On a recent episode of the Trepp podcast, JLL Capital Markets Senior Managing Director Mike McDonald made an assertion that would have sounded contrarian to many institutional allocators a decade ago. Dallas, he argued, now belongs in the same strategic conversation as New York for global office investors and the traditional definition of "gateway markets" is holding portfolios back.
McDonald, who co-leads JLL's National Office group and has closed more than $70 billion in transactions, traced the problem to an older framework that enshrined a handful of coastal cities as the only acceptable homes for core capital. Those lists typically featured New York, Boston, Washington, D.C., Chicago, Los Angeles and San Francisco, occasionally adding Seattle. In that world, Dallas and other Sun Belt markets were slotted as "secondary" almost by default.
An Outdated Gateway Map
"Institutional capital was taught that there were six or seven 'gateway' markets and everything else followed behind," he said on the podcast.
"If that definition had included Dallas, Miami, Tampa, Atlanta, Charlotte and Nashville from the beginning, I think the investment trends and returns would look very different."
The gap between that legacy framework and market reality has been widening for years. Net migration data show a long-running movement from high-tax coastal states toward lower-tax, business-friendly environments in the Sun Belt. McDonald stressed that the shift did not begin with Covid, even if the pandemic made it more visible. Tenants, particularly large corporations, started moving their people and payroll years ago.
"Tenants want less tax," he said. "The investors follow the tenants, and that's exactly what happens in our business."
Why Dallas Has Pulled Ahead
Dallas has become the emblem of that pattern. The region has posted sustained population growth and over the last several years, it has tallied a substantial number of corporate headquarters relocations and expansions. Trepp's hosts referenced estimates of more than 100 headquarters moves into the metro area since the late 2010s, as companies sought lower costs and a central U.S. base.
McDonald contrasted Dallas with Atlanta to underscore how the nuances matter for capital. He is deeply familiar with both, splitting his time between the two metros. Atlanta, he noted, has its own strengths and a long-established institutional presence. But a few structural features have given Dallas an edge with capital allocators.
"Dallas is in the state of Texas, and Atlanta is not," he said. "Dallas is in the Central Time Zone, Atlanta is not. Dallas has two airports, Atlanta does not. Atlanta should have done that 45 years ago."
Those details can sound almost glib, but they speak to the infrastructure and accessibility that large occupiers and investors weigh when they make long-term commitments. For national and global users, Central Time makes coordination across coasts easier. Two major airports deepen connectivity. The Texas tax and regulatory environment adds another layer of appeal for employers and high-income employees.
The result is a feedback loop. Corporate relocations and expansions support demand for high-quality office space. That creates a deeper leasing market in select Dallas submarkets, which in turn gives investors confidence that they can underwrite rent growth, backfill risk and exit liquidity.
Gateway Behavior Without the Label
McDonald cited the marketing process for 2000 McKinney and Texas Capital Center as an example of how far the market has come. The assets drew a mix of opportunity funds and lower-return "core-ish" capital, all clustering around similar pricing. He likened the bid sheet to a red-eye flight from Las Vegas to the East Coast, where groups that normally would not be in the same cabin were suddenly side by side.
"Our pricing went higher than we originally thought," he said of the Dallas sale. "We sold to a really good group, and they're going to do exceptionally well with it."
That kind of buyer depth is a hallmark of what institutional investors historically demanded from gateway markets. McDonald contends that Dallas now checks those boxes while also offering the growth profile and relative affordability that many legacy coastal markets lack.
He also pointed to a more qualitative factor that matters to corporate site selectors and, by extension, their landlords: quality of life. Dallas and other Texas markets have leaned into that pitch, promoting a full suite of professional sports, cultural amenities and housing options at a cost that looks attractive versus coastal peers.
"From my perspective, Dallas is on fire," McDonald said. "It's one of the hottest points in the entire country for the top 40 points of global capital."
The implications for capital allocation are significant. If allocations continue to be constrained by older gateway definitions, investors risk concentrating in markets with weaker demographic support while underweighting metros where both tenants and competitors are already moving. McDonald believes that is beginning to change, as data on migration, corporate moves and office performance become harder to ignore.
He stopped short of suggesting New York's primacy is under threat. "New York is the greatest city in the world. That'll never change," he said. But he argued that the old hierarchy—coastal gateways first, Sun Belt later—no longer aligns with how value is created in offices today.
As capital continues to track demographic and corporate realities, Dallas looks less like an outlier and more like a preview. For institutional investors reassessing office exposure, the question may no longer be whether Dallas belongs in the gateway conversation, but whether portfolios that still treat it as peripheral are already behind the curve.
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