Q3 2022 Office Space Report: Dallas-Fort Worth
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
The state of Texas is one of the nation’s most popular business hubs, with 23 Fortune 500 companies headquartered within the Dallas-Fort Worth metropolitan area, often shortened to the DFW Metroplex.
Although both cities have similar square mileage, Dallas is home to 385,000 more people than Fort Worth.
During the past year, construction equipment giant Caterpillar departed Illinois for Texas. Oracle, Tesla, and Hewlett-Packard followed, leaving their West Coast headquarters.
Lower taxes, cheaper costs of living, and less stringent industry and zoning regulation??s are encouraging relocation, along with a warm climate.
Although the future looks positive for investors shopping for office properties in Dallas-Fort Worth, it’s important to research the area’s vacancy rates and the reasons behind them.
General Area Overview & Demographics
During the third quarter of 2022, the Dallas-Fort Worth (DFW) commercial real estate market continued to rebound from the effects of the COVID pandemic.
Employment numbers within the area continue to grow and currently exceed pre-pandemic levels by over 14%.
During the first nine months of the year, leasing activity for office space continued to rise, with over 13 million square feet of leases being signed.
However, after nine months of positive net absorption, Q3 2022 had 574,571 sq. ft. of negative absorption. This was largely due to more tenants putting their space on the sublease market.
As of Q3 2022, 312.9 million sq. ft. of office space was vacant.
Considering this data, how did office space leasing perform in Q3 2022?
Fort-Worth Ahead of Dallas in Absorption Numbers
Brokers define the DFW area as having four major submarkets and a collection of 17 smaller submarkets.
Currently, the Dallas Suburban major submarket boasts a total inventory of 126,119,784 square feet, with the Dallas CBD coming in second with 24,484,711 square feet.
This didn’t translate to higher absorption rates and lower availability percentages.
Direct availability percentages for Class A space in Fort Worth’s Suburban and CBD submarkets were 14.7% and 15.3%, considerably lower than Dallas’ 23.1% to 32.7% availability.
What are office space rents like in Dallas-Fort Worth?
The average pricing for corporate office space in the DFW metroplex recently rose to around $30.00 PSF.
During the third quarter of 2022, DFW’s total office market decreased slightly, falling from the Q2 2022 asking price of $30.36 to $30.01.
The Dallas Suburban submarket was the top performer, with the average asking rate for Class A office space at $35.66 per square foot (PSF).
Fort Worth’s CBD beat out their neighbor Dallas’ CBD, coming in with the second-highest asking rate of $31.37 PSD for Class A properties, more than Dallas CBD’s top $30.64 rate.
Purchase & Leasing Activity
Net office leasing in the DFW area totaled almost 660,000 square feet of space.
This helped improve absorption over the past 12 months to a positive 3,328,000 sq. ft.
Office space vacancies in Class A and Class B properties remained high: over 18%.
Companies continued to reduce overheads to combat inflation, seeking more sublease space. This resulted in sublease prices increasing to over 10 million sq. ft.
Notable Office Space Deals in Dallas-Fort Worth in Q3 2022
Investment bank Goldman Sachs’ decision to pre-lease 1 million sq. ft. was, by far, the biggest deal of the quarter, especially as the building still doesn’t have an official name.
The developer of the 980,000-square-foot project, Hunt Realty Investments, estimates the total construction costs to eventually add up to around $500 million.
Other bigger leases include bank Comerica’s new lease for 100,000 sq. ft. within The Star Phase IV office complex.
Smaller leases made the news because of their price, especially those within the trendy Dallas Uptown submarket. Landlords are currently leasing office space for $60.00 PSF.
One example: the 26-story 23Springs, a new Class A building.
Dallas-Fort Worth Leads in Office Space Development
The DFW area leads the nation in 2022 office property starts, with Austin, Texas directly behind in second place.
As of Q3 2022, almost 7 million sq. ft. of office space was under construction.
The biggest projects are within Dallas’ Uptown, Turtle Creek, Frisco, and West Plano submarkets. About 24% of offices built on spec had already been leased.
Developers are optimistic about Dallas-Fort Worth’s future. What are other CRE experts saying?
Market Forecast for the DFW CRE Office Market
CRE researchers and brokers are seeing a generally positive market in 2023, although are some potentially volatile factors to watch for.
Some businesses may continue to delay decisions for economic factors, although those requiring workers to return to the office are seeking properties with additional amenities to limit staff turnover.
Rent abatement (i.e., free rent) as a tactic to draw new tenants is still a popular negotiation tactic. Both short and long-term leases are receiving longer abatements.
Takeaways for Potential DFW Office Space Investors
Even with fears of a recession, the DFW metroplex remains popular with investors, as they enjoy additional benefits: a stable economy, a talented workforce, and lower taxes.
The area is already home to some of the nation’s richest companies, including oil and gas providers, investment firms, telecommunications companies, and high-tech manufacturing.
Do your research, stay diligent, and happy investing.
List & Browse Commercial Real Estate for Free on MyEListing.com!
You can list and browse commercial real estate for free right here on MyEListing.com.
Simply sign up for a free account and get unlimited access to accurate local market intelligence, customized property type alerts, comp software, and more.
Other recent articles
Article Search
Share
All Article Categories
