Dallas Commercial Real Estate Outlook 2025: Industrial and Data Center Sectors

This story was originally published at dmagazine.com

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The Dallas-Fort Worth (DFW) commercial real estate market is a vital economic hub, and understanding its projected trends is essential for industry professionals. This summary focuses on the 2025 outlook for the industrial and data center sectors, drawing from expert analysis . It aims to provide a concise overview for real estate consultants and their clients.   

Industrial Real Estate in 2025: Normalization Amidst Challenges

The Dallas industrial sector is anticipated to experience strong leasing activity throughout 2025, driven by deferred demand from the previous year, particularly for spaces exceeding one million square feet . Experts predict a normalization of the market, with net absorption expected to be between 18 and 20 million square feet . This indicates a stabilization following potentially more rapid growth periods.   

Developers are likely to be more cautious with new construction in 2025, prioritizing the absorption of existing inventory . This strategy aims to balance supply and demand and prevent downward pressure on lease rates. However, managing rental rate expectations will be a key challenge, as prior increases will necessitate careful negotiations .   

Securing land for industrial development is expected to become increasingly difficult, especially in South Dallas . The expansion of the data center sector, which has acquired numerous potential industrial sites, is a major contributing factor. This competition for land could tighten supply and potentially increase land prices, impacting the feasibility of future industrial projects in the area. Indeed, the intense competition for land in South Dallas from data center developers may contribute to increased industrial vacancy and rental rates within that specific submarket .   

The performance of the smaller industrial market segment (under 200,000 square feet) will be closely monitored in 2025 . Negative absorption in this segment in 2024, possibly due to economic uncertainties, warrants attention. The recovery of this segment could reflect broader economic sentiment among smaller businesses. Market activity is expected to vary by submarket. McKinney is anticipated to be active for smaller spaces, while Alliance, South Dallas, and South Fort Worth are projected to see more activity in larger ranges . East Forney is expected to grow due to its favorable labor market, and Denton is also predicted to see increased leasing activity . These localized variations highlight the importance of submarket-specific analysis.   

A notable trend is the increasing demand from owner-occupiers, particularly manufacturers, seeking to purchase their own facilities despite higher interest rates . This suggests a long-term investment perspective. Additionally, the trend of companies outsourcing distribution to third-party logistics (3PL) providers is expected to continue, further driving demand for large, strategically located industrial spaces .

Submarket	Expected Activity Size Range	Key Drivers/Characteristics
McKinney	Smaller	Demand for localized or niche industrial facilities
Alliance	Larger	Logistics and distribution hub
South Dallas	Larger	Logistics and distribution; impact of data center growth
South Fort Worth	Larger	Logistics and distribution
East Forney	Both	Favorable labor market attracting manufacturing and distribution
Denton	Both	Expanding population and infrastructure driving leasing

Data Center Real Estate in 2025: Continued Expansion and Key Challenges

The DFW data center market is projected to continue its significant growth in 2025, building on a strong 2024 marked by substantial land acquisitions and power requests . This ongoing expansion solidifies DFW's position as a leading data center market. However, securing the necessary power resources will remain a critical challenge . The ability of utility companies and private entities to meet this growing demand will significantly influence the pace of future development.   

Operators with large existing data center portfolios may find opportunities by leveraging tenant turnover or backfilling vacant spaces to meet near-term demand . This offers a quicker solution than new construction. Furthermore, collaborations between data center developers and energy providers to fund alternative energy solutions for new campuses present a significant opportunity, addressing both power needs and sustainability concerns .   

Demand for data center campuses capable of supporting the high-density IT requirements of hyperscale cloud providers and artificial intelligence (AI) companies is expected to remain strong . These entities require robust power and cooling infrastructure. While major Tier 1 markets like Northern Virginia, Phoenix, and DFW will remain key, Tier 2 and 3 markets are also expected to see growth as hyperscalers seek areas with more readily available power . This suggests a potential decentralization of data center development.   

There is a consistent near-term demand for specialized data centers with high-performance computing (HPC) capabilities, driven by AI and HPC workloads . Data center developers and operators who can provide facilities optimized for AI, including features like liquid cooling and high-density designs, will have a competitive advantage . The ability of utilities to deliver the substantial power needed by hyperscale and AI customers is expected to be a major bottleneck . Additionally, long lead times for critical equipment like transformers and generators will continue to pose planning challenges . Managing the increasing heat from higher rack densities required by AI workloads will be a critical technical challenge, potentially requiring advanced cooling technologies like liquid and immersion cooling . Finally, companies prioritizing investments in renewable energy, energy storage, and net-zero carbon emissions will be well-positioned in the increasingly sustainability-focused data center sector .   

Conclusion

The Dallas commercial real estate market in 2025 presents significant opportunities and challenges in both the industrial and data center sectors. The industrial market is expected to stabilize with strong leasing, but navigating rental rates and land acquisition will be key, especially with competition from data centers. The data center sector will continue its rapid growth, driven by digital demand, but overcoming hurdles related to power, infrastructure, and supply chains will be crucial. Real estate consultants in the DFW region must understand these sector-specific dynamics to provide effective guidance to their clients in the coming year.