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The DFW Suburbs Will Be The 'It' Place Post-Pandemic

Prior to the coronavirus outbreak, urban core submarkets in Dallas-Fort Worth captured headlines, with reports of Downtown revitalization abounding.

But new market data shows DFW remains a predominantly suburban market where citizens live and work outside of the urban core, and this trend is expected to increase in the wake of the coronavirus pandemic

"I think there was a large narrative that existed for a while that the suburbs are dead [and] all of the energy is in the urban core," Transwestern Executive Managing Partner Paul Wittorf said. "I think things tend to get exaggerated based on whatever is the herd thinking at the time."

Out of all markets analyzed by CommercialCafé nationwide, DFW recorded the most suburban office development, 32.3M SF, over the past 10 years. The firm found 73% of DFW's total office space is in the suburbs, accounting for a total of 229M SF of suburban office.

While market brokers and analysts don't dispute quality urban development took place in DFW in the last real estate cycle, the suburbs appear poised to come out of the coronavirus pandemic ahead.

CommercialCafé released a new study on suburban office this month, concluding the coronavirus is now contributing to a strong trend of companies seeking spaces in lower-density offices in suburbia. 

Three suburban office markets — Frisco/The Colony, Quorum/Bent Tree (near Carrollton and Addison) and the Upper Tollway/West Plano — captured a third of all DFW office leasing activity in the first half of 2020, CoStar Analytics Managing Director Paul Hendershot said.

"Ten years ago, or throughout the previous real estate cycle, everyone pretty much wrote off the suburbs," Hendershot told Bisnow. "Everyone believed it's going to be all about downtown and millennials. But those millennials have been aging out, and they are looking to suburban locations and that has once again fostered this newfound love of suburbia, and the office environment is following suit to a point."

That drumbeat that millennials love downtowns has rapidly shifted in the past four months in favor of suburban living and working, with report after report saying the lower cost and larger amount of space afforded in the suburbs will be more appealing in the wake of the pandemic, both in apartments and in less dense, shorter offices.

“It’s an upside-down world,” Aviva Investors Director of Research for Real Assets Chris Urwin told Bisnow in June. “What was good is bad, what was bad is good, one day we want lots of people together, the next we don’t.”

Paul Wittorf and his family.

Millions of U.S. workers being pushed to remote work has helped drive this trend, and reports are springing up around the country of more businesses considering a spoke-and-wheel model of office space, with a downtown hub and small satellite offices in suburbs.

"In today's environment, and I'm not suggesting this is going to last forever, but at least in the near-term and midterm, having sprawl and driving your own car are positive and those two things also sort of play more for the suburbs versus the urban core," Wittorf said.

Costs are another factor, Hendershot said. With Uptown Dallas office rents coming in at $40-plus per SF, Preston Center at $39.52 and the Downtown Dallas CBD hitting $26.90 per SF, suburban markets have a competitive edge, according to CoStar data. Suburbs like Richardson and Coppell have high-quality mixed-use and corporate office product with space going for $24.76 and $25.25, respectively, according to Hendershot.

"They may look for that lower-cost alternative as they adapt to the increased distancing and all of the other measures associated with this new normal that it looks like we are going to be in for quite a while," Hendershot added.

Contact Kerri Panchuk at kerri.panchuk@bisnow.com.