Keeping up with the Commercial Real Estate Market in Dallas: Monthly Analysis

Navigating the dynamic landscape of the Dallas-Fort Worth (D-FW can be a complex endeavor, given its distinct trends across various sectors including multifamily, office, industrial, and retail spaces. Your understanding of the commercial real estate market in Dallas, Texas and the latest Dallas real estate news plays a crucial role in making informed decisions whether you’re an investor, a broker, or simply keen on the Texas real estate scene.

As this article delves into a comprehensive monthly analysis, you’ll gain a deeper insight into top-performing sectors, the impact of economic factors, emerging opportunities, and the challenges faced within the commercial real estate market in Dallas. Utilizing resources like Crexi Insights, MSCI, and CoStar, you’ll be better equipped to navigate the capital markets, understand vacancy rates, retail services, and keep up with Dallas commercial real estate news and trends, ensuring you’re always a step ahead in the Dallas Fort Worth real estate market.

Market Overview and Trends

In examining the dynamic commercial real estate market in Dallas, several key trends emerge, highlighting the area’s growth and potential challenges:

1. Market Vibrancy and Investment Appeal

Dallas-Fort Worth leads population growth among all top metro areas. According to the U.S. Census Bureau, 152,600 people moved to the area between 2022 and 2023. That’s an average of 418 people every single day.
The region has grown a whopping 26% since 2010. Collin and Denton County lead the pack in growth, with Kaufman, Rockwall, and Ellis Counties coming in strong with increases between 5% to 8% over the past year.

2. Sector-Specific Highlights

The multifamily sector showed new rent growth from February 2024 to March 2024, with gains of .2%. This was the third consecutive month for rent gains. In Q1, renters leased up 4,900 units, making it the top first quarter in leasing since 2019. While year over year rent growth remains down at negative 1.3%, experts forecast a rebound throughout 2024 and predict year over year gains of at least 1.3% by year’s end, according to CoStar.
The industrial sector continues to remain strong, though vacancies have risen to 9.5%. Market rent growth sits at 9% year over year, but rent growths are slowing due to a large supply with the power now shifting to tenants seeking space in outlying submarkets, while property owners continue to increase rent growth in interior markets.
Retail investors find the Dallas market very attractive, especially with all the population growth, which led rents to increase 5.3% in 2022, well above the national average, and then by 10% annually in 2023! There is currently 5.7 million square feet of new retail space under construction in the region.
In the office market, 12-month-net-aborption is negative 329,000 square feet. Vacancies are still hovering around 18% but market rent growth sits at 1.9% overall. But, due to lower rates, the area is quickly becoming attractive to national corporations. In addition, the market remains above average in terms of workers returning to the office.

3. Emerging Opportunities and Challenges

The brisk activity from AI companies and large cloud service providers are sparking unprecedented leasing activity in Dallas.
North Texas is in the top four in the nation with a record-breaking 193 hotels under construction, promising substantial growth in the hospitality sector.
Insurance capital is increasingly playing a larger role in CRE financing. According to one report in the Commercial Observer, “Fallon said insurance companies along with pension funds have had the most money sitting on the sidelines ready to lend over the past 10 years. Borrowers would often bypass them, however, in the previous era of lower interest rates.”
According to a report from MSCI, CRE prices have fallen 12% since the Fed’s first rate hike in March of 2022 and since hitting a peak in July 2022. Therefore, investors can be on the lookout for prime opportunities in solid markets and sectors with positive net absorption.

However, challenges such as high construction costs and interest rates persist, requiring strategic navigation to leverage Dallas’s commercial real estate opportunities.
Fannie Mae and Freddie Mac have originated half a trillion in outstanding multifamily loans all set to mature within the next 10 years, with $300 billion due in the next five years, according to Yardi Matrix. The largest number of properties secured with those loans can be found in five cities, including Dallas.

Top Performing Sectors

Exploring the vibrant landscape of Dallas’s commercial real estate, certain sectors have emerged as particularly dynamic, drawing attention from investors and homebuyers alike. Here’s a closer look at these top-performing sectors:

Industrial Market: Known as a logistics and distribution hub, Dallas’s industrial market has experienced a surge in construction coupled with robust demand. This sector has notably returned to pre-pandemic levels, with rental costs continuing to grow, albeit at a moderated pace. Industrial rent growth marked 9% year over year, but vacancies have risen due to the supply. Smaller industrial buildings are still faring better, as are spaces located in interior markets.
Retail Sector: Meanwhile, the Dallas retail market remains dynamic, experiencing a slight decrease in vacancy rates and achieving record-high asking rents with 5% growth year over year, outpacing the national average, according to CoStar. Rent growth has slowed somewhat quarter over quarter in 2024 as consumers have pulled back on spending. However, the resilience of the retail sector is underscored by stable vacancy rates and a swift recovery in consumer spending at physical locations, as well as a population boom in the area. Two-thirds of spaces leased are for 5,000 square feet or less.
Multifamily Market: This sector is striking a healthy balance between supply and demand, with a 27% increase in delivered units over the past year. This growth is driven by urban migration and demographic changes, indicating strong demand.

The DFW area continues to be a significant player in the commercial real estate scene, hosting diverse sectors from financial services to tech, energy, and medical hubs.

Impact of Economic Factors

In the Dallas commercial real estate market, economic factors play a pivotal role in shaping investment and development trends. Here’s how these factors are impacting the market:

Job Creation and Corporate Relocations: Dallas boasts a strong job creation rate, further bolstered by numerous Fortune 500 companies choosing the city for their headquarters. This influx stimulates demand across all real estate sectors, notably in office and industrial spaces, as businesses seek to expand in this burgeoning market.
Interest Rates and Financing:
- The rise in interest rates and stricter lending criteria have compelled real estate sectors and businesses to explore alternative funding solutions, such as private credit. This shift has introduced new risks, including a spike in interest rates for hard money loans, which have jumped from 7-8% to 15%.
Market Opportunities Amidst Challenges: Despite these hurdles, the Dallas market presents unique opportunities. With $1.4 billion in distressed properties and $8.8 billion in troubled deals, savvy investors have a chance to capitalize on these conditions, provided they navigate the higher borrowing costs and evolving work patterns post-pandemic.

Emerging Opportunities

Emerging opportunities in the Dallas commercial real estate market are signaling a vibrant growth trajectory for investors and businesses alike. Noteworthy trends include:

Adaptive Reuse and Conversion Projects: With high development costs and materials demand, adaptive reuse emerges as a strategic solution. The potential of converting assets across various types, from office to retail to industrial, can help to meet the evolving market demands. Projects like Bogart on Ross exemplify this trend by transforming spaces into modern office and retail areas with tenant amenities.
Shift in Healthcare Facilities: A significant trend is the decentralization of healthcare services, moving from central hubs to ambulatory care facilities in suburban areas. This shift not only meets the growing healthcare needs of DFW’s expanding population but also presents a cost-effective opportunity for developers to retrofit or build and operate these facilities as rental investments.
Multifamily Market Growth: With a peak leasing season in Q1 of 2024, multifamily is off to a great start. With the population influx continuing into the area, multifamily is expected to rebound this year and end with positive rent growths instead of the negative 1.3% it experienced in 2023.
For Retail, the Future is Bright: “The outlook for Dallas-Fort Worth’s retail market remains bright, thanks to the structural economic and demographic tailwinds, and both trends are expected to support retail demand in the long run,” reports CoStar.

Challenges and Risks

Navigating the upcoming challenges and risks in the Dallas commercial real estate market requires a strategic approach, especially considering the potential for a wave of defaults and financing hurdles:

Loan Maturities and Potential Defaults:
- Over 52 million square feet of office space and more than 87 million square feet of industrial space in Dallas have loans maturing between 2023 and 2025. This looming deadline could lead to a significant number of defaults due to the combination of high vacancy rates and increased interest rates.
Hybrid Work Impact on Office Demand:
- The office sector faces uncertainty as hybrid work schedules continue to evolve, potentially reducing the long-term demand for office space. This shift poses a significant challenge for the sector, with negative absorption rates indicating more space is becoming vacant than is being filled.
Financing and Construction Challenges:
- Owners seeking to refinance their properties are encountering difficulties in securing affordable financing, a situation exacerbated by banks’ reluctance to lend for new construction projects. This pullback from lending could hamper the development of new projects and exacerbate the challenges within the office sector.

These factors underscore the importance of vigilance and adaptability for stakeholders in the Dallas commercial real estate market as they navigate these turbulent times.

Conclusion: Dallas Commercial Market News

Through this article’s exploration of the Dallas-Fort Worth commercial real estate market, we’ve navigated the vibrant landscape marked by promising sectors, weighed the impact of economic factors, and surveyed emerging opportunities alongside challenges.

Whether it’s the booming industrial arena, rapidly evolving office and retail spaces, or the multifamily market’s balance of supply and demand, each segment presents a unique set of dynamics within the Dallas commercial real estate sphere. The insights drawn do not only reflect current market conditions but also forecast the potential for strategic growth and investment in this region.

As stakeholders consider their next moves amidst this complex yet lucrative market, the importance of informed decision-making cannot be overstated. Balancing caution with optimism, investors, brokers, and developers alike are encouraged to leverage detailed analyses and market insights.

For those ready to navigate these opportunities and challenges with expertise, contact the #1 Listing Firm and fastest growing D-FW Commercial Firm M&D Commercial Group today for all of your commercial real estate needs.

Engaging with a knowledgeable partner like M&D Commercial Group could be your next strategic step towards capitalizing on Dallas’s dynamic commercial real estate market.