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Masked by Headwinds Within the Class A Segment,
Class B/C Office Demand is Much Sturdier
Mid- and lower-tier offices exhibit greater stability. Dallas-Fort Worth’s Class B/C vacancy rate stood at 16.1 percent entering the second quarter of 2024, roughly 1,100 basis points below the market’s Class A rate. Relative to year-end 2019, the mid- and lower-tier metric was only 170 basis points higher, compared to a 670-basis-point surge within the high-end segment. Demand for Class B/C space was illustrated by three different submarkets recording net absorption above 100,000 square feet during the opening quarter of this year — Arlington-HEB-Grapevine, LBJ Freeway and Lewisville-Denton. The latter area also posted segment rent growth above 6 percent year-over-year in March. Lewisville-Denton has been one of the fastest-growing outlying suburbs in the Metroplex in recent years. New households are generating local Class B/C office demand from a variety of firms, including healthcare, insurance and finance.