Dallas Multifamily’s Path to Stabilization in 2024
After a difficult 2023 with record deliveries, Dallas may not be on every investor's list, but there are many signs that this year and next promise a return to normal.
In early 2024, the Dallas-Fort Worth multifamily market reflects a nuanced landscape. Reports from Yardi Matrix, CBRE, and Colliers highlight a year marked by a slight rent decline and a substantial fall in investment volume, despite strong job growth and an unprecedented rate of new construction completions.
With rents falling by 1.9% year over year through January and a modest recovery anticipated, the market's dynamics contrast with the national trend.
In this brief, I’ll examine the multifamily market's recent performance and outline prospects for 2024, considering construction, occupancy, and economic indicators.
Dallas’s Market Performance in 2023
The Dallas-Fort Worth multifamily market experienced several key trends in 2023 that have set the stage for the current year.
Rent Growth
The metro saw a year-over-year rent decrease of 1.9% through January 2024, a deviation from the national average rent growth of 0.5% during the same period. This downturn points to localized market pressures despite an overall slightly (okay — very slightly) positive national trend.
Completions
On the construction front, more than 8,300 units were completed in the fourth quarter of 2023 alone, marking the highest level of quarterly delivery in over a decade. This surge in completions reflects a robust development pipeline and a strong confidence in the market's long-term demand when these projects started — but now, they are cause for concern in how they will impact occupancy.
Job Growth
The job market in Dallas-Fort Worth showed resilience with a 4.1% year-over-year growth as of November 2023. This economic strength is a critical driver for multifamily demand, yet it contrasts with the slowing pace compared to the previous year.
Investment Volume
Investment in the Dallas-Fort Worth multifamily sector saw a significant contraction, with a 57% drop in volume year over year. This reduction signals a cautious approach from investors, possibly influenced by broader economic factors and market-specific challenges.
These elements collectively paint a complex picture of the Dallas-Fort Worth multifamily market in 2023, characterized by strong construction activity and employment growth but tempered by softening rent growth and investment enthusiasm.
2024 Outlook for the Dallas-Fort Worth Multifamily Market
As we look towards 2024, the Dallas-Fort Worth multifamily market is poised at a crossroads, influenced by past trends and current dynamics. Here’s what the outlook seems to suggest based on the available data and trends:
Rent Growth
Following a year of modest decline, rent growth in Dallas is forecasted to rebound slightly to 0.7% this year. This anticipated recovery, though modest, is a positive sign, reflecting adjustments to the supply-demand equilibrium and potentially stabilizing economic conditions.
Occupancy Rates
With an occupancy rate of 92.9% as of the end of 2023, there's an expectation for a gradual increase. This uptick is likely to be supported by the strong job market in the Dallas area and a slowing pace of new completions entering the market, allowing demand to catch up with the recent surge in supply.
Construction Trends
The construction sector, while still active with about 69,370 units under construction at the end of 2023, is seeing a slowdown in starts. This deceleration will likely help mitigate risks of oversupply in the short term and support a healthier balance between supply and demand.
Investment Volume
After a notable drop in investment volume in 2023, the market may see a cautious but strategic re-engagement from investors. Factors influencing this include the region’s economic resilience, job growth, and the recalibration of rent growth expectations.
Economic and Employment Factors
The Dallas-Fort Worth economy, with its solid job growth figures, remains a critical driver for the multifamily market. As the job market continues to expand, albeit at a potentially slower pace than in previous years, it will remain a foundational pillar supporting demand for multifamily housing.
How to Succeed in Dallas Multifamily in 2024
All told, Dallas-Fort Worth multifamily in 2024 is expected to navigate through many of the same challenges of the previous year with cautious optimism. The interplay of slowing construction starts, a slight uptick in rent growth, and a robust job market sets a stage for potential stabilization and gradual growth in the sector.
While the outlook is positive, it remains tempered by the lessons of the past year, indicating a market that is adapting to new realities while maintaining its core strengths.
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