Dallas, Fort Worth Multifamily Markets Continue to Capitalize on New Development
Known for both its big-city excitement and suburban living options, the Dallas-Fort Worth (DFW) metroplex is now the fourth-largest metropolitan area in the country with 7.5 million residents. At this rate of growth, DFW is poised to surpass Chicago as the third-most populous metroplex in the country within the next two decades.
Although DFW is commonly recognized as a shared marketplace, it’s important to understand that Dallas and Fort Worth are two separate cities with separate real estate markets. Fort Worth’s downtown area and Western charm have attracted a total population of about 880,000 compared to Dallas’ international and metropolitan mecca of roughly 1.34 million, according to U.S. Census Bureau.
As Dallas and Fort Worth continue to provide a record number of jobs to accommodate this growth, multifamily development is keeping pace. In the past year, 81 multifamily developments with 23,916 units opened in DFW, of which the market absorbed 20,456 units in that same period, reaching an occupancy rate of 91.8 percent.
The strong job market and affordable cost of living throughout the metroplex continue to have a positive impact on multifamily development and construction, bringing a plethora of new players to the space. However, we continue to see rising land and construction costs throughout the supply chain as a direct result of this elevated
Urban Core of Dallas Booms
In the past 10 years, we’ve seen the urban core of Dallas boom. Dallas has capitalized on Texas’ pro-business community — the favorable tax climate, low cost of doing business and variety of economic opportunities have all contributed to its growth.
Historically, Dallas has been a hub for several major Fortune 500 companies, such as Southwest Airlines, Texas Instruments Inc. and AT&T.
Additionally, pharma giant McKesson Corp. relocated from San Francisco to Irving’s Las Colinas district this year, and Uber recently tapped Dallas as its next largest hub outside of the Bay Area, a move that is anticipated to create about 3,000 new jobs.
To accommodate this population spike, Dallas has expanded its mixed-use districts as an infill strategy. Uptown Dallas was the city’s first real attempt at concentrating its density while also incorporating retail, office and real estate in a conveniently walkable area.
Its popularity has now revitalized the city, with similar neighborhoods such as Deep Ellum and Oak Cliff following the same model. As a result, these neighborhoods continue to be key submarkets for new multifamily projects.
Nationally, Dallas is the industry leader in the number of new single-family homes under construction. However, affordability is a major concern as home prices continue to increase.
The National Association of Home Builders Index found that 52.4 percent of homes were affordable, 8.6 percent lower than the national average. Another study shows the number of homeowners in Dallas County has sunk to under 50 percent of the total population, the lowest point that this figure has reached in 50 years.
The increasingly high cost of owning a single-family home, paired with corporate relocations and expansions that have brought thousands of new jobs to Dallas, are driving the demand for multifamily development.
Fort Worth Gains Momentum
What began as rural farmland in the 19th century is now the third-fastest-growing city in the nation. This year’s U.S. Census Bureau data estimates that Fort Worth gained 20,000 people in the past year.
Fort Worth’s current efforts to capitalize on its colleges and universities to turn the city into a research hub for healthcare, life sciences, engineering and energy will be the city’s golden ticket in strengthening its economic base and attracting more corporate relocations with higher-paying job opportunities.
The city has also been actively encouraging the development of mixed-use neighborhoods with urban infill. For example, the West 7th neighborhood tripled in population between 2000 and 2010. The Near South Side and Magnolia Avenue submarkets have been largely built out, and many existing buildings have been converted into apartments to meet the growing demand.
While Fort Worth hasn’t grown at the same rate as Dallas, it is beginning to attract more large-scale, top-tier employers. Joining companies like American Airlines and Lockheed Martin will be financial services powerhouse Charles Schwab, which is relocating from San Francisco. Another key employer to join the Fort Worth ranks is Chip 1 Exchange, a distributor of electronic components that recently announced a relocation of its U.S. headquarters from Southern California.
The demand for new housing developments are increasing, and it will only be a matter of time before Fort Worth becomes an urban hub.
The Bottom Line
Anchored by the growth of our two major cities, the ‘booming ‘burbs’ have also made a huge impact on DFW’s emergence as top market for multifamily development, investment and absorption.
Because of the area’s low taxes, affordable cost of living and central location, we have seen the region emerge as one of the true Tier-1 metropolitan areas in the nation.
In 2019 alone, over 20,000 new apartments hit the North Texas market, solidifying its title as the top multifamily construction market in the country. Impressively, this supply is being met with ample demand, demonstrating to investors that the multifamily market’s metrics are very healthy.
Overall market trends for Dallas-Fort Worth show a combination of positive occupancy and rent growth. As long as the job growth continues, the future for multifamily in DFW and its suburbs looks very promising.
— By John Griggs, founder and co-CEO, Presidium. This article first appeared in the December issue of Texas Real Estate Business magazine.