DFW Office Performance Depends On Which Report You Read, But Everyone Agrees High Availability Is A Problem

Office leasing throughout Dallas-Fort Worth was either up or below historic norms during Q3, while availability remained steady or declined slightly. 

It all depended on who did the measuring, reflecting a quarter of continued uncertainty in the Metroplex’s office market.

Quarterly office reports from Avison Young and Savills indicated availability is still a major concern in DFW but diverged on the extent of the issue. The reports also differed in their views on leasing, though each suggested the office market is stabilizing.

“It's definitely [showing] upward momentum,” Savills Research Manager Deandre Prescott said to Bisnow. “This quarter, there was a good amount of leasing done [and] a lot of that was driven by renewals. DFW still has a decent sized construction pipeline … and with new supply comes, potentially, an increase in availability and vacancy with a lot of the construction pipeline being spec development.”

Savills’ third-quarter report shows DFW leasing jumped to 4.2M SF for the quarter. That’s an increase of 1.8M SF over Q3 from a year ago. It’s also a 50% rise over the previous quarter that the report linked to major lease renewals, including Bank of America reupping its nearly 554K SF agreement and Aimbridge Hospital renewing almost 249K SF. Both buildings are in the North Dallas corridor. 

However, Avison Young’s report says leasing activity was around the same as the last two years, which is 70% or less of the Metroplex’s historic Q3 pace.

Why the disparity?

Savills starts working on its office report before the quarter ends, so Prescott said leasing at the end of a quarter could be reflected later in his firm's report than another company’s quarterly report. There’s also the possibility the inconsistencies came from different statistical criteria being considered by the two companies.

“From our standpoint, we've definitely seen an increase in leasing activity compared to the prior quarter,” Prescott said. “There was a decent amount of renewables this quarter for a good amount of space. The Bank of America [lease] was over 500K SF and there were four or five of the top deals that we had all over 100K SF.”

Office availability came down 2.8M SF for the quarter but remains elevated thanks to the popularity of remote work and the continued growth of coworking spaces in DFW’s suburbs, per Avison Young. 

“Office space availability has improved but is persistently high,” Avison Young Senior Insight Analyst Walter Bialas said in a statement. “Deals are being done, although leasing activity continues to be sluggish and not sufficient to take down the high level of space availability.”

Savills’ report showed DFW’s availability rate remained at 30% compared to last year. 

“We're expecting availability to stay where it's been at over the last couple quarters,” Prescott said. “We don't expect to see a big dropoff in availability anytime soon, just with the new construction coming along.”

The firm also reported the market's overall inventory rose by 1.7M SF compared to Q3 of 2023. The overall asking rental rate was up 8.4% to almost $31 per SF last quarter, according to Savills.

Net office absorption turned positive for 2024 in Q3 with approximately 700K SF, according to Avison Young. The firm also noted office vacancy in the Metroplex was stable at just over 26% for Q3. 

“Q3 2024 stats showed modest improvement across the board,” Avison Young Dallas Managing Director Greg Langston said in a statement. “As we have noted before, demand is strong for top quality buildings in walkable locations. Leasing has also been solid among small- to mid-size tenants, under 10,000 sf who are returning to the office before many larger companies.”

Metrics from earlier this year show DFW’s overall office return rate approaching 63%, which outpaced the national percentage, according to the Office Busyness Index compiled by Avison Young. This quarter’s data shows DFW’s rate remaining around the same level.

Dallas came in second for most vacant offices in the country among large metros for Q1, Moody's Analytics reported. That issue intensified in Q2, when vacancies rose 30 basis points to 26.6% quarter-over-quarter, per a JLL report.