$1,515 2Q 2024
-1.6%
91.9% 2Q 2024
70 BASIS POINTS
11,041 [YTD: 16,276]
11,718 [YTD: 21,785]
Dallas-Fort Worth’s apartment market is rebounding as robust demand catches up with recent supply growth. In Q2 2024, over 11,000 units were absorbed, nearly matching the 11,718 units that were added to the market during the same period.
Developers have significantly scaled back on new multifamily projects, reducing starts from approximately 20,000 in the first half of 2023 to just 9,000 in the same period this year.
Among the myriad corporate expansions and relocations bolstering the Metroplex’s economy, one of the most noteworthy and potentially market-shifting announcements is the initiative by BlackRock and Citadel Securities to establish a rival stock market in Dallas. This move could significantly enhance the metroplex’s long-term investment prospects, underscoring its growing status as a global center of finance.
QUARTERLY DEMAND
QUARTERLY COMPLETIONS
Dallas-Fort Worth’s apartment market is bouncing back as strong demand is catching up with recent supply growth, mirroring pre-pandemic leasing trends. Over 11,000 units were absorbed in Q2 2024, with suburban areas like Frisco and North Fort Worth leading the charge (21.7% of total demand). This surge is easing pressure on landlords and paving the way for potential rent increases by years end.
The Dallas-Fort Worth apartment market is better positioned than other Sun Belt markets, despite the significant number of units still under construction. As of June 2024, the metroplex had 44,800 units in development, yet there’s been a marked decrease in new starts. Developers have scaled back, with starts dropping from approximately 20,000 in the first half of 2023 to just 9,000 in the same period this year. This slowdown, combined with rising demand, suggests that Dallas-Fort Worth may experience a quicker recovery in occupancy and rent growth compared to its Sun Belt counterparts.
The surge of new rental units has triggered a noticeable decline in occupancy rates across the Dallas-Fort Worth metroplex, with an overall 70-point drop year-over-year, bringing occupancy down to 91.9%. However, this impact is not uniform across all areas. Occupancy rates across the metroplex’s submarkets show substantial variation, ranging from a low of 86.1% in East Fort Worth to a high of 94.8% in Hood County. Remarkably, four submarkets have recorded annual improvements in their occupancy rates, with Downtown Fort Worth leading the way with a substantial 260-point increase, followed by the Southeast Dallas submarket which recorded a 130-basis point increase on the year.
While demand surged this quarter, the Dallas-Fort Worth region is still adjusting to a period of market correction after a historic influx of new multifamily units. Average rents have declined by 1.6% year-over-year, bringing the effective rental rate down to $1,515 as of June 2024. Particularly hard-hit, some submarkets like North Dallas saw steeper drops of up to 5.2%. However, the outlook for 2025 is optimistic. The peak of new unit deliveries seems to have occurred this quarter, with 21,800 units delivered in the first half of 2024. In contrast, only 11,000 units are scheduled for completion in the latter half of the year. This deceleration in new construction is expected to continue, potentially easing the pressure on owners and operators to reduce rents to maintain occupancy. According to our forecasts, annual rent growth should return to positive territory by year’s end, accelerating to 2.2% by mid-year 2025.
Average Monthly Mortgage Payment
Average Monthly Rent
The Dallas-Fort Worth Metroplex topped all U.S. metros in transaction volume during the first half of 2024, with sales totaling $1.6 billion across 47 deals. Notably, institutional investors have significantly increased their activity in the Metroplex this year. After two years where their share of the buyer pool shrank to roughly 10%—historically, they averaged 23%—they made a substantial comeback, accounting for 24% of purchases through the first six months of 2024.
Institutional capital has been cautious over the past two years, often remaining on the sidelines. While it’s premature to declare a full resurgence, this uptick in investment activity by institutional buyers in the metroplex is encouraging. The underlying fundamentals that position multifamily as a preferred asset class in commercial real estate remain strong. Despite a temporary surge in supply, the multifamily market is undergoing a cyclical rather than a secular shift, aligning with the broader economic cycle’s ongoing dynamics.
*Most Active Buyers and Sellers are based on the sale volume of apartment units.
* Trailing 4Q average PPU
* Preliminary Data from RCA – Individual transaction $2.5M +
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Under 35 Years
|
35 to 44 Years
|
45 to 54 Years
|
55 to 64 Years
|
65 to 74 Years
|
75 to 84 Years
|
85 Years & over
|
|---|---|---|---|---|---|---|
|
1.0%
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-0.3%
|
-0.5%
|
0.0%
|
0.6%
|
-0.1%
|
-0.1%
|
The under-35 age group is the fastest-growing renter demographic in the Dallas-Fort Worth metro area, with a 1.0% increase from 2019 to 2022. This trend indicates a rising demand for rental housing that caters to a youthful population, prioritizing proximity to live-work-play nodes.
A temporary market correction is unlikely to dampen the prospects of the Dallas-Fort Worth multifamily market. Among the myriad corporate expansions and relocations bolstering the Metroplex’s economy, one of the most noteworthy and potentially market-shifting announcements is the initiative by BlackRock and Citadel Securities to establish a rival stock market in Dallas. This move could significantly enhance the metroplex’s long-term investment prospects, underscoring its growing status as a world center of finance.
Additionally, Fort Worth is seeing transformative developments, including a $630 million mixed-use plan to modernize the Historic Stockyards, recently approved by the city council. Furthermore, Henry Schein, the world’s largest healthcare materials provider, has opened its largest U.S. distribution hub in Fort Worth. With its competitive costs, strategic location, and ongoing population growth, DFW remains a prime region for sustained residential and commercial demand.
As we enter the latter half of 2024, increased demand coupled with a slowdown in new deliveries is expected to stabilize local occupancy rates and turn rent growth positive, with performance projected to rebound to pre-pandemic levels by mid-2025. This optimistic forecast highlights DFW’s enduring resilience.
