Dallas, a city in Texas, is emerging as a commercial real estate hotspot. Its booming population and increasing influx of financial service companies have earned it the moniker "Wall Street of the South."

However, the city's core presents a contrasting picture. Downtown Dallas is currently experiencing the country's most sluggish business conditions.

Office buildings in the downtown area are deteriorating. Numerous businesses have left the city center, moving to the vibrant Uptown district nearby or to suburban areas. Concerns over crime and homelessness often drive these relocations, leaving behind defaulted loans, foreclosed properties, and fire sales at significantly reduced prices.

According to financial and real estate data firm MSCI, investors acquired only USD 51,7 million in downtown Dallas office properties during the first 9 months of the year, compared to USD 1,8 billion in the suburbs. The office vacancy rate in downtown Dallas stands at 27,2%, the second highest nationally, surpassed only by Seattle.

A view of downtown Dallas. Photo: WSJ

The situation in downtown Dallas is not an isolated case. Trends like remote work, homelessness, and security concerns are weakening many other downtown areas across the country. Businesses and investors have withdrawn from city centers in places like St. Louis, San Diego, and Portland, redirecting their capital to more stable suburban regions.

The decline of downtown Dallas highlights the uneven recovery of the office market across the United States.

One reason for this trend is that Dallas never developed around a dense financial center like older cities in the northeastern US. Instead, the metropolitan area expanded along its highway system and corporate campuses, forming new urban areas with multiple financial hubs such as Las Colinas, Preston Center, Frisco, Plano, and Legacy West.

This trend accelerated in the 1990s and 2000s with the rise of the Uptown district, north of the city center, which attracted many financial, legal, and technology firms.

After the Covid-19 pandemic, Dallas's suburbs became more competitive than most US cities. These areas feature modern buildings, proximity to employee residences, ample parking, and amenities like gyms and outdoor spaces.

In contrast, the downtown core primarily consists of older buildings with fewer amenities, causing it to gradually "hollow out" as office demand dispersed.

The entire Dallas region maintains its appeal due to a relatively low cost of living and business-friendly tax policies, which are particularly attractive to financial companies. Nasdaq, which currently has an office in Irving, announced an expansion of its operations in the area. The New York Stock Exchange is also planning to establish a branch office north of downtown.

Goldman Sachs is constructing a campus spanning approximately 7,4 hectares in Victory Park, northwest of downtown, designed to accommodate over 5.000 employees. The group has not yet indicated whether it will close its current downtown office, which serves as Goldman's largest operating center in the US outside of New York.

Closed businesses on Akard Street, downtown Dallas. Photo: WSJ

The allure of the suburban market compels Dallas authorities to seek ways to retain large businesses in the city center.

Saks Global, which acquired the Neiman Marcus fashion chain in 2024, considered closing its 111-year-old establishment on Main Street in downtown Dallas.

The company stated that most Neiman Marcus customers in Dallas prefer shopping at its NorthPark Center store, a high-end mall located approximately 11 km from downtown.

Saks agreed to maintain the downtown store's operations until at least next year and is exploring renovation options for the 9-story building. These plans may prioritize space for art events and fashion shows, significantly reducing traditional retail floor area.

A significant challenge in retaining businesses in downtown Dallas is the crime and homelessness situation. This year, police recorded assaults, trespassing incidents, and the possession of knives and firearms on the campus of AT&T headquarters, one of America's largest telecommunications corporations.

Not all indicators are bleak for downtown Dallas. Property owners have worked to reshape the area into a more livable residential district, rather than solely an office hub. According to a recent report by real estate services company CBRE, downtown Dallas ranks third nationally in office-to-residential conversions. The area is also expected to revive through a USD 3,7 billion convention center redevelopment project, slated for completion in 2029.

Downtown Dallas's future also significantly depends on its professional basketball and hockey teams, the Mavericks and the Stars. Both teams currently play at the aging American Airlines Center, north of downtown, and have expressed a desire to build new home arenas.

Mavericks CEO Rick Welts stated he is considering locations on the southern edge of downtown for a new sports complex, spanning over 20 hectares, to ensure security and other factors. "This series of projects will be a major turning point for downtown," he said.