space to the market.