Dallas’ Office Market Just Had Its Best First Quarter Since 2020

The first quarter of 2025 brought a wave of encouraging news for the Dallas office market.

According to JLL, at a time when the Texas city remains the third-largest population mover in the country, with nearly 178,000 new residents migrating in from July 2023 to July 2024, the office market saw the highest first-quarter leasing volume since the start of the pandemic, and rents for office space built over the past decade increased 5.2 percent year-over-year.

In general, office rents in Dallas-Fort Worth increased 2.8 percent annually in the first quarter, to $32.94 per square foot, an all-time high for the market, according to Cushman & Wakefield.

While Dallas is not completely back to pre-pandemic prosperity, this news is leading to some uncharacteristically positive outlooks on the local office market.

“I think we finally have our footing back underneath us,” said Micah Rabalais, a research manager at JLL. “Anecdotally, talking to teams across multiple service lines, we’ve spent so long between pandemic recovery, figuring out return to office, and inflationary concerns that everyone was just figuring out where the market was. But, now, we’re finally at the point where occupiers and teams have a good idea of where they are and what strategy they want to roll out. We’re starting to see decisions that were long gestating finally getting made.”

Matt Wieser, managing director of Stream Realty Partners, concurs, noting that the freedom to sign long-term deals seems to have returned to the sector after a lengthy absence.

“Over the last couple years, a lot of tenants have wanted more flexibility: shorter-term leases, and not really wanting to expand. There have been more contractions. We’re seeing the inverse of that now,” said Wieser. “We’re seeing a lot of tenants expand their footprint and make longer-term decisions. We still have some economic uncertainty on the capital markets side, but the transaction side in Dallas is the healthiest we’ve seen in five years.”

This is borne out by leasing figures. In the first quarter, JLL cites the city’s leasing volume at 3,147,718 square feet, the highest first-quarter total since the onset of the pandemic, and a 640,000-square-foot improvement over the first quarter of last year.

“This was our best Q1 from a leasing activity perspective, when you look at total square footage and volume of deals signed, since the pandemic outbreak,” said Rabalais. “Ever since `21, we’ve been seeing less than 3 million, or sometimes on the lower end of 2 million, square feet of transactions being tracked for Q1, which is usually a quieter quarter. Whereas this quarter, it was a little over 3.1 [million square feet]. A lot of that was driven by larger occupiers making decisions to get back into the market and finally start executing on deals.”

T.D. Briggs, a JLL executive managing director, notes that companies throughout Dallas seem to have finalized their return-to-office procedures, clearing the way for long-term office planning and a clear rise in occupier demand.

“Pre-pandemic, we were averaging somewhere around 10 to 12 million square feet of what we call ‘tenants in the market’ — that is, tenants actively seeking to lease space,” said Briggs. “We used to always have 10 to 12 million feet of deals looking into the market. Well, we fell off the cliff [during COVID], and that went down to almost zero, then settled in at around 2 or 3 million. Now we’re at about 6 [million]. So we’re not all the way back to where we were, but we’ve come a long way.”

One potentially concerning sign is the Dallas market’s high vacancy rate, which is hovering in the mid-20s. But Andrew Matheny, senior research manager at Cushman & Wakefield, noted that higher-than-usual vacancy rates are somewhat perpetual in Dallas due to a preponderance of older, less-desirable office stock.

“We’ve always had a higher vacancy rate compared to the rest of the nation because we overbuilt so much office in the 1980s,” said Matheny. “We have a lot of obsolete stock that just kinda sits there and has a higher vacancy overall.”

Rising employment numbers and corporate expansions and relocations lead Matheny to expect vacancy rates to drop somewhat within a few quarters. But there is also good news in how rents have remained strong in the face of these higher vacancy numbers.

“Normally when we see vacancy going up to these levels, we see rent growth in the negative. But that hasn’t occurred at all,” said Matheny. “In fact, most buildings are, at least on the quality side, achieving rents that are higher than they were before the pandemic.”

Matheny sees this as a result of the area’s flight-to-quality trend, as companies reducing space due to work from home or hybrid work are often compensating by moving to higher-quality headquarters.

“Companies are realizing that if they need to reduce their footprint by 20 to 30 percent, they can pay 20 to 30 percent higher rents and it’s cost neutral, but they get much better space that attracts and retains talent,” said Matheny, who noted that 151.6 million square feet, or 63.7 percent of all Dallas office space, is categorized as Class A. “A lot of companies are opting to do that.”

(By way of comparison, 54.1 percent of New York City’s overall office space, and 60.8 percent of Manhattan’s, was categorized as Class A as of mid-2024, according to CoStar.)

That said, the flight to quality has its victims as well, as those buildings of lesser quality than higher-end Class A stock are reaping fewer benefits than the top product.

“The Class A office space is capturing the lion’s share of all the activity,” said Wieser. “Older buildings that are not improved are being left behind. If you look at the numbers over this last quarter, essentially all of the absorption has taken place in the Class A space.”

While firms in numerous industries are contributing to this recovery, Matheny noted that financial firms have played an outsize role, leading to Dallas’ financial sector being referred to throughout the business media as “Y’all Street.”

Last year, the Wall Street Journal, citing Bureau of Labor Statistics data, noted that “Texas investment-banking and securities employment has increased 111 percent over the past 20 years and 27 percent since the pandemic, compared with 16 percent and 5 percent, respectively, in New York. The number of people employed in finance overall has risen 13 percent in Texas since 2019, compared with 2 percent in New York and 3 percent nationally.”

Moody’s Analytics, meanwhile, reports that office-using employment in the Dallas-Fort Worth (DFW) region grew by 22,970 jobs, or 1.9 percent year-over-year, while financial firms in the region increased employment by 3.7 percent over last year’s first quarter, outpacing national growth over that time period of 0.8 percent. By the end of the first quarter, “DFW office-using employment was 18.4 percent above pre-pandemic levels and was expected to grow another 3.5 percent over the next two years.”

As a result of all this, Dallas is now second to New York in terms of the number of workers employed in finance-related professions.

The proof is in the portfolios. Currently, Dallas developer KDC is building a $455 million, 850,000-square-foot, two-tower, 22-acre headquarters campus for Wells Fargo in the suburb of Irving. It’s scheduled to open by year’s end. Developer Hillwood Urban is building a $500 million, 3-acre office campus, including an 800,000-square-foot office tower, for Goldman Sachs in Downtown Dallas. It’s scheduled for a 2028 opening.

Bank of America will occupy more than 238,000 square feet of a new 30-story, 500,000-square-foot Dallas office tower that KDC and Pacific Elm Properties is developing, and further major projects are underway as well for Charles Schwab and Deloitte.

Briggs said he believes we’ll see more of this in the coming years as companies headquartered around the country continue relocating to Dallas.

“The city’s working on a couple of significant relocations right now. Folks are voting with their feet and we’re starting to see that,” said Briggs. “There are 30 deals you could name that are part of what’s going on, big relocations that will be significant and needle-moving. And those leave a wake that other tenants tend to follow. So we look at relocations as a huge sign.”

Stream Realty’s Wieser noted that all this is being helped along by the city’s diversity of industry.

“One thing that’s helped Dallas remain such a healthy, vibrant commercial market, even in light of the last five years, is the diverse tenant base we have here,” said Wieser. “Houston, for example, has so much reliance on the oil and gas industry. Austin has suffered of late with the technology industry. Dallas is just a very diverse city.”

Overall, the growing demand combined with a lack of new Class A supply on the horizon offers good news for owners of high-quality Class A office buildings. According to Cushman & Wakefield, new construction in Dallas is currently at its lowest level since 2012. No new projects were started or completed in the first quarter of 2025, and spec projects totaled just 1.6 million square feet, with 62.2 percent of this pre-leased.

Only one project, Granite Properties’ 26-story office tower 23Springs, is expected to deliver in Dallas proper this year, and only two other projects are set to break ground: The Offices at Firefly Park, bringing 125,000 square feet to the Frisco suburb; and the next phases of The Offices at Clearfork, 50,000 square feet in South Fort Worth that is already 78 percent pre-leased to Wells Fargo.

“Right now the pipeline for new projects is at least a decade low. It’s looking very thin compared to what we normally see in Dallas,” said Cushman & Wakefield’s Matheny. “That’s going to push more tenants toward existing buildings, or lead them to do build-to-suits like Wells Fargo or Goldman Sachs. If building owners have assets they’re investing in with attractive amenities, those owners will be in a good place, especially if they’re in the prime submarkets that are well located to see demand and occupancy go up.”

The bottom line to all this is that, while vacancy and absorption figures illustrate how the Dallas office market is not completely out of the woods, the sector’s growth shows Dallas is fighting the good fight to prove to New York and Los Angeles that it can compete at the highest level.

“Dallas has become a third coast,” said Briggs. “It’s become a good go-to, must-be-in market. When you look at job growth and all the other factors, you’re seeing smart institutional money say, ‘Be in Dallas.’ The smart money says that you’re going to see a lot of institutional buyers place their bets in Dallas.”