Elevated Costs And Complicated Cap Stacks Can't Stop DFW Deals From Getting Done

Despite the same headwinds that other markets face, there are still commercial real estate deals to be made in Dallas-Fort Worth for the companies willing to put in the work.

Developers are hesitant to build in DFW due to concerns about tariffs, rising construction and labor costs, and geopolitical risks stemming from the conflict in Iran. It takes a lot of effort to convince companies the time is right to build since costs are only going to continue to rise, The Beck Group Chief Revenue Officer Scott Lowe said. 

And when deals do happen, they often have really complex capital stacks that take a lot of work.

“We find ourselves working twice, three times as hard for the same dollar now,” Lowe said at Bisnow’s Dallas-Fort Worth State of the Market on Tuesday at the Terraces at Solana in Westlake. “But I don't think it's going to remain that way.”

Companies will always want to mitigate risk, but Lowe said he believes DFW’s commercial sector is on the cusp of taking off because of its strong fundamentals. Sectors such as hospitality, retail, industrial and office are seeing momentum in the region, and mixed-use projects remain a must-have in nearly all DFW markets.  

The region’s continued population growth, housing demand and status as a major logistical hub for the nation are all positive tailwinds for DFW’s commercial real estate sector. 

The office sector is hyperfocused on the region’s proven submarkets, KDC Senior Vice President Bill Guthrey said. That’s why submarkets such as Uptown Dallas, the Knox-Henderson area and Frisco have seen the most office deals in recent months.

"Nobody wants to pioneer and take any risks," Guthrey said. 

Most of the deals getting done feature trophy office space, since those have been fetching record-high asking rents. 

However, even those high-end finishes face cost concerns. 

"The deals that we are seeing pencil are high-end spec suites and amenities with bars and lounges and speakeasies,” said Lauren Kraemer, principal at Arco/Murray Design Build. “The really cool amenities are what our tenants are looking for.”

Yet, the company has to get creative when determining which amenities are worth spending capital on. For example, Arco/Murray will sometimes just run power to core furniture locations and hold off on wiring full-spec suites.

In addition to cost issues, global geopolitical risk is also making it hard to get deals across the finish line, according to Ryan South Central Region President Nathan Golik. International instability often causes companies to delay significant capital investments. 

Other deals nearing the finish line include advanced manufacturing and logistics projects for DFW’s thriving distribution market. Golik said he expects those to continue to drive positive momentum in the region. 

To address the complex capital stacks, developers are often turning to the state's commercial property assessed clean energy program, according to Lone Star Pace Chief Operating Officer Glenn Silva. 

C-PACE helps property owners fund energy-efficiency, renewable energy and water conservation upgrades using private dollars. Plus, the long-term, fixed-rate financing can be used before, during or after construction for a variety of projects.

“It's about being green, but more so, it's about being smart and putting smart money in cap stacks,” Silva said. 

There have been a significant number of hospitality projects utilizing the funding program, as have developers building multifamily and large mixed-use developments. 

Lowe said hospitality projects moving forward often fall into one of two categories: traditional extended-stay hotels and high-end, luxury boutique offerings. 

Another asset class that continues to pencil is data centers. The nation is amid an artificial intelligence-driven data center boom.

Texas has emerged as a favorite destination for data center developers because of an abundance of energy resources, the availability of land and a business-friendly operating environment, according to JLL’s North America 2025 year-end data center report.

Logan McWhorter, department manager at Colliers Engineering & Design, said data center deals seem to pop up every day since developers can make them work just about anywhere. 

"If you have power, then they'll come calling,” McWhorter said. “If you don't have power, they'll come make their own."

Texas is on pace to pass Virginia by the end of the decade as the nation’s biggest data center market, according to JLL’s report. The state had around 4 gigawatts of data center capacity and another 6.5 GW under construction when the report was published in February. 

With roughly 2.4 GW of capacity, Dallas-Fort Worth is the largest data center zone in Texas, with Austin’s 1.7 GW in second place.

That’s why McWhorter believes data center demand won’t slow down anytime soon. 

“There's not a place in the Metroplex or in the state or in the country that is not on the table,” he said.