DFW Commercial Sales Plummet in First Quarter

Market conditions have caused commercial property sales to plunge in Dallas-Fort Worth.

Commercial transactions totalled $3.5 billion in the first quarter of this year, a drop of more than 70 percent compared to the same period in 2022, the Dallas Morning News reported, citing a study from MSCI.

DFW was crowned the commercial king, leading the nation in commercial property deals last year. And the region still ranks second in the nation behind Los Angeles’ $6.3 billion.

“Deal volume has been challenged by rising mortgage costs and more conservative credit terms for newly issued debt,” Alexis Maltin, MSCI’s head of real assets research, told the outlet. “Despite recent price declines … buyers and sellers still disagree on pricing, with buyers more apt to walk away than to overpay.”

DFW’s office sector has been hit by the surge in costs and tighter lending climate. Yet, the region still amassed about a half billion dollars in office sales in the first quarter.

Despite the challenges, plenty of investors are willing to spend on properties with mortgages that are about to mature or at risk of being seized by a lender, the outlet said. With the remote work alive and well, some investors are looking to repurpose beleaguered office buildings, including office-to-resi conversions.

Most investors, however, probably won’t be comfortable pursuing deals until the market stabilizes, according to Paul Smith, a partner with Dallas-based property investor Velocis.

“My sense is we will start to see that capital free up when the needle stops moving on interest rates,” Smith told the outlet. “It doesn’t have to go down, just stop moving up. Then the equity can underwrite, and deals can be priced when it knows where debt can be priced.”

—Quinn Donoghue