Dallas (1)

Commercial Real Estate Outlook – Dallas 2022 (update)

Virginia Beach, VA  |  September 16, 2022

According to the most recent “Emerging Trends in Real Estate” market report by PwC and the Urban Land Institute (ULI), Dallas/Fort Worth ranked 7th out of the 80 U.S. markets to watch in overall real estate prospects for 2022. As part of the “Super Sun Belt”, markets in the South and Southeast are still affordable for businesses and residents, even while powerhouse economies like Dallas/Fort Worth have attracted – and will continue to attract – a wide range of businesses. With 16 percent of the “Emerging Trends” universes population, the Super Sun Belt markets will generate 28 percent of its new jobs between now and 2025. Despite their size, these metro areas average over 5 million residents, the second most of any sub-group in the survey – almost all are among the fastest-growing markets in the country. Moreover their economic performance has been solid through thick and thin. Though every market lost jobs during the pandemic, recovery has been much quicker and more complete in the Super Sun Belt markets.

According to an article in the January 2022 issue of Texas Real Estate Business magazine, the Dallas office market and North Texas region as a whole continue to evolve as leading destinations for corporate relocations, led in part by a favorable business climate. This reputation as a top landing spot for regional workforce consolidations and outright relocations from the other states has helped Dallas become a national leader in some key back-to-work metrics.

Barring any unforeseen circumstances, such as a prolonged spike in cases from the Omicron variant, a research director from Colliers expects this trend to continue through 2022. Dallas recorded several notable sales of iconic office assets in 2021, plus numerous deals for suburban midrise properties to local, out-of-market and new to market investors.

According to Colliers’ most recent Global Capital Markets Outlook, Dallas should be the top overall investment destination in the country for 2022 after leading the country in total investment sales volume the last two years. Debt and equity remain widely available. Investors are moving out along the risk spectrum, with value-add plays becoming more commonplace. Sun Belt markets remain highly popular investment targets, with lenders underwriting significant yields for deals in key Dallas submarkets.

According to Cushman & Wakefield’s recent Q2 2022 “Marketbeat Dallas/Fort Worth” office report, the Dallas-Fort Worth (DFW) economy continued its recovery in Q2 2022. With over 4.1 million people employed, the region has fully recovered the jobs lost at the onset of the pandemic. DFW’s population increased by 118,158 people year-over-year (YOY), and by 32,965 in Q2 alone, continuing a long trend of population growth. As of June 2022, the population reached a new high of over 8.0 million residents.

According to Moody’s Analytics, office-using jobs grew by 90,360 positions when compared to Q2 2021, an increase of 8.3%. The leading indicator of office demand is driven by business and professional services roles, which account for 62% (738,419 jobs) of office-using employment. The regions office employment totaled 1.2 million jobs as of June 2022.

For the third consecutive quarter, the DFW office market saw occupancy grow, absorbing 353,375 square feet (sf) in the second quarter of 2022. Increased leasing activity in previous quarters drove the number, as the pace of companies moving into space surpassed the pace at which leases were expiring. Demand for Class A product continues to drive the market, with nearly 2.6 msf of new leases transacted in the second quarter, or 75% of all leases signed.

Throughout the office market downturn, landlords did not lower asking rates in DFW, instead offering competitive concession packages which included free rent and additional tenant improvement dollars. Q2 2022 marked a continuation of DFW’s recovery. The long-term outlook for the region remains very positive, especially compared to other large, U.S. metro areas.

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Continental Capital Partners (CCP) is a “best-in-class” real estate acquisition, development, and asset management firm based in Virginia Beach, Virginia. Our focus is on providing our investment clients with superior risk adjusted returns on institutional quality office and industrial properties located in our target markets throughout the Mid-Atlantic and Southeastern United States.