DFW Office Market Absorption Turns Positive, Vacancy Rate Inches Down, and Leasing Activity Up in Q3 2025

EXECUTIVE SUMMARY

Momentum in the Dallas-Fort Worth office market increased in Q3 2025, with the total vacancy rate down by 30 basis points to 25.0%. The flight to quality will continue to shape market dynamics as developers deliver new, amenity-rich properties, leading to higher vacancies in older buildings in areas like the Dallas CBD, Mid-Cities, and LBJ Freeway. Leasing activity increased 20.2% quarterly from 3.7 million sq. ft. to 4.4 million sq. ft. Total net absorption saw a significant turn to positive for the quarter, recording 1.4 million sq. ft., with both Class A and Class B properties contributing to the total.

Construction deliveries for the quarter totaled 898,000 sq. ft., up significantly from the previous quarter, and the construction pipeline decreased 21.5% over the quarter to 2.5 million sq. ft. Rental rates rose 2.5% over the quarter and 4.8% over the year to $32.06 per sq. ft. Class A gross rental rates hit a record high of $35.69 per sq. ft. and are forecasted to continue to rise. Class B rental rates increased to $25.22 per sq. ft. from $24.31 per sq. ft. in Q2 2025.

SUPPLY & DEMAND

KEY MARKET INDICATORS

MARKET OVERVIEW

DALLAS ECONOMIC UPDATE

Employment in DFW grew at an annualized rate of 2.5% in August, while Texas employment increased by 3.2%. Despite the growth, the unemployment rate rose to 4.1% from 3.7% in July. The jobless rate was 4.1% in Dallas and 4.0% in Fort Worth. The most significant gains were in education and health services, information, and government sectors. The largest losses were in construction, financial activities, and professional and business services.

VACANCY RATE INCHES UDOWN

The total vacancy rate decreased 30 basis points over the quarter and by 10 basis points over the past year to 25.0%. Submarkets with generally older inventory, such as the Dallas CBD at 33% and Far North Dallas and Las Colinas at 28%, are affected. The higher vacancy rates are primarily due to tenants gravitating toward newer properties with more amenities, which are more highly concentrated in Uptown and other northern suburban submarkets.

CONSTRUCTION DECREASED AND DELIVERIES INCREASED IN Q3 2025

Construction deliveries for the quarter came in at 898,000 sq. ft. The under-construction pipeline shrank over the quarter by 21.5% to 2.5 million sq. ft. Most of the pipeline under construction is in the Uptown/Turtle Creek submarket (51%), with the remainder sprinkled throughout the other submarkets.

LEASING ACTIVITY INCREASED QUARTER OVER QUARTER, BUT DOWN YEAR OVER YEAR

Quarterly leasing velocity, which is comprised of both new leases and renewals, stood at 4.4 million sq. ft. during Q3 2025, a 20.2% increase over last quarter and down 18.5% from Q3 2024. Notable lease transactions in Q3 2025 include Pennymac’s 300,000 sq. ft. sublease at AmerisourceBergen at 5025 Plano Pkwy., Goldman Sachs’ 51,000 sq. ft. sublease at 717 N Harwood St, and Fieldpulse’s 28,000 sq. ft. lease at The Gild North.

NET ABSORPTION TURNS POSITIVE FOR THE QUARTER

Net absorption—move-ins minus move-outs—was positive 1.4 million sq. ft. in Q3 2025, significantly up quarter over quarter and year over year. Both Class A and B properties contributed to the positive absorption, with Class A recording 1.1 million sq. ft. and Class B properties posting 290,625 sq. ft. in Q3 2025. Some tenants that moved in during Q3 2025 included Sally Beauty Holdings, Inc., which moved into 203,000 sq. ft. at 3001 Colorado Blvd., and Global Life, Inc., which took 136,000 sq. ft. at 7677 Henneman Way.

INVESTMENT SALES TRENDS

CoStar Capital Market Analytics reports the cumulative 12-month sales volume at $1.1 billion in the DFW office market. With 203 deals completed, the average transaction price currently stands at $294 per sq. ft. with an average cap rate of 7.1%. Notable recent sale transactions in Q3 2025 include Avalair Group’s purchase of One Main for an undisclosed price. The 653,000 sq. ft. property is 51% leased. Also, Crescent Real Estate LLC purchased the Texas Capital Center from Union Investment for a rumored $295 million. The property, located in the Uptown/Turtle Creek submarket, is 73.5% leased.

OVERALL RENTAL RATES UP QUARTERLY AND ANNUALLY

The average gross rental rate for the DFW office market is $32.06 per sq. ft., up 2.5% quarterly from $31.29 per sq. ft., and up 4.8% annually. The Uptown/Turtle Creek submarket boasts the highest rental rates, with the overall average gross rent currently sitting at $60.88 per sq. ft. The lowest rental rate is $21.67 per sq. ft. in the Stemmons Freeway submarket.

For More Information, Contact:

Steve Triolet
SVP of Research and Market Forecasting
tel 214 223 4008
[email protected]