DFW Apartment Leasing Can’t Keep Up With Construction
Year-end rents were down 1.6% from 2022.
North Texas led the nation in apartment leasing in the final months of 2023.
But with more than three times as many new apartments opening as were filled by tenants, Dallas-Fort Worth rental occupancies fell.
Net apartment leasing in DFW totaled 3,018 units in the fourth quarter. But at the same time, developers opened 9,695 new units, according to data from analysts at Richardson-based technology firm RealPage.
The imbalance between supply and demand caused apartment occupancy levels in North Texas to fall to just under 93% at the end of 2023 — the lowest level since early 2011.
“Fourth quarter is typically a seasonally slow leasing period, but we saw strong demand in the last three months of 2023 — the third-strongest fourth quarter we’ve ever seen in DFW behind 2021 and 2005,” RealPage chief economist Jay Parsons said. “There was a lot of demand for apartments in 2023; and in fact, DFW led the nation in apartment leasing.
“But there’s even more supply, as DFW led the nation in that category, too.”
In 2023, 29,035 new apartments opened in DFW, almost double the net leasing in the area.
Another 47,968 apartments are scheduled to be completed in 2024, according to RealPage’s estimates. After that, apartment supply is expected to head downward with fewer new rental communities opening.
“Starts in 2023 totaled 25,578 units, down 44% from 2022 in DFW,” Parsons said.
The current oversupply of new apartments in North Texas is good news for renters, who can expect more freebies and slightly lower housing costs.
DFW apartment rents were 1.6% lower year-over-year in December at an average of $1,517.
“This was DFW’s largest year-over-year rent cut since the second quarter of 2010, coming out of the Great Financial Crisis,” Parsons said. “It looks like 2024 could be the ‘year of the renter’ in North Texas and elsewhere across the country. Renters are still benefiting from job growth and wage growth — even if moderating — so there’s still strong demand. “
With DFW continuing to be one of the country’s fastest growing employment and population markets, demand for rental units is expected to remain high this year.
“Typically in a strong economy we’d see narrowing vacancy and growing rents,” Parsons said. “But because apartment supply is at 40-year highs, renters instead are benefiting from a surge in new options, which in turn is leading to moderately declining rents and, in some cases, generous concessions.
“We expect those conditions to persist through 2024 before supply drops off in 2025 and 2026.”
Most of the new apartments are on the way in the northern suburbs, with 10,376 units under construction in Allen and McKinney and 8,330 apartments being built in Frisco at the end of the year.
Almost 3,400 apartments were being built in downtown and Uptown Dallas at the end of 2023.
Parsons said at the end of the year there were “still 69,370 units underway, a decline from the peak of 76,800 at the start of 2023 — meaning we saw more completions than starts last year.”
Source: Dallas Morning News