DFW’s apartment market – a closer look at the challenges

Occupancy and effective rent in Dallas-Fort Worth's multifamily market

The apartment development pipeline in Dallas-Fort Worth has been significant. Since 2018, almost 120,000 units have been added to the market—that is close to a 27% increase to the stock in only the last 5 to 6 years. The increase in apartment development has been largely fueled by local population growth combined with slow single-family housing development. The surprising finding here is that this new apartment supply has not impacted the local market to any degree. In fact, occupancy in existing class A and B units delivered between 1980 and 2018 are running at 92.0%. This is spot on with the region’s longer-term average.

Our review of recent deliveries also shows extraordinary market acceptance, as evidenced by their lease-up. Apartments delivered between 2018 and 2021 have high occupancy ranging between 91.8% and 93.7%. The only challenge is for newly delivered units, where 2022 apartments are now at 80.8% occupancy versus 49% for 2023 additions. Since these properties are still in initial lease-up, it is too early to identify any approaching demand issues.

The biggest potential challenge for DFW is the unsustainable impact of rising rents. Before rates began to escalate in early 2020, the average was $1,300 per month. Today, that existing stock (1980-2018) runs $1,518, with the newest product fetching $1,900 per month. That is a total increase of $600 per month, or 46%, from what had been the market norm (over 2010-2020 rents increased 2.8% annually).   While rents have come down from 1.5% to 2.0% recently, that is a minor shift and rents will continue to push the upper bounds given full occupancy at these properties.

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