Demand for commercial real estate in North Texas remained resilient in 2022, despite a broader slowdown in investment activity across the country.
North Texas remains one of the most in-demand real estate markets in the U.S. thanks to its robust pipeline of commercial investments planned for the area.
While strong investment demand has helped insulate DFW from record-high inflation and other economic headwinds, it was not enough to spare the region from a modest pullback in 2022. However, persistent demand is setting the region up for explosive growth once economic pressures begin to lift and dissipate.
“What’s happening in Dallas-Fort Worth is unprecedented,” Mark Dotzour, an experienced real estate economist, told The Dallas Morning News. “It’s really a boomtown.”
Even though it appears that the U.S. may be headed into a recession, the data indicates that “Texas is choosing not to participate in it,” Dotzour said during an economic forum sponsored by Dallas-based Strive Commercial Real Estate Advisors.
North Texas continues to be a dominant player in the commercial real estate investment sector, having led the country for the past three years, according to Morgan Stanley Capital International (MSCI).
North Texas “wrested the top slot from Manhattan at the onset of the pandemic and has held it ever since,” MSCI analysts wrote in a recent report.
Manhattan had the sixth-highest commercial sales volume in the U.S. with $21 billion — half that of Dallas-Fort Worth, according to reporting by the Real Deal.
In 2021, DFW had $45 billion in commercial real estate investment. MSCI estimates that $42.5 billion in commercial properties were sold in DFW in 2022.
“The headline figures on real estate investment sales declined in 2022, but growth rates are only part of the story,” the MSCI analysts claimed. “The level of activity for the full year was elevated relative to history, and 2022 was the second-most active year for sales volume over time.”
“I’m bullish on Texas and I’m bullish on commercial real estate,” Dotzour said. Nobody is losing interest in commercial real estate, he asserted; buyers are just putting their pencils down for a while until conditions improve.
Once the economy has settled down and prices have reset, that is when buyers are going to stage a major comeback, he predicted. Until then, he said, the slowdown in commercial investments will allow the industry to reprice real estate to reflect higher borrowing costs better.
Not only is the demand for commercial real estate skyrocketing in DFW, but job demand in the region is also on an upward tear, despite slowing investment activity in 2022.
North Texas has been the beneficiary of several corporate relocations over the years, including Charles Schwab in 2019, CBRE in 2020, AECOM in 2021, and last year, North Texas welcomed Caterpillar, the world’s largest construction equipment manufacturer.
“I think we are going to see population growth over the next decade here that’s going to exceed every estimate we have seen,” said Dotzour, who previously served for 18 years as the top economist for the Texas Real Estate Research Center at Texas A&M University.
Dotzour believes that current market conditions today, which differ greatly from those in 1986 and 2008, make North Texas a prime location for major property investors.