Dallas Office Vacancies hit 26% in the First Quarter

Dallas’ office sector flashed glimmers of hope in the first quarter, but vacancies remain high as companies continue to downsize and supply outpaces demand.

The city saw 2.5 million square feet of leasing activity in the first quarter, indicating that demand is starting to bounce back after dropping to historic lows during initial years of the pandemic, the Dallas Morning News reported, citing JLL.

However, net absorption — the amount of space leased minus the amount of space vacated — stood at negative 1.1 million square feet through the first three months of the year. The overall office vacancy rate was 26.2 percent.

Four years removed from the onset of the pandemic, companies are still shrinking their office footprints in light of the remote-work movement. At the end of 2023, roughly 71 million square feet, or 30 percent of total office inventory, was available in Dallas-Fort Worth, according to data from Avison Young.

The amount of sublease space in Dallas rose to more than 8.6 million square feet in the first quarter. A chunk of that came from accounting firm KPMG, which put 63,000 square feet up for sublease in the 19-story KPMG Plaza, at 2323 Ross Avenue, in February.

Several other massive subleases hit the market in the first quarter. Mortgage servicer Mr. Cooper vacated and is subleasing over 200,000 square feet, according to JLL. Gainsco Auto Insurance will vacate its 107,000-square-foot lease in the 12-story Uptown building at 3333 Lee Parkway, voiding about 45 percent of the property. EnLink Midstream also plans to shed about half of its 157,000-square-foot lease in the 24-story One Arts Plaza in the Dallas Arts District.

Despite an uptick in leasing activity, supply continues to outweigh demand. Over 5 million square feet of office space is under development in the Dallas area, with most of it concentrated in Uptown-Oak Lawn and Grand Prairie-South Irving submarkets.

Bank of America’s 238,000-square-foot lease at Parkside Uptown and Deloitte’s 104,500 square feet at 23Springs “are two examples of Uptown continuing to be a preferred office submarket of financial firms.”

Under-construction office projects in Dallas were 63.5 percent pre-leased to start the year.

—Quinn Donoghue