Dallas Fort Worth is Top in the Nation for Commercial Real Estate Investment - Market Report

Dallas-Fort Worth Ranks #1 in U.S. for Commercial Real Estate Investment

Published: August 4, 2022

According to a recent report by CoStar, Dallas-Fort Worth remains the top spot for investors in the country.

Leading the charge is Multifamily, followed by industrial real estate, office and then retail.

MULTIFAMILY

The country leads the nation in apartment sales – with $29.2 Billion in transactions this past year, more than double the number from the previous year. 

Rents have continued to increase in the area, with strong population growth and corporate relocations driving up demand for rental units. High demand for single-family homes also contributed to more families renting longer than expected.

Most of the deals occurring are still in value-add properties across the region.

The cost of living in Dallas also helps investors dollars go further. Making continued industry growth, population growth and lower cost of living prime reasons the area has just a 4 percent vacancy rate. Rent growth in DFW set records in 2021 and rents have continued to rise throughout 2022. Rent growth is expected to continue to raise for the foreseeable future, even if the pace does slow some from last year.

Total investment topped $57 billion over the past 12 months, beating out competitors like New York and Atlanta for the number one spot in the nation.  

Between Q1 and Q2, Dallas-Fort Worth also became the number one metroplex for commercial real estate construction, growing an estimated 24 percent during that timeframe, which was double the growth of the next competitor, according to a Dallas Innovates recent report.

INDUSTRIAL

Industrial Real Estate and Commercial Investment at Number 1 in DFW

Job growth also continued in the industrial sector, with an additional almost 65,000 jobs added over the past year, amounting to a 5.8 percent increase since last year.

The DFW area also remains at the top spot for industrial construction, breaking records again with 70.1 million square feet under construction, an increase of a whopping 150 percent in the past 12 months. Vacancy rates now hover around the 5 percent mark, mostly due to the region’s prime spot as a hub for transportation and distribution.

The second quarter of 2022 saw a rental rate increase, another indicator of strong occupancy. The average rental rate now hovers around $5.75 per square foot, over 5 percent higher than the average rate in Q1 of 2022.

“The average sales prices per square foot in the market has increased to $114 compared to $89 in early 2021,” according to CoStar.

OFFICE

Dallas Fort Worth outpaces nation in Office Sector Growth

The office sector grew this past year, adding an additional nearly 100,000 jobs in DFW. For the past three quarters, the office market has seen occupancy grow with increased leasing activity.

However, available sublease space increased since Q1, with nearly 35 percent vacancy due to the increase in delivery of new vacant space in the market. But a rising trend appears to be spaces offering tenants a discount, especially in suburban areas. These discounts have been a weight on rent growth, but it has not stopped the DFW area from outpacing the national average.

According to CoStar, the metroplex is seeing a 1.9 percent rent growth compared to a national growth of 1.1 percent.

The suburbs have buoyed the office market demand. Suburbs showed a 6.2 million square foot positive net absorption compared to the urban area’s negative 7.9 million square feet.

RETAIL

Retail Demand in Dallas Fort Worth Climbs with Consumer Spending

Rent growth has picked up over the past quarter while vacancy rates decreased to around 6 percent, the lowest in nearly 15 years. The market is showing net absorption levels of 6.7 million square feet as of the end of Q2. DFW’s retail market leads the nation, as it has for five of the past ten years.

Currently, vacancy rates are at about 4.8 percent as of the end of Q2, down nearly 1.5 percent from 18 months ago.

The area has made a great recovery since pandemic times, with consumer demand increasing helping to drive the retail demand. According to a CoStar report, sporting goods, home goods and gyms have helped drive leasing activity.  Additionally, shopping centers anchored with grocery stores are attracting the most attention right now.

The past year has seen continuous growth in net absorption levels.  Currently, asking rent prices are around $22.50 per square foot nationally for the sector, an increase of about 5 percent over the previous year.