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Market Research - Dallas

United States: Dallas office market - H2 2021

The region’s economic performance increased investor interest in deploying capital to the region. In the 2021

Migration continues driving growth in Dallas-Fort Worth

Dallas-Fort Worth’s main growth factors—namely in-migration of working age adults, friendly business climate, and diverse industry base—accelerated the region’s recovery in 2021. Unemployment at year-end reached 3.6%, just 40 basis points above lows recorded in February 2020.
In late December, the region’s chamber of commerce recently reported a four-fold increase in the number of relocation projects. Long-term forecasts predict Dallas-Fort Worth will likely surpass Chicago as the United States’ third largest metropolitan area by 2035.

 

Vacancy increase has negligible impact on prime office rents

Dallas-Fort Worth has a high structural vacancy rate due to an excess of obsolete space constructed during the 1980s. Market vacancy reached 16.7% at year-end 2021, on par with the Great Financial Crisis in 2010. 
Elevated vacancy rates have not impacted property owners’ ability to raise rents, particularly in prime office properties that are experiencing elevated demand from tenants desiring quality space to attract employees back to the office.  Asking office rents in prime properties have grown by more than 7% over the last two years. 
 

Office and industrial lead overall investment to new high

The region’s economic performance increased investor interest in deploying capital to the region. In the 2021 AFIRE International Investor Survey, Dallas-Fort Worth was ranked as the top secondary market for planned investments.
Office investment returned to normal levels in 2021 with cap rates ranging from 4.0% for the highest quality assets to 9.0-9.5% for Class B & C properties in periphery locations. 
Despite relatively low levels of retail and hotel investment in 2021, overall property investment reached a new high due to strong investor demand for industrial properties.

Dallas Office Market - H2 2021
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