An almost 60% drop in sales wasn’t enough to knock Dallas off its top spot as the country’s leading commercial real estate investment market last year.
Close to $19 billion in Dallas-area commercial properties traded in 2023 — the most of any metro area in the country, according to year-end estimates by analysts at MSCI Inc. Dallas has been the leading commercial investment market for three years in a row.
Dallas outranked Los Angeles, Manhattan and Chicago for commercial property investment during the year. That was even though Dallas had the largest — 58% — decline among those cities in sales from 2022 to 2023.
Nationwide, the volume of commercial property transactions sank by 51%, according to MSCI. More than $374 billion in properties sold during the year.
“Deal volume fell at a pace in 2023 that was reminiscent of the worst parts of the Global Financial Crisis” of more than a decade ago, according to MSCI analysts. “Prices continued to decline as well, with some elements of the market down at double-digit rates.”
A jump in interest rates, a decline in lending for new transactions and continuing shakeout in the office building industry held down commercial property sales across the U.S.
Still, several major property trades in the Dallas area were among the largest in the country in 2023.
The more than $576 million purchase of the huge CityLine office tower campus in Richardson was the seventh biggest U.S. commercial property deal last year. The October sale of the 500-unit Sloane Street apartments in Carrollton to investor AvalonBay Communities Inc. totaled $142 million.
Downtown Dallas’ 1.2 million square foot Plaza of the Americas office and retail complex also changed hands to a joint venture between Glen Park Capital and Shelbourne, a New York-based commercial real estate owner and management company.
Almost half of the Dallas-area commercial property trades last year were apartments, with more than $9 billion in purchases. MSCI estimates that $4.4 billion in industrial buildings in the Dallas area were sold.
Dallas was the biggest U.S. market for apartment sales in 2023 and also a top metro area for industrial building purchases, according to MSCI.
“Unless office comes back in a big way, industrial and apartment will continue to drive these rankings,” MSCI chief economist Jim Costello said. “The Metroplex is more liquid than comparably sized areas globally. “
MSCI estimates that more than $1.9 billion of the commercial real estate deals in Dallas last year were by offshore investors. Dallas was second to Manhattan for foreign commercial property investment. Most of the Dallas transactions were by Canadian investors.
“Cross-border players increased their (nationwide) exposure to industrial and apartment, with net purchases of $3.3 billion and $1.5 billion, respectively,” according to MSCI. “These investors exited the suburban office sector, with net dispositions of $1.8 billion.”
Only about $52 billion in office purchases were recorded nationally in 2023 — a drop of 56% year-over-year. About $2.3 billion in Dallas offices were acquired.
“Unless some outside force drives sudden new excitement around office investment, current owners of assets will need to endure further price declines,” MSCI analysts predict.