Profitable investing in commercial real estate in the Dallas-Fort Worth area requires a careful look at current investment trends and the outlook entering into a new year. Based on a strong end to 2016, those interested in commercial office space and other commercial investments can hopefully look forward to continued growth and a solid economy to support their ventures.
Commercial Sales Outlook
Last year ended strong, with record prices being paid for commercial office space in the Dallas-Fort Worth area, some reaching as high as $500/sq. ft. in more competitive areas. These favorably high prices have led to many larger companies offering their buildings for sale in order to cash in on this great opportunity, as more businesses continue to find interest in the DFW area. With a strong economy and the influx of jobs flowing into the area for quite some time, there is a high expectancy that 2017 will continue to see a strong market for commercial real estate.
Absorption Rates On The Mend
Although absorption stalled in 2016, down nearly half from the 6.4 million sq. ft. of absorption in 2015, net absorption is expected to improve considerably in 2017. This is partly due to some major acquisitions in the area and continued job growth, which is currently increasing in the Dallas-Fort Worth area faster than any other market in the nation. This all suggests an increase in absorption as new companies become established in the area.
In addition, much of the decrease in absorption has most likely been due to the reorganization of leased space, as tenants are focusing on the efficient use of commercial office space. While not all areas are expected to see an increase in absorption, others are expected to rebound as the demand for space prompted by job growth rises.
Rental and Vacancy Outlook
Along with sales rates and in spite of lower absorption rates, rental rates climbed in 2016, reaching nearly $25.00/sq. ft. by the last quarter. Vacancy rates in the DFW area increased only marginally throughout the year to 15.5 percent. Rental rates are expected to keep climbing as demand grows with more jobs coming to the area. The number of Class A buildings is also going up, driving rents higher as investors attempt to recover ever-increasing construction costs.
Vacancies, while holding mostly steady throughout the entire region, continue to fluctuate as demand for Class A and Class B buildings change and some major companies have moved. Yet with the demand for commercial real estate still strong in the area, expectations for 2017 suggest little overall increase in vacancies.
The greater Dallas-Fort Worth area and rental rates continue to experience growth as more businesses move into the area, driving up the demand for commercial office space. Due to this growth, expectations are that absorption will rise considerably this year. The forecast for commercial real estate looks bright for 2017, with many opportunities available for investors interested in taking advantage of this challenging, yet positive commercial market!