The state of the Dallas economy heading into 2023 and why the Dallas commercial real estate market is on fire
As people continue to pour into North Texas, Dallas is feeling the effects of its increasing population and labor pool. With more jobs and more people, inflation and home prices are on the rise—and so is the Dallas real estate market. Here we have summarized the outlook for the Dallas economy going into 2023, as well as how the commercial market performed in 2022 and what is expected to take place this year.
Dallas on the rise as a desirable place to live as it continues to attract a strong labor pool
Last year, the Dallas-Fort Worth region nearly topped the nation with 292,900 new jobs added to its economy as reported by Kyle Arnold with Dallas News. According to the U.S. Bureau of Labor Statistics, it also grew its job ranks by 7.7%, coming in third to the New York and Los Angeles metro areas. Texas as a whole ranked No.1 on the U-Haul Growth Index for highest net number of one-way U-Hauls that came into the state, placing it at the top of the list of states for attracting and maintaining residents in 2022.
The increase in residents and job labor has also put a strain on housing and affordability as, in May, home prices in the Dallas-Fort Worth region increased 30.8% year over year, and inflation rates rose 9.1% mainly in grocery, utility and energy prices. While the US average median household income is currently $53,482 a year, that of a Dallas resident is $43,359 a year.
Though affordability is becoming a challenge, the Dallas job market shows no signs of slowing according to the analysis of the Dallas economy by BestPlaces. While its unemployment rate of 7.4% is higher than the US average of 6.0%, the Dallas job market increased by 3.3% over the last year. Additionally, job growth over the next ten years is predicted to be 45.1%, which is higher than the 33.5% US average.
Altogether, Dallas continues to lead the nation across multiple categories of growth, including earning the No.1 spot for best downtown living in the US reported by David Nguyen with Dallas Business Journal. Dallas ranked highest across several categories: apartments located in luxury buildings, apartments with access to fitness centers, apartment personal space, and most spacious apartments—with an average of 995 SF of space per person. Coming in second was Austin for its green apartment buildings and educated population, while Houston took seventh for its rent-to-income ratio and access to fitness centers.
Dallas #1 for commercial real estate deals last year
Though nationwide commercial property sales fell 15% last year to $729 billion, Dallas came out on top with $42.5 billion in commercial property deals, coming in first for the third year in a row. Steve Brown with Dallas News provided a breakdown of transactions as well as where Dallas currently stands within the commercial real estate market.
With strong job growth and large migrations of people into the state, Brown wrote that “Texas’ major metro areas have emerged as the country’s leading property markets”. Last year, the Dallas-Fort Worth area had the largest dollar volume of apartment sales of any U.S. market, making it one of the most promising regions for multifamily investment opportunities. In fact, apartment sales accounted for more than half of D-FW’s property investment volume in 2022. The Emerging Trends in Real Estate forecast, released annually by the Urban Land Institute and PriceWaterhouse Coopers, predicted D-FW to have the strongest overall real estate market in 2023, behind only Nashville.
D-FW is also currently among the five U.S. markets with the most office construction underway, totaling about 7.7 million SF of new office buildings near the end of 2022. In addition, North Texas is ranked fourth in the nation for office sales with $4.7 billion in transactions last year.
One of the most notable commercial transactions was the downtown Dallas Trammell Crow Center office tower selling for $615 million, making it onto the MSCI’s list of the country’s biggest real estate transactions of 2022. Others included the McKinney & Olive tower in Uptown Dallas at almost $400 million, the two-tower Spectrum Center office complex in Addison for $114.3 million, and the nearly 300-acre Exxon Mobil campus in Irving for more than $110 million.
Dallas real estate continues commercial streak with new projects slated to begin this year
The staff at Dallas Business Journal have compiled a list of upcoming commercial, private real estate projects in North Texas slated to begin sometime this year. Dallas isn’t letting up in its streak of commercial builds as a new five-story hotel began construction late this past month. The hotel, TownePlace Suites by Marriott, will be nearly 60,000 SF and is expected to cost around $10 million. Located in Dallas, TownPlace Suites is owned by DHMR, Inc. and is expected to be completed by January of next year.
A new multifamily project is expected to begin construction in July of this year, as Lalosa Well Living Inc. is planning to build a four level, nine-unit residential condominium building in Richardson. The project, named Residences on Duck Trail – Building B, is expected to cost $2.3 million and will feature a post-tensioned concrete pedestal garage as well as an elevator that services all four levels. At over 25,000 SF, the condominium building is planned to be completed by November of next year.
Another hotel is planned to go up in Dallas beginning in March of this year. Floridays Sapphire Bay Compass Hotel is owned by Floridays Development and will be a 91,000 SF building containing 130 rooms. The cost of construction is estimated at $16.5 million and is expected to be completed by mid-May of next year.
Fort Worth will be receiving a new tire retread facility by June of this year as construction on the Cowser Tire Retread Facility is already underway. Owned by MK Davis Enterprises LLC, the new building will be 40,000 SF and is expected to cost around $3.2 million to construct.
Three new commercial projects will directly benefit the community
Plamedie Ifasso with Dallas Business Journal reported that a new 18-acre community park complex is coming to Fair Park beginning November of this year. The park is planned to feature a market grove, outdoor cafe, picnic areas, gardens, a dog park, and a central lawn. It is the first phase of the Fair Park Your Park campaign currently underway by Fair Park First and is expected to be finished by 2025.
Fair Park First CEO, Brian Luallen, said that the most prominent aspect about the park is its delivery on a 40-year promise. He told Dallas Business Journal, “It’s certainly not lost on us that the site that over 80% of the citizens that live in the surrounding area chose for this park was big enough to accommodate the very diverse program that they asked for, and also the site where over 350 minority homes were displaced in the ’60s and ’70s. That certainly left a deep scar in the surrounding community. The idea that this will become a part of the future, but that it is also a space that acknowledges the past, I think, is very profound.”
A new pediatric medical campus is planned to begin construction in Dallas in the near future, according to Will Maddox with D Magazine. Children’s Health and UT Southwestern Medical Center are currently in the planning stages for the pediatric campus, which is expected to have a total project cost of $2.5 billion and be completed by 2028. Though the two entities have not officially confirmed final construction plans, released solicitation documents detailed a new campus with 532 beds, a 90-bay emergency department, a 90-bed newborn intensive care unit, and a new delivery and labor program offering close to 30 beds.
The solicitation documents also described the new campus as intended to replace the services of the old hospital as well as bring in new ones. Plans include an ambulatory care facility with 250 exam rooms, a parking garage with 6,500 spaces, an administrative building for clinical and support staff, and a utility plant to support the campus. The new hospital is likely to be located somewhere in the Medical District so as not to disrupt the current services offered by Children’s Health.
The Medical District is currently home to the site of a new psychiatric hospital that broke ground in December and is located across the street from Children’s Health. The project, which is expected to be complete by 2025, will feature a pediatric psychiatric wing with 296 beds—96 of which will be reserved for children. The psychiatric hospital received $282.5 million from the state and an additional $200 million donated by Children’s Health in support of the pediatric wing.
Universal Studios is coming to Frisco
Frisco Mayor, Jeff Cheney, announced this past month that Universal Parks & Resorts is planning to build a new family-centric theme park on the northside of Frisco, as reported by Frank Heinz with NBC DFW. The theme park will feature shows, kid-friendly rides without height requirements, beloved Universal characters walking the park, and a 300-room hotel. It is intended to cater to families with young kids by providing a one- to two-day, engaging experience on 97 acres—roughly a quarter the size of the Universal parks in Orlando and Los Angeles.
Universal Parks & Resorts Chairman and CEO, Mark Woodbury, stated “We literally looked virtually every place you could imagine and North Texas rose right to the top, and Frisco rose right to the top of North Texas. So it became pretty evident that this is a great place and it’s a great market in itself and everything we want—a vibrant community, a growing community, lots of young families and very centrally located.”
The theme park, which does not yet have a name or anticipated completion date, will be built near the 2500-acre Fields development—an area that is planned to host a golf course, about 10,000 homes, the headquarters of the PGA, and the $500 million Omni hotel and resort. Bill Hethcock with Dallas Business Journal reported that Frisco has become known for using public-private partnerships to complete huge projects in the city, such as Omni PGA Frisco Hotel and Resort as well as The Star— a mixed-use development built around the world headquarters and practice facilities of the Dallas Cowboys, valued at $1.5 billion.
“Frisco is known for being family friendly,” said Jeff Cheney, Mayor of Frisco. “It’s known for being innovative, being first and leaders in everything. We’ve been named the No. 1 place to raise a family, the No. 1 place to raise an athlete, to host a business, and the No. 1 place in America to live—and here in Frisco, we play to win.”
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