The Dallas-Fort Worth (DFW) commercial real estate market continues to demonstrate resilience and adaptability as we progress through 2025. This comprehensive update covers key trends and statistics across various sectors, providing valuable insights for investors, developers, and industry professionals.
The DFW market is experiencing a significant shift towards adaptive reuse, particularly in the office sector. With high vacancy rates persisting, many underutilized office spaces are being converted into residential units or mixed-use developments. This trend is likely to accelerate, as the Texas Legislature considers easing zoning restrictions for such conversions. State Sen. Bryan Hughes’ new bill would prohibit Texas’ largest cities and counties from requiring property owners to rezone when converting commercial properties like office buildings, shopping centers and warehouses into apartments or condominiums, according to The Texas Tribune.
Another notable development is the continued growth of the build-to-rent (BTR) sector. Texas leads the nation in BTR development, with nearly 22,000 units in the pipeline. However, industry experts report that growth in new construction starts has slowed due to challenges in securing capital and potential policy changes affecting the construction industry, reports BisNow.
The region is also seeing a boom in data center development, driven by increasing demand for AI and cloud applications. Companies like Aligned Data Centers are expanding their presence, with new projects planned in Mansfield and Plano. This trend underscores the diversification of the DFW commercial real estate landscape.
Rising insurance costs are impacting commercial real estate:
Developers are increasingly focusing on extraterritorial jurisdictions for new master-planned communities – and emphasize the most important factor is timing. Another critical factor for the future will be working with cities to add water system infrastructure. The use of special financing districts and innovative approaches to infrastructure development are becoming crucial for success in these projects. This trend is reshaping the suburban landscape and creating new opportunities for large-scale, mixed-use developments.
The DFW office market continues to face challenges, with vacancy rates remaining stubbornly high. This is particularly true for older buildings constructed during the 1980s, which account for a significant portion of the vacant space. However, the market’s affordability, central location, and strong air connectivity via DFW International Airport continue to attract out-of-market companies seeking regional offices.
Key office market indicators (CoStar):
Despite these challenges, certain submarkets are showing strength. High-quality suburban office spaces within mixed-use developments in Collin County are attracting significant interest from tenants and investors alike. This trend highlights the importance of location and amenities in the evolving office landscape.
The industrial sector in DFW is experiencing a period of rebalancing as new deliveries align more closely with tenant demand. The vacancy rate has stabilized, and this trend is expected to continue through the first half of 2025. The market’s performance in the latter half of the year will largely depend on demand for large-scale industrial spaces, particularly those exceeding 500,000 square feet.
Key industrial market metrics (CoStar):
Demand remains strongest for properties in the market’s urban core. For example, Wieland Metal Services recently signed a 10-year lease for 111,000 square feet at the Perimeter Distribution Center, with a starting rate of $6.15 per square foot. Smaller spaces (under 50,000 square feet) are commanding higher rents, typically between $10.00 and $12.50 per square foot. Also, the demand for logistics and last-mile delivery hubs remains high, particularly in areas near major transportation routes like the I-20 corridor and DFW Airport.
The retail sector in DFW has shown remarkable resilience, leading major U.S. markets in net absorption with 2.1 million square feet in the past year. New construction is primarily concentrated in the northern suburbs, particularly in Collin and Denton counties, where population growth has been strongest.
Key retail market indicators (CoStar):
DFW currently leads major markets with inventories of 250 million square feet or more, boasting an annual rent growth of 3.6% as of Q1 2025. This performance underscores the strength and attractiveness of the DFW retail market.
The multifamily sector in DFW is working towards rebalancing after a surge in supply during 2024. Rent growth remains slightly negative at -1.0%, but demand is strong in fast-growing suburban submarkets, particularly in Collin and Denton Counties. Areas like Frisco, Prosper, Allen, and McKinney have been leading in absorption, accounting for a third of market demand in the past year. These areas have seen population growth of 50% since 2010, driving demand for new multifamily units.
According to a recent report by Zumper, Coppell is the most expensive city in the metroplex, with one-bedroom apartments at $1,710. Second most expensive was Frisco, then Richardson. Cleburne was least expensive, with one-bedroom apartments at $1,000 and Arlington was the next least expensive at $1,080. Hurst ranked third. Coppell also had the fastest-growing rents, up 24.8% since early 2024. Weatherford increased 9.9% and was the next fastest-growing city, then Garland was 3rd, with rents up 9.1%.
Key multifamily market statistics (CoStar):
Average asking rents per unit are $1,557, with a concession rate of 1.4%. Studios average $1,233 while 3-bedroom units average $2,196. These rates reflect the diverse range of housing options available in the market, catering to different demographic segments.
Investment activity in the multifamily sector remains robust, with an average market sale price per unit of $181,000 and cap rates around 5.7%. These metrics indicate continued investor confidence in the long-term prospects of the DFW multifamily market.
Notable developments in the multifamily sector include Hillwood’s luxury apartment and townhome project in Argyle and JPI’s new community at Frisco Railhead. These projects highlight the ongoing demand for high-quality multifamily properties in growing suburban areas.
Experts project rent stabilization in the second half of 2025, with modest growth expected to return in 2026, potentially reaching just above 2% annually, according to experts at CoStar. This outlook suggests a positive trajectory for the multifamily sector in the coming years.
Texas continues to attract a significant influx of residents, particularly millennials, driving demand across all real estate sectors. In 2023 alone, Texas experienced a net influx of more than 46,200 millennials, making it the top pick in the talent race. This migration trend is reshaping the market and creating new opportunities for development and investment across various property types.
Since March 2020, the region has added an impressive 450,000 new jobs, significantly outpacing many other major metropolitan areas. This employment growth has directly influenced real estate demand across all sectors.
However, similar to other markets, Dallas-Fort Worth’s employment picture showed tapering growth through the end of 2024 at 1.6%, down from 2.8% between 2015-2019. Still, the financial sector performed best at 4% growth, and DFW also added 4,500 net new jobs in Q4 2024.
As the DFW commercial real estate market navigates these trends and challenges, it continues to demonstrate resilience and adaptability. The region’s strong economic fundamentals, coupled with ongoing population growth and business-friendly policies, position it well for continued growth and opportunity in the coming years.
Investors and industry professionals should closely monitor the evolving trends in adaptive reuse, data center development, and master-planned communities. Additionally, the impact of rising insurance costs and changing demographic patterns will play crucial roles in shaping investment strategies and development decisions in the DFW market.
With its diverse economy, strong job market, and favorable business climate, the Dallas-Fort Worth metro area remains a key player in the national commercial real estate landscape. As we move through 2025 and beyond, the market is well-positioned to capitalize on emerging opportunities and overcome challenges, offering a wealth of possibilities for savvy investors and developers.
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