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As the Dallas Cowboys struggle to win, the team’s home metro area has scored a big win for next year’s real estate investment prospects.
Real estate investors and experts have ranked Dallas-Fort Worth as the top metro area for real estate investment in 2025, returning to the top spot for the second time six years ago.
Emerging to the top means Tennessee has maintained its No. 1 spot for the third year in a row in the Urban Land Institute’s annual report, Emerging Trends in Real Estate, now in its 46th year. It was meant to replace Nashville.
Nashville fell to No. 5 in a major ranking reshuffling that reflects the resurgence of Texas and Florida’s largest metros heading into a year that real estate industry experts predict will be the starting point for an industry recovery.
Miami rose from 14th in 2024 to second next year, ahead of Phoenix, which dropped to 10th. Houston moved up from No. 11 to No. 3, while Tampa St. Louis moved up from No. 11 to No. 3. St. Petersburg rose 14 places to fourth place. Orlando moved up from 19th to 6th place.
ULI collaborated with consulting firm PwC to produce the report and interviewed nearly 2,000 industry experts. Private property owners and commercial/apartment developers accounted for 35% of responses, making up the largest group in the survey.
Over the past two years, the real estate industry has been dealing with rising interest rates, declining real estate sales, and a slowdown in apartment development, especially. The number of apartment construction starts is at an all-time low nationwide.
In September, the Federal Reserve cut interest rates for the first time since March 2020, giving hope to the real estate industry. Further interest rate cuts are expected.
“We are on the cusp of the next upturn in the real estate cycle and now is the time to think about plans and lay the foundations for growth over the next two to three years,” one investment banker said in a ULI survey. .
Florida real estate is up again for now
Miami, Tampa St. Petersburg and Orlando have benefited greatly from migration patterns during the COVID-19 pandemic. Apartment construction is booming. Rising interest rates and construction costs have dampened developer enthusiasm.
Concerns were raised that there was too much supply. Rising insurance costs due to hurricanes began to put pressure on profits. Last year’s ULI report cited insurance as the reason Florida cities fell down in the most promising rankings this year.
The ULI report says Miami’s high cost of living is pushing people out of the metro, but an influx of international immigrants and wealthy people is offsetting the losses. Miami’s apartment market is stable, and industrial real estate in the metro is also strong, according to the report.
Tampa Street St. Petersburg has also benefited from immigration, but now has housing affordability issues. But the report says job growth is strong and business costs are below the national average.
The report does not include Hurricane Helen, which struck near Tampa on September 26th, and Hurricane Milton, which made landfall on October 5th. Both major storms caused flooding and wind damage. By then most of the report had been completed.
But these hurricanes strengthened ULI’s view that prospects for Florida cities could weaken if migration eases or reverses, “particularly if the costs of climate change continue to rise.”
Big D expected to return to top of real estate industry
Dallas-Fort Worth rose to the top of the rankings in 2019 and 2016 and has been in the top 10 for nearly a decade.
According to the ULI report, the metro’s population growth has surged by 11.2% since 2020, making it one of the top cities in terms of population growth over the same period. Only Raleigh-Durham, North Carolina, has more at 13%. Charleston, South Carolina, 13.3%; Austin is 17.3%.
Dallas-Fort Worth’s population growth rate of 152,598 people from 2022 to 2023 was the highest among all metropolitan areas, according to census data released in March.
The Dallas-Fort Worth area has been attracting major corporate headquarters and corporate offices for more than a decade and has seen the construction of notable corporate headquarters and corporate offices in recent years.
Pharmaceutical giant McKesson moved to Irving from San Francisco five years ago, making it the region’s largest Fortune 500 company. Caterpillar, a manufacturer of agricultural and construction equipment, moved its headquarters from Deerfield, Illinois to Irving two years ago. The PGA of America will move its headquarters from Florida to Frisco in 2022.
Investment firm Goldman Sachs is building a campus in Dallas that will house a regional operation that promises to employ 5,000 people.
New residents needing a place to live is driving the construction of new homes and apartments.
Dallas-Fort Worth has 41,214 apartment units under construction, second only to the New York City metro area with 59,389 units, according to data from real estate firm Cushman & Wakefield.
Dallas-Fort Worth led the way with 90 metro Cushman & Wakefield Line apartments for rent. In the third quarter of this year, Cushman’s preliminary data shows more than 8,100 net new units were leased, following the second quarter when 9,128 units were leased.
Housing data firm Zonda ranked Dallas-Fort Worth No. 1 in new home construction in a July report.
No problem in Houston
Houston’s metro has been quietly climbing up the ULI rankings over the past seven years.
“I call Houston Cinderella,” says Christine Mastandrea, chief operating officer of Houston-based Whitestone REIT, comparing Metro to Dallas-Fort Worth.
The real estate investment trust owns community shopping centers in Houston, Dallas-Fort Worth, San Antonio, Austin and Phoenix, all of which are growth cities ranked highly in ULI’s outlook rankings.
“Houston is steadily growing,” Mastandrea said. “It just doesn’t get the attention.”
Its rise to No. 3 marks a major reversal from its ranking of No. 40 in 2017, which saw it drop significantly from the top spot among real estate candidates two years ago.
Known as the “Energy Capital of the World,” Houston’s fortunes tend to rise and fall depending on what’s happening in the energy sector. In 2016, when ULI was compiling its 2017 report, the oil and gas industry was grappling with a supply glut that caused a historic collapse in oil prices.
“Houston’s real estate market is facing a period of uncertainty, with participants wondering how the energy industry will recover and the new space supply that began at a time when Houston’s economy was benefiting from high oil prices. We are waiting to see how the market responds,” ULI said in a 2016 report.
In addition to oil and gas, the Houston metro port is one of the nation’s largest and ranked fifth in cargo volume last year, according to the American Journal of Transportation.
NASA and the aerospace industry employ tens of thousands of people. Texas Medical Center is the world’s largest and growing medical center, employing more than 120,000 people.
The metro is home to 24 Fortune 500 companies, most of them energy companies. ExxonMobil moved its headquarters from Dallas to Houston last year, taking over its existing, expansive campus.
Population growth is steady. According to Census data, Houston will add 139,789 new residents from 2022 to 2023, ranking it second only to Dallas in population growth. Both were the only cities with increases of more than 100,000.
“While this growth is likely a product of economic expansion, residents are also attracted to the metro area’s relative affordability,” the ULI report states. “Houston’s cost of living index is 28 percent below the average for the most populous cities (metropolitan areas).”
In the third quarter, average asking rents for apartment properties in Houston averaged $1,379 per month, compared to average rents in Dallas of $1,559, according to Cushman & Wakefield data.
