When Will DFW Commercial Real Estate Bounce Back?

It’s been the toughest year for commercial real estate in Dallas-Fort Worth since the Great Recession, but industry experts are hopeful for the beginnings of a rebound in 2024.

Lenders became more conservative this past year as the cost of debt rose, causing office leasing to slow and new projects to all but dry up, the Dallas Morning News reported.

Even though commercial building starts were down about 17 percent in the first half of the year, North Texas was still second only to New York City for new construction.

DFW led the nation in commercial sales in the first nine months of 2023, although sales were down 60 percent from the previous year.

The market will continue to see pricing decline in 2024, said Bill Kitchens, director of market analytics at CoStar Group. He expects pricing to be down 24 percent from its peak in 2022 to the end of 2024.

“I think it’s going to be an interesting early 2024,” Andrew Alperstein of PWC told the outlet. “Putting aside office, the fundamentals for retail, industrial and multifamily real estate are still pretty good.”

That’s due to the region’s robust growth.

Investors are waiting to see if the Federal Reserve will lower interest rates in 2024, Alperstein said. Once activity starts up, it will accelerate quickly because investors won’t want to miss out on bargains, he said.

Local developers expect distress in the commercial sector won’t last long.

“It’s going to be relatively short-lived, with the exception of office. Office has a lot of things to work through,” said John Goff, chairman of Fort Worth-based Crescent Real Estate.

Bob Sulentic, CEO of Dallas-based CBRE, recently told investors he expects the rebound to be slow. He said he predicts transactions won’t bounce back until the second half of 2024 at the earliest.