D-FW Office Market Closes Out 2024 With Mixed Bag

Investors betting on the D-FW office market got some decent news recently, with a pair of industry reports showing a significant increase in leasing activity over the last year.

CRE brokerage firm Savills clocked an 18% year-over-year spike in office leases by square footage, crediting a number of big renewals and relocations with bolstering the market’s metrics in 2024. Some 3 million square feet of office space made it to contract in Q4 alone.

Zooming in on the quarter, Savills noted that inventory stayed relatively flat year over year, however, the average asking rental rate increased by 6.4%. This bump was largely due to a larger spike in Class A asking rental rates (8.3%), which accounted for around 65% of leasing activity.

Two sub-markets stood apart in terms of rental rate, with Uptown and Preston Center commanding more than $50 per square foot. The sub-market with the third highest rental rate was the Central Expressway at $34.46 per square foot. The cheapest was Northeast Fort Worth at $16.05 per square foot.

As previously reported by CandysDirt.com, some developers are putting their chips behind office properties in and around Dallas, in spite of the number remote work has done on the sector. While the remote work trend has abated somewhat, it may still be quite a while before the office market really makes a comeback.

Other Report Offers More Sober Assessment

Avison Young’s brokerage team in Dallas dropped a report of its own that looked back at 2024. It gave a bit of a mixed bag and emphasized some less-than-optimistic statistics.

First off, the firm found that roughly 15.5 million square feet of office space was leased last year, coming in at about 77% of the 2011-2019 average. Acknowledging the uptick, Avison Young still seemed to find it less than impressive, calling it “slow compared to the last economic cycle.”

“This is all good news for D-FW, however, the slow progression suggests that it will take considerable time for tighter market fundamentals to return,” the report reads. “Complicating this is that most leases continue to get smaller as tenants accommodate a less-than-perfect return to the office dynamic for employees.”

All in all, the report characterized the spike in leasing and other promising stats as the market continued to stabilize in the aftermath of the COVID-19 pandemic. In 2024, the vacancy rate appeared to stall out and even decrease some. Absorption metrics have also been on a streak, “with no major negatives since 2020,” according to Avison Young.

2025 Outlook

Savills thinks leasing activity in D-FW will continue to impress in 2025 due to the metro area’s population growth and business-friendly environment. That being said, the company asserted that lessees would still have the leverage in negotiations.

“Expect concessions to remain high as landlords prefer giving free rent and tenant improvement allowances in order to keep their face rents high,” Savills wrote.

Availability is also expected to increase with more than 4 million square feet of office space in the pipeline. Avison Young clocked 17 projects currently under construction. Some 75% of the space is already leased.