Dallas-Fort Worth Office Vacancy Dips, Trophy Assets Dominate

The Dallas-Fort Worth office market finally caught a break, if only in Uptown’s penthouse suites. 

The metroplex market posted its first drop in vacancy since 2019, driven almost entirely by flight-to-quality demand for trophy and Class A space, especially in Uptown, the Dallas Morning News reported.

Overall vacancy declined from 26.1 percent to 25.3 percent in the second quarter, according to Avison Young. Still historically high, it’s the first meaningful improvement after years of hemorrhaging occupancy. 

Nearly all the absorption came from higher-end assets: the Class A segment absorbed 472,000 square feet in the second quarter alone, pushing its year-to-date total to 1.3 million square feet. Class B buildings, by contrast, posted another 294,000 square feet in negative absorption.

Uptown, which commands the metro’s highest asking rents at $63.35 per square foot, outpaced all other submarkets. Its vacancy rate is 24.4 percent, but the submarket also accounts for more than 70 percent of the metro’s 2.8 million-square-foot construction pipeline with 2 million square feet under development. Roughly 69 percent of that space is already pre-leased, according to Avison Young.

Towers in development, such Granite Properties’ 23Springs in Uptown, are pulling tenants like Deloitte and JPMorgan Chase away from legacy properties downtown, where many buildings are nearly half empty. 

Preston Center, another Class A hub, now has under 9 percent vacancy and almost no new supply coming online, a combo destined to push rents even higher.

Overall leasing activity in the second quarter totaled 3.5 million square feet, down 19.7 percent from the same quarter last year and nearly 18.5 percent below the market’s 10-year average for first-half leasing.

Capital markets are starting to stir, with deal volume up 32 percent year-over-year. But the market’s future still hinges on whether demand for top-tier space will eventually trickle down, or if much of the DFW office inventory will remain obsolete.

— Judah Duke

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