Dallas Office Vacancy Third-Highest in Nation

Office landlords in Dallas-Fort Worth are grappling with the nation’s third-highest amount of unused office space.

The DFW metro trailed behind New York and Chicago with 52.8 million square feet of unused space during the second quarter, a figure that translates to a potential rent loss of $1.62 billion, the San Antonio Business Journal reported, citing an analysis by Switch On Business.

In contrast, commercial landlords in Texas’ other major metros fared a little better.

Houston had the second-highest vacancy in the state with nearly 50 million square feet of empty office space, accounting for $1.55 billion in unrealized rent. Austin followed with more than double the vacant office space of San Antonio, translating to $835 million in losses. San Antonio, meanwhile, fared better than its counterparts, with 8.4 million square feet of empty office space tied to about $200 million in potential rent losses.

The evolution in office demand is more about “metros and neighborhoods, where buildings, regardless of class, are either going to do quite well over the next few years, or they’re going to become obsolete,” said Thomas LaSalvia, director of economic research at Moody’s Analytics.

With hybrid and remote work models reducing the demand for traditional office environments, vacancy is surging across the country. Major metros have struggled with the fallout of this transition, leaving approximately 11 markets with more than $1 billion in unrealized rent.

Trophy office assets fare much better than older buildings, and certain neighborhoods, such as Dallas’ Uptown, which is the center of Y’all Street, attract high-profile tenants.

“It really turns out that the old saying ‘location, location, location’ is still incredibly valuable, and maybe more than ever in this asset class, as we move toward employees wanting to be in vibrant neighborhoods, where there actually are amenities even outside of what that Class A building can provide.” LaSalvia said.

— Andrew Terrell