New Opportunities for Housing Developers Under SB 840
Introduction: A Bold New Direction for Texas Housing Senate Bill 840, passed by both the Texas Senate and House, and
M&D Commercial Group
The Dallas-Fort Worth (DFW) commercial real estate market continues to demonstrate resilience and growth, with several notable developments and new trends to watch shaping the landscape for this month’s DFW Commercial Real Estate Market Update.
In the wider world of commercial real estate, the lending market experienced a remarkable surge in Q4 2024, as evidenced by CBRE’s latest research report. The CBRE Lending Momentum Index soared by 21% quarter-over-quarter and 37% year-over-year, underscoring a robust recovery in lending activity. This acceleration was fueled by a “substantial wall of capital, strong fundamentals across most sectors, and the anticipation of maturing debt driving further improvement in 2025.” The confluence of these factors signals a vibrant market poised for continued growth, presenting exciting opportunities for investors and industry professionals in the coming year.
In more local news, DFW’s appeal as a business hub continues to grow, with the recent announcement that the New York Stock Exchange is definitely planning to establish NYSE Texas in Dallas.
This move aligns with a broader trend of exchanges relocating to the Lone Star State, also further cementing DFW’s position as a key player in the national financial landscape.
In Fort Worth news, Hillwood has reported that the economic impact of AllianceTexas in the region is substantial. The development has now surpassed $130 billion in economic impact, generating $10.21 billion in 2023 alone — and the area continues to grow with new companies. Already, AllianceTexas includes employers like Amazon, FedEx, BNSF Railway, Deloitte, UPS, and many, many more. In fact, there are over 574 companies with 58 million+ square feet of office, retail, and industrial space in the complex.
Then, in other Fort Worth news, the city has just recently surpassed Austin as the fastest growing large city in Texas. Fort Worth has experienced a 7.7% growth rate since 2020.
Texas is now leading the nation in Build-to-Rent (BTR) developments, with D-FW at the forefront. Fort Worth is actually spearheading this growth, followed by McKinney, Princeton, and Melissa. There are currently about 8,400 units under construction in the metroplex today. This trend is being driven by a growing demand for suburban living and of course, affordability, as renters in BTR communities can save around $1,000 per month compared to the entry level cost of homeownership in the area.
Also, many of the new BTR developments come with great amenities, form a nice neighborhood, often have upscale finishes, a two-car garage and the perk of a maintenance-free living situation. BTR’s are also gaining in popularity due to their higher tenant retention rate and commanding higher rents, since they typically offer 300-600 more square feet of space than a typical apartment unit.
The next trend on our to-watch list is a new multifamily development in Fort Worth. One developer is betting on “shorter leases, cheaper rents and smaller spaces with a new style of apartment complex.” The new development has 94 units and offers tenants rent payments that are 21% less than the average studio in Fort Worth. They’re also offering shorter lease terms, including a 3-month option.
Rooms are smaller and don’t come with kitchens, but each floor has a community kitchen and laundry room space for tenants to share. The developers say they’re targeting younger people in their 20’s and 30’s, as well as individuals working temporary jobs in the area with shorter term needs.
First, a $2 billion entertainment district is planned for the 160-acre Lakeside Village in Flower Mound. This ambitious project will feature retail spaces, multifamily units, condos, and office space, showcasing the region’s commitment to large-scale, innovative developments.
Similarly, Mansfield is set to see a $1 billion mixed-use project featuring a riverwalk, further highlighting the area’s dedication to creating vibrant, multi-purpose spaces.
Last but not least, Frisco, one of the fastest-growing suburbs in the region, continues its rapid expansion with new high-end office developments planned near the PGA of America headquarters. The project is by Cawley Partners and named after Veritex Community Bank.
These larger developments continue to break ground regularly in the Dallas-Fort Worth area, indicative of the region’s surging population growth and the unique opportunity it presents for commercial real estate developers and investors.
The office market in DFW is showing signs of recovery and adaptation in DFW. Occupancy losses have decreased as more companies renew, and net absorption turned positive at 1.1 million SF in 2024, which can be attributed primarily to financial services, reports CoStar.
High-quality office space in prime submarkets like Uptown, Las Colinas, and Far North Dallas remain in short supply. This scarcity is driving a “race to the top” for premium office amenities, as landlords compete aggressively to attract and retain tenants. Class A properties are thriving due to corporate relocations and return-to-work mandates, while Class B and C buildings still face serious challenges, with a vacancy rate of 27%, according to a report by CRE Daily.
The average asking rent for office space in DFW is $32.19 per square foot, with annual escalations of 2.2%, according to the latest data from CoStar. To attract tenants, landlords are offering competitive tenant improvement allowances and upgraded amenities. The current vacancy rate in DFW stands at 18% overall — again, primarily concentrated in Class B and C buildings. However, it’s worth noting that Downtown Fort Worth’s office market remains particularly strong with a low 11.5% vacancy rate, significantly outperforming other areas of the Metroplex.
The industrial sector in DFW is experiencing both opportunities and challenges as it navigates a period of significant growth in new supply. The vacancy rate stands at 9.5%, among the highest of the 20 largest U.S. markets. Again, this elevated vacancy rate is primarily due to supply-side pressures, with 33.1 million square feet of net deliveries in the past year alone, according to CoStar.
Despite these challenges, the sector shows signs of resilience. Asking rents average $9.78 per square foot, and the market absorbed 20.8 million square feet in the last 12 months. The average sales price for industrial properties is $119 per square foot with a cap rate of 6.6%, indicating continued investor interest in the sector.
Annual rent growth also remains positive at 4.1%, suggesting underlying strength in the market despite the current supply-demand imbalance.
The multifamily market in DFW is adapting to changing dynamics, balancing strong demand with an abundance of new supply. The current vacancy rate is 11.4%, reflecting the recent surge in new developments. However, net absorption reached an impressive 29,256 units in the past 12 months, surpassing pre-pandemic averages of 20,000 between 2015-2019, and indicating robust demand for rental housing.
Average asking rent across the DFW multifamily market is $1,549, with studio apartments averaging $1,227 and three-bedroom units commanding $2,177. The sales price for multifamily properties averages $180,000 per unit.
While rents have seen a slight decline of 1.1% on average, they are still 17% higher than 2020 levels, underscoring the overall strength of the market. To navigate the current supply-rich environment, 50% of properties are offering concessions, particularly in high-growth areas like Collin County and North Fort Worth where owners are offering 6 to 8 weeks of free rent to lease up properties.
Looking ahead, the projected population growth of 11.5% over the next five years suggests sustained demand for rental units, boding well for the sector’s long-term prospects.
The retail sector in DFW continues to show remarkably strong performance. It ranks #1 in the country in net absorption at 2.2 million square feet, indicating very robust demand for retail space in Dallas-Fort Worth. Asking rents average $24.55 per square foot, reflecting the sector’s strength, while the vacancy rate is low at just 4.6%.
A notable trend in the retail market is the preference for smaller spaces, with two-thirds of leased spaces being 5,000 square feet or less. This shift aligns with the growing popularity of single-tenant locations, such as Dutch Bros and Salad and Go, which are driving significant demand. But also, major grocers and retailers like H-E-B are expanding their presence in the area, too, further solidifying DFW’s position as a prime market for retail growth and innovation.
The Dallas-Fort Worth commercial real estate market is demonstrating remarkable resilience and adaptability across various sectors. While challenges persist still due to interest rates and supply-side pressures, particularly in the office and industrial sectors, there are still numerous positive indicators that point to a robust and evolving market.
The region continues to attract major developments and corporate interest, as evidenced by the NYSE’s plans to establish a presence in Dallas. Also, look at the volume of new developments, amounting to investments in the millions and billions throughout the metroplex and surrounding suburbs. This sustained interest from major players underscores DFW’s growing importance as a national and international business hub.
In the multifamily sector, the market is adjusting to current conditions, with signs of stabilization in demand for mid-tier properties. The projected population growth of 11.5% over the next five years suggests that demand for housing, both rental and owned, will remain strong, supporting continued development and investment in this sector.
The retail sector’s strong performance, particularly in smaller spaces and single-tenant locations, indicates evolving consumer preferences and business models. This adaptability bodes well for the sector’s future, as it continues to meet changing consumer demands and shopping habits.
Looking ahead, DFW’s projected population growth and the strong economic diversity of the region points to a positive outlook for the commercial real estate market as a whole.
However, stakeholders should remain vigilant of market dynamics, particularly in the office sector, where the shift towards high-quality, amenity-rich spaces may continue to challenge older properties.
The region’s diverse economy, strategic location, and pro-business environment continue to sustain its attractiveness for commercial real estate investment and development.
Investors, developers, and businesses would do well to keep a close eye on the opportunities emerging in this dynamic and resilient market.
Introduction: A Bold New Direction for Texas Housing Senate Bill 840, passed by both the Texas Senate and House, and
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