Dallas Multifamily Market Report
Dallas By the Numbers
- Asking Rent Growth: -1.3%
- Vacancy: 10.8%
- Deliveries for 2024: 38K Units
Last 12 Months | Source: CoStar Group
Market Overview
As operators are aware, the influx of new supply in the Dallas market has placed additional pressure on occupancy and rent growth. According to CoStar, Dallas-Fort Worth’s asking rent growth was -1.3% year-over-year in Q2 2024, and vacancy reached a high of 10.8%. Realpage reports that Dallas is on track to outpace all other U.S. markets with over 38,000 units set to be delivered by the end of 2024. Despite a slowdown in job creation this year, Dallas leads the nation with 101,000 jobs created in 2023. The market also retains its position as having the highest gross rental demand for 2024, with 6,963 net absorbed units through June, according to ALN Apartment data.
With development economics remaining tight, new supply is set to taper off significantly starting early to mid-2025 to about 21,500 units delivered in 2026, according to RealPage. On the positive side, with inflation under control for now, expense growth is expected to moderate, and recent earnings calls from apartment REITs suggest a trend toward lower operational expense growth, particularly in taxes and insurance.
Dallas Multifamily Market Performance
In the current market, there are compelling arguments both for and against buying and selling. On the buy side, institutional investors have demonstrated confidence in high-end, well-located assets, investing over $13 billion in three major acquisitions, signaling that now might be an opportune time to invest.
Transaction volume in the DFW area, which plummeted 90% from market highs, are beginning to rise, suggesting the market may be nearing its bottom. With apartment property values down 2% over the past year and 22% from their peak, there is potential for acquiring properties at a discount with the reduced competition.
Market fundamentals remain sound, and buyers can expect to see operational efficiencies with expense growth softening and local demand catching up to supply. Additionally, despite a recent rise in treasury yields, the current lending environment remains somewhat favorable, and some buyers are betting on future rate cuts for advantageous refinance later on.
On the selling side, property owners facing imminent loan maturities and unfulfilled business plans may find themselves in challenging positions. However, those who acquired properties at low bases might benefit from favorable selling conditions, especially if their capital could be better utilized elsewhere. On-market supply remains relatively tight, and increased demand could make aggressive offers more common, although significant price increases are unlikely to occur rapidly. Despite this, many buyers are still selective, particularly regarding older properties, and some sectors like syndicators and private investors are pulling back. Core assets, however, remain attractive.
With a likely rate cut anticipated in September, treasury yields might decrease, potentially leading to lower interest rates and cap rate compression, thus making selling decisions even more nuanced. The Green Street Commercial Property Price Index notes a 2% decline in apartment property values over the past year, highlighting ongoing volatility in the market.
