Q4 2020 Dallas Office Market Report22 Jan 2021
The Dallas-Fort Worth metro (DFW) saw another quarter of negative net absorption as a result of the COVID-19 crisis. The market finished 2020 with an eye-opening -3,675,265 sf of negative net absorption and -916,382 sf of Q4 net absorption. As a result, the office vacancy rate finished the year to 17.3%.
The office market saw a substantial 3.2 msf deliver in 2020. Cranes continue to fill the skyline as construction carried on with 6.6 msf underway; down from the cycle highs of 2016, which saw 14 msf under construction, but still enough to make DFW one of the most active markets in the county. However, COVID-19 has put much of that construction off schedule or delayed, such as Uber’s announcement that it was delaying some construction at its Deep Ellum location until 2021.
“Flight-to-quality” trends continued, as Class A product saw the lowest drop in absorption for classes, though even it finished the quarter with -678,211 sf. Economic strain could push more tenants to look at less expensive options in the future. The market’s record 9.1 msf sublease space will likely be a defining transaction driver for 2021. Class B and older properties continue to post negative net absorption.
Sales volume also noticeably dropped, as office product only saw $411M in sales for the quarter, versus the >$1B/quarter it usually saw.
Before COVID-19, the DFW office market was positioned to maintain steady positive quarterly growth. We will have to wait and see what awaits the market for the coming months.