By: Zachary Whittacre, Senior Manager – Real Estate
The Dallas-Fort Worth (DFW) office property market has undergone significant shifts in recent years, driven by evolving workplace strategies, fluctuating tenant demand, and broader economic challenges. While Downtown Dallas and Las Colinas continue to experience prolonged vacancies, suburban markets such as Frisco/Plano and Fort Worth have shown greater resilience. Market rents have seen varying degrees of adjustment across property classes, with landlords increasingly offering concessions to attract and retain tenants.
At the same time, investor confidence in office assets has shifted, leading to changes in capitalization rates and overall market activity. The rise in sublease availability has further compounded these challenges, increasing competition among landlords and adding downward pressure on direct lease rates.
This article examines how these market trends are influencing office property tax valuations in DFW and across Texas as commercial real estate owners and investors prepare to receive their notices of value this April. Many office property owners face assessments that do not reflect current market realities, making strategic property tax appeals an essential tool for ensuring fair and accurate valuations this assessment cycle.
The DFW office market has experienced sustained turbulence since 2020, with Class A and 5-Star office buildings bearing the brunt of rising vacancies and weakening demand. Downtown Dallas, Las Colinas, and Richardson have been particularly affected, with Class A vacancy rates exceeding 25%, while Frisco/Plano and Fort Worth have demonstrated more stability, benefitting from corporate relocations and tenant retention strategies.
A growing sublease inventory has further exacerbated these challenges, as many corporate tenants downsize their footprints, adding a significant volume of discounted space that competes directly with new leases. Sublease availability remains elevated, and in some submarkets, it is a primary driver of increased vacancy rates. This dynamic has contributed to rental stagnation, particularly in Class A properties, where landlords are now compelled to offer substantial tenant improvement packages and free rent periods to secure new leases. Asking rents for Class A offices currently range between $30-$34 per square foot, though effective rates often fall below these benchmarks due to ongoing concessions. As rental revenues have declined, investor confidence in office properties has weakened, leading to higher cap rates, now ranging between 7.5% and 9%. This shift reflects an increased perception of risk, particularly in high-vacancy submarkets. The culmination of these pressures has directly impacted office property values, with Class A properties in struggling submarkets seeing price declines of approximately 33% per square foot, while Class B properties have remained more stable.
Many office properties in DFW are currently over-assessed, meaning owners are paying property taxes that do not align with the true economic performance of their assets. Rising vacancy rates and declining net operating income (NOI) are clear indicators that many office buildings are generating significantly lower revenue than in prior valuation periods. Additionally, landlords are being forced to offer substantial lease concessions and increased tenant improvement (TI) allowances, further reducing effective rental income and overall asset values.
Office owners must be prepared to present a compelling case when filing property tax appeals in the DFW and throughout Texas. Market-based evidence should include rental rate trends, cap rate increases, occupancy shifts, and sublease market pressures to demonstrate why a reduction in assessment is necessary. Assessors often rely on outdated valuation models that fail to account for these economic challenges. By leveraging actual operating data, comparable distressed sales, and changes in market conditions, office owners can strengthen their argument for reduced property tax burdens. In a market experiencing prolonged instability, a well-supported tax appeal can provide significant financial relief for property owners struggling with declining valuations.
The DFW office market is in transition, with high-end office properties facing valuation challenges and suburban assets maintaining more stability. The reality of rising vacancy rates and declining NOI must be accurately reflected in property tax assessments. Owners who fail to challenge their valuations risk overpaying property taxes based on outdated assumptions.
Invoke Tax Partners specializes in navigating Texas property tax laws and securing reductions for office property owners. With four Texas locations, including both Dallas and Fort Worth, and extensive experience analyzing property values and market conditions, we have successfully assisted office property owners and investors across DFW in securing meaningful property tax relief. If you own or manage office properties in DFW, schedule a consultation to discuss tax strategies and market positioning today. Learn more about what to expect as value notices roll out in Texas here.
