(214) 450-9850 [email protected]

By Justin Boyar and Paul Hendershot – CoStar Analytics

At the Same Time, Houston and Dallas Are Home to Some of the Nation’s Lowest Occupancy Rates.

Dallas leads the pack among large U.S. markets for what Kastle Systems defines as physical occupancy

Dallas, Austin and Houston ranked first, second and third as of June 9 among large U.S. markets for what Kastle Systems defines as physical occupancy, according to aggregated and anonymized data from the building security company. Notably, these three Texas markets all had physical occupancies exceeding 40%, a phenomenon not seen elsewhere in the nation and more than double the rate in cities such as San Francisco and New York. The average of the top 10 cities was 31.5% as of the latest weekly reading.

Kastle Systems measures swipes of its access controls across more than 2,600 buildings in 138 cities. While this is only a sampling of buildings by one security company, the data gives a peek into how employees and employers are responding to office use during the pandemic.

Texas cities have been leading the pack partly because they are less dense, and workers are less reliant on public transportation, according to the Wall Street Journal. Those disparities have widened even more in recent weeks as the country has reopened, the Wall Street Journal reported. In the age of social distancing during COVID-19, Texas metropolitan areas’ relatively lower density and car-centricity might at least partially explain why workers have been more willing to return to the office. Other explanations range from culture to politics, but it is arguably more difficult to broad-brush the fastest-growing U.S. state these days: Between 2010 and 2020, Texas added nearly 4 million residents, more than 1 million more than the second-fastest growing state during that time, Florida.

Meanwhile, a look at CoStar’s office occupancy rates paints a slightly different picture.

As of June 18 this year, Houston and Dallas had the lowest and third-lowest occupancy rates, respectively, out of all 390 markets that CoStar tracks in the United States. CoStar occupancy measures space physically occupied by tenants, whereas Kastle Systems measures space physically occupied by individuals using its keycard, fob and KastlePresence app access data

Dallas, the fastest-growing city in the nation across several metrics, is challenged by an overhang of structurally obsolete office product built in the 1980s as tenants continue their flight to quality. Many of these assets have been or are in the process of being modernized and upgraded to meet the needs of today’s tenants. The 1980s oil bust and savings and loan crisis were watershed moments after which Dallas decided to diversify its economic base away from energy. As a result, it has emerged as one of the fastest-growing economies of the last decade.

Meanwhile, Houston continues to be faced with the same issue as Dallas of structurally obsolete office product, although the Bayou City decided to double down on energy after the 1980s. Houston’s economy is more diverse today, yet energy companies continue to maintain an outsized impact on the local office market in the so-called energy capital of the world.

Tech-heavy Austin fared better as of the latest reading, with an occupancy rate of 85.7%. The capital city, however, has a significant amount of new supply to work through.

All Texas markets have relatively low barriers to entry for new supply, including relatively easy permitting processes, permissible — or in the case of Houston, largely nonexistent — zoning and affordable, abundant land. This ability to quickly bring on new supply is also weighing on headline occupancies.

How To Get Started


Sign Up

The first step to invest with us is to fill out our Interest Form. We’ll connect and discuss your goals, then we’ll find the best investments to help you meet these goals.

Invest and Enjoy

After you invest you can just sit back, relax, and receive quarterly cash flow payments from your passive investments.

Sairam Kota

Sairam is an experienced multifamily deal sponsor and asset manager for 738 units, a key principal in 332 units and limited partner in 1000 units. He has a strong experience in asset management, property reposition, income generation, implementing operational efficiencies and cost reduction. Sairam is a licensed Real Estate Broker in the state of Texas. He is a successful IT Consultant with 20+ years of experience in corporate America.