Commercial property construction in Texas was red hot last year, outpacing all other states across the nation and showing little sign of slowing in 2023.
Texas had the most economically prosperous commercial real estate market in the country in 2022, according to an annual report by the National Association of Industrial and Office Parks (NAIOP) Research Foundation.
The commercial real estate sector in Texas was an enormous contributor to the state’s Gross Domestic Product (GDP) in 2022, Kathryn Hamilton, vice president of NAIOP, explained in an email to The Dallas Morning News.
“Texas is the highest-ranking state in the U.S. … with $184 billion in overall contributions resulting from the state’s commercial real estate sector,” Hamilton told the DMN.
Of this total sum of nearly $184 billion, Hamilton noted that over $70.3 billion was in the form of direct spending. This actually doubled from 2021 levels, the DMN reported.
Other top states showing sizeable contributions to the U.S. GDP through their commercial real estate sector include Arizona with over $91.3 billion, Ohio with roughly $64.4 billion, Florida with about $39.5 billion, and California with nearly $36.5 billion, per NAIOP’s report.
Texas also led in the number of jobs supported by its commercial real estate sector with a total of over 1.2 million, which, as reported by The Dallas Express, represents a leap of over 650,000 from the year before, according to the Bureau of Labor Statistics.
In terms of Texas’ commercial building construction in 2022, NAIOP’s report concluded that the state topped the list in office, industrial, and retail building activity.
This can be seen clearly in North Texas, which was ranked as one of the top U.S. markets for commercial office space in 2022, according to a Q4 office market report by Avison Young.
“It is this strong demand and affordability that has been pushing this development pipeline to new highs as the region advances its position as a key U.S. logistics hub,” said Greg Langston, principal and managing director for Avison Young, according to the DMN.
However, in the case of Dallas itself, just because a project is in the development pipeline, doesn’t mean that it will be built any time soon — the city’s backlogged permitting process makes it difficult to get projects across the finish line, hamstringing Dallas as other cities in the metroplex flourish.
Nevertheless, as The Dallas Express reported earlier this month, a new 17-story, 180,000-square-foot Uptown office tower project led by Stonelake Capital Partners will arrive in Dallas sometime in 2025. Another Dallas-based project due in 2025 is the Rosewood Residences Turtle Creek, a 17-story high-rise condominium planned for the Oak Lawn area of Dallas.
While such new projects bode well for the state, commercial demand in Texas could face a slight pullback if economic conditions worsen, according to a statement from Marc Selvitelli, president and CEO of NAIOP, provided to the DMN.
Inflation headwinds, workforce constraints, and higher interest rates are all amplifying economic uncertainty in 2023, which could lead to a slowdown in commercial activity, Selvitelli said, the DMN reported.