Dallas Multifamily Update

DFW By the Numbers

• Asking Rent Growth: -1.3%
• Vacancy: 10.8%
• Deliveries for 2024: 38K Units

Last 12 Months | Source: CoStar Group

The Dallas multifamily market continues to demonstrate remarkable resilience and growth, making it one of the most dynamic apartment markets in the nation. With strong demand drivers and a significant influx of job additions, Dallas remains a magnet for renters, spurring extensive apartment development and transformation across the region.

The Dallas-Fort Worth-Arlington, TX area experienced a 1.3% increase in jobs according to the latest BLS release for July

Robust Supply and Demand Dynamics

As of Q1 2024, Dallas ranks as the fifth largest apartment market in the United States, boasting over 696,000 existing units, according to RealPage Market Analytics. Over the past decade, the city has added more apartments than any other market in the country—over 181,000 units since 2014—resulting in a staggering 35.3% increase in the existing inventory. Despite the immense growth, demand continues to remain strong, with over 15,000 units absorbed in the past year, making it the second-best performance nationwide, only after Houston.

Record High Completions

Dallas recently marked a historic milestone with annual deliveries surpassing 23,100 units by the end of Q1 2024. This represents the first time Dallas has broken the 20,000-unit barrier for annual completions since records began in 1992. Currently, over 52,000 units are under construction, with nearly 37,000 expected to be completed in the next year. Forecasts indicate that annual supply may peak at approximately 38,000 units by Q4 2024 before tapering off, signaling a potential normalization in construction activity.

Submarket Variability

The growth in apartment supply has not been evenly distributed across the Dallas-Fort Worth area. Submarkets such as Frisco, Rockwall/Rowlett/Wylie, and Allen/McKinney have seen their inventories more than double since 2014. In contrast, areas like North Irving and Far North Dallas have experienced minimal changes in their unit counts. This unevenness highlights the diverse growth trajectories within the metroplex, influenced by factors such as local demographics and economic opportunities.

Changing Demand Landscape

While demand in the Dallas multifamily market remains strong, it has not kept pace with the rapid influx of new units. The market’s vacancy rate currently stands at 10.8%, reflecting an increase of 110 basis points year-over-year, and remains near a 20-year high. Rent growth has also been negatively impacted, with average rents declining by 1.2% over the past year.

However, not all segments are experiencing the same challenges. The suburban areas of Frisco, Allen/McKinney, and North Fort Worth account for about a third of the total market demand, benefiting from significant population gains in Collin and Denton Counties, which have seen a 50% increase since 2010.

Mid-Tier Market Resilience

Interestingly, the mid-tier, 3-Star segment has demonstrated signs of recovery, with net absorption of 1,820 units in the first half of 2024. Yet, vacancy rates in this segment remain stubbornly high at 11%, indicating a continued struggle to attract tenants amidst rising prices and competition from higher-quality units.

Future Outlook

Looking ahead, the Dallas-Fort Worth multifamily market appears well-positioned to navigate ongoing economic challenges. Job growth remains a cornerstone of the region’s resilience, with recent figures indicating the addition of over 450,000 jobs since March 2020. While growth rates are stabilizing, the continued influx of residents—153,000 new residents from 2022 to 2023—provides a solid foundation for sustained rental demand.

The forecast suggests that vacancy rates may hold steady before tightening closer to 10% by next year, with rent growth anticipated to stabilize and potentially increase by 3% in 2025 and beyond. This stabilization aligns with a reduction in new construction starts, as rising costs and a cooling market prompt developers to be more cautious in their investments.

Conclusion

The multifamily landscape in Dallas-Fort Worth reflects a blend of rapid growth and emerging challenges. While supply continues to outpace demand in certain areas, the underlying demographic and economic trends offer a promising outlook for the region. As the market adjusts to these dynamics, both developers and investors will need to navigate a complex environment characterized by shifting tenant preferences and evolving market conditions. With strong job growth and a steady influx of new residents, Dallas remains a key player in the national multifamily arena, poised for continued evolution in the years to come.