Dallas Office Construction Starts Ramped Up in 2024

The Metroplex’s office sector remained steady in 2024, with more than 2.9 million square feet under construction and 2.8 million square feet delivered across 18 properties, CommercialEdge data shows. Additionally, Dallas office construction starts picked up last year, as 1.7 million square feet broke ground, marking a 50 percent increase year-over-year.

However, the metro still faces a few challenges. The vacancy rate rose 330 basis points year-over-year as of January, clocking in at 24 percent. Additionally, as loan delinquencies increased, property owners have been more frequently selling their underperforming office buildings at a discount.

Construction activity remains above national average

Dallas’ office construction pipeline at the end of 2024 totaled more than 2.9 million square feet, accounting for 1 percent of the metro’s inventory. That was 20 basis points higher than the national threshold, as well as peer markets such as Houston (0.8 percent) and Atlanta (0.5 percent) but lagged behind Austin (3.7 percent).

When taking into account projects in the planning stages as well, the market’s share jumped to 4.6 percent. Additionally, Dallas’ office construction starts in 2024 amounted to 1.7 million square feet from the 17 projects that broke ground. That represents a more than 50 percent increase year-over-year.

In April, a joint venture between Pacific Elm Properties and KDC obtained $290 million for the construction of Parkside Uptown, a 500,000-square-foot development in Dallas. The developer broke down on the project in 2023 using funds from a $300 million note and expect to deliver it in 2027.

Office deliveries drop year-over-year

Dallas’ office construction activity led to 18 properties coming online in 2024, which totaled more than 2.8 million square feet. That accounted for 0.8 percent of its total stock, slightly above the 0.7 national average. However, that figure was still almost 30 percent lower year-over-year.

Among peer markets, the metro had the largest share of office space delivered. Atlanta and Austin (2.2 million square feet each) were slightly behind, while

Last quarter, Ryan Cos. completed Ryan Tower, a 409,000-square-foot office building in Plano, Texas. The 23-story high-rise, which was already more than 50 percent leased at the time, is part of the $3 billion mixed-use development Legacy West.

Office-to-residential conversions on the rise

Investors remain keen on office-to-residential conversions due to ongoing challenges in the office sector, such as rising vacancy rates. CommercialEdge’s Conversion Feasibility Index, powered by Yardi, assesses the practicality of repurposing buildings based on factors like walkability, age, and floorplate shape.

The CFI score classifies buildings into three tiers, with Tier I being the most suitable for conversion. In the Metroplex, there are 43 office properties totaling 4.8 million square feet in this category and 353 properties spanning 43.1 million square feet in the Tier II category.

At the end of last year, Pacific Elm Properties completed the office-to-residential conversion of 14 stories within Santander Tower, a 50-story downtown building. Despite the building having a lower CFI, the developer repurposed the space into 291 units.

Dallas office prices below the national average

After ranking fourth nationally in terms of sales in our last market update, Dallas saw a decrease in investment volume. The metro registered $1.5 billion in assets trading last year, with the average price per square foot standing at $107, considerably lower than the $174 national average.

However, only gateway markets surpassed the Metroplex, with peer metros such as Phoenix and Atlanta ($1.4 billion each) ending the year with less sales. Manhattan continued to lead nationally with $4.9 billion.

In one of the largest deals of the year, Provident Realty Advisors acquired Lakeside Campus, a two-building office campus totaling 807,354 square feet in Richardson, Texas. Trigild sold the 1991-completed asset that features a 16-story building and a four-story low-rise.

Vacancy rate continues to increase

Dallas’ vacancy rate at the end of the January clocked in at 24 percent, 330 basis points higher year-over-year, and considerably above the 19.7 percent national average. San Francisco (29.3 percent) continued to have the most vacant space, followed by Austin (27.8 percent).

At the end of the year, Merit Energy Co. signed a 104,034-square-foot lease at Nuveen Real Estate’s Two Lincoln Centre in Dallas. The firm will mover from a 127,000-square-foot space that is less than 2 miles from the new location.

The metro’s listing rate as of January was $31.4, a 14.9 percent increase year-over-year. Among peer markets, Austin ($45.8), Atlanta ($32.3) and Charlotte ($35.9) fared better, while Houston ($30.1) trailed behind.

The Metroplex’s coworking inventory grows

The Metroplex’s coworking inventory as of January reached 5.2 million square feet across 284 locations. That accounted for 1.8 percent of the market’s total office stock, 20 basis points under the national average.

Miami (3.8 percent) continued to have the largest share of coworking space nationally. Among peer markets, Dallas was on par with Houston and Austin, while Atlanta (2.2 percent) fared better.

Regus remained the largest coworking space provider in the Metroplex with 598,606 square feet across 35 locations. The company was followed by Lucid Private Offices (414,617 square feet), Caddo (274,500 square feet) and HQ (254,757 square feet).

Last year, Workbox entered the Metroplex’s coworking sector, opening a 50,000-square-foot shared office space location in downtown Dallas, at Asana Partners’ Victory Plaza. WeWork previously occupied the location but failed to renegotiate the leasing terms following its Chapter 11 exit.