Industry experts are optimistic about the long-term strength of the Dallas-Fort Worth multifamily market, citing strong migration and economic trends.
In the first half of 2022, the metro added just under 150,000 jobs, the largest gain in the nation, according to Marcus & Millichap’s recent market report for the third quarter. Dallas-Fort Worth also ranked at the top for overall population growth in a metro area with the Census Bureau reporting 97,290 people added between July 2020 and July 2021.
That’s welcomed news for multifamily developers and owners in the market, with population growth outpacing inventory growth.
As part of its 2022 outlook, Marcus & Millichap projects 20,500 multifamily units will be completed by the end of the year.
“Supply additions in 2022 fall to a six-year low, which should help curtail upward pressure on vacancy,” states the report, which predicts the vacancy rate to reach 4% by year’s end. “Still, Metroplex inventory will expand by at least 2% for the ninth consecutive year.”
According to Marcus & Millichap, as of July, almost 50,000 multifamily units were underway with delivery dates slated for 2023 and later.
“My map suggests that we’re not building enough right now,” says Kimberly Byrum, Zonda’s managing principal, multifamily. “We’re starting to see construction loans become harder to come by so that’s a challenge.”
Rising rents also have been making headlines in the metro, with the Marcus & Millichap market outlook forecasting an 11% increase in effective rent for the year. “Rent growth set a record last year with a 17.3% annual gain. The advance in 2022 will be the second fastest over the past two decades, with the average effective rent moving up to $1,540 per month.”
Byrum adds that she isn’t seeing the giant rent gains of the recent past but also isn’t seeing a correction backward. “I think before we see rent changes we will start to see more stabilized concessions. That’s a forward indicator that we’re watching.”
A leading multifamily operator in the metro, Ashcroft Capital owns 18 communities with 6,475 units. Founder and CEO Frank Roessler says depending on the submarket, his firm has seen rent growth in excess of 20% over the past year.
“Bear in mind, we’re often renovating our units, which causes a portion of this rent growth,” he says. “But much of it is being caused by positive migration trends, a strong economy, and a national housing shortage.”
Another trend that Roessler is seeing is that suburban communities in the metro continue to offer a high quality of life and give residents working from home the opportunity to live farther away from infill locations.
“We have a lot of renters that are working from home for the foreseeable future. Due to this, residents are drawn to larger floor plans with more bedrooms, and this describes a lot of apartment communities in the Dallas-Fort Worth market,” he says. “We also see residents taking advantage of the shared workspaces that we’ve created in several of our clubhouses.”
Byrum adds that horizontal apartments also are becoming more prevalent in the metro, representing 7% of the market under construction.