Are ‘Dallas Office Developers’ Building Too Many Buildings?

With 7.6 million square feet of new commercial real estate construction coming online, Dallas ranks second only to New York in terms of new office real estate construction, according to a new study.

There is no more concrete indicator of the booming North Texas economy than the number of cranes filling-out the skyline. Just how booming? Well, with 7.6 million square feet of new commercial real estate construction coming online, Dallas ranks second only to New York in terms of new office real estate construction, according to a new study.

That prompted researchers to wonder: is Dallas building too much new real estate? Well, not really, if you drill into the numbers. For one, nearly 60 percent of the new construction is pre-leased, which is very unlike the boom-and-bust 1980s, when the city constructed a skyline on spec — and then that skyline never quite filled up, forever becoming the too-big-to-fill albatross around downtown Dallas’ neck.

In addition, researchers say there was a shortage of supply heading into the latest boom. All the new construction has caught up with demand, and if it exceeds supply, it won’t do so excessively. You may expect a slow down of rental rate growth in the commercial real estate market, which will eventually slow new construction and growth in real estate value, but it is good news for tenants with looming lease expirations.

In fact, reading the entire, semi-alarmist Dallas Morning News article about the Dallas’ over-hungry builders, I could only spot one small negative for the city: the economic boom isn’t in Dallas. Well, not entirely. Yes, Uptown is driving the growth, but the big numbers are also coming from Richardson, Irving, and Plano. As much as they indicate a healthy regional economy, these numbers help place in context the scale to which the economic center of the region is migrating northwards.

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