Strong leasing activity in Dallas-Fort Worth is being overshadowed by an oversupply of apartments.
Last quarter, 7,247 units were leased in North Texas, ranking first in the nation. However, that achievement was diluted by the 8,170 new apartments that were completed during that stretch, the Dallas Morning News reported, citing data from RealPage.
While multifamily landlords can take comfort in robust apartment demand, they’ll also be less inclined to raise rents due to the oversupply causing an imbalance in the market. DFW has experienced a population boom in recent years, and in response, builders got busy — perhaps a little too busy.
“DFW ranks No. 1 in the country for total construction and No. 1 for demand in the third quarter,” RealPage economist Jay Parsons told the outlet. “For the next 15 months or so, we’ll likely continue to see more supply than demand — even in a high-demand market like DFW — and that means renters will likely continue to see more options and more rent discounts through 2024.”
Over 72,000 apartments are under construction in North Texas, and more than 25,000 rental units are expected to be delivered by the end of this year. Despite the surge in construction, the average rent decreased 1 percent year-over-year last quarter to $1,592 per month. The region’s apartment occupancy rate also fell to 93 percent, marking a 1.5 percent year-over-year decline.
Construction starts are down 45 percent compared to last year due to increased construction costs, softening rents and high interest rates. But the high volume of apartments in the pipeline indicates elevated completions through mid-2025, according to Greg Willett, national director of research for Institutional Property Advisors.
“Vacancy rates are likely to rise a little above the past average but not to reach unhealthy levels,” Willett told the outlet. “Rent growth probably will be sluggish, but it still seems likely that pricing should inch up a little.”
The construction boom is primarily happening in the northern suburbs, with almost 11,000 rental units underway in Allen and McKinney and another 8,200 units in Frisco. Apartment builders are confident that the oversupply will be temporary, given Texas’ continuing growth.
—Quinn Donoghue
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