Rapid Growth Puts Pressure on Filling Multifamily Demand
Written by Lisa Brown
As of now, 55,000 units are set to deliver between the last half of this year and 2021, and while new units are being added across the metroplex, the lion’s share are in Dallas and to the north-central suburbs.
DALLAS—Multifamily development in DFW has been especially robust during the last few years to accommodate the ongoing growth of 100,000-plus jobs each year. The number of apartments under development has drifted higher as the affordable homebuilding market has struggled to deliver product, according to a JLL research report on multifamily development in North Texas.
“Quite simply, we’ve been growing so fast it is difficult to meet new housing demand from that sector, given rising land and construction costs, especially at relatively close-in locations where the jobs are being created,” says Jorg Mast, senior vice president, JLL Capital Markets. “With so many apartments now under development, it is hard to keep track of the players without a scorecard.”
Due to that frenzy, JLL tallied all the projects that recently delivered and those under construction from a variety of sources to get a true scale of the pipeline. As of now, 55,000 units are set to deliver between the last half of this year and 2021. While new units are being added across the metroplex, the lion’s share are in Dallas and the in-town to north-central suburbs.
Although there looks to be a slowdown coming in 2020, this is more because of the timing of the development cycle than a shift in activity, says the report. As long as DFW growth remains high, a full pipeline of new apartment units should follow. The challenge here, as JLL points out, is matching the pipeline with demand–at the right rents.
And, developers are facing unique challenges. Multifamily development sites are harder to find, obstacles are coming from local governments, construction costs are continuing to rise, banks are pulling back on construction loans and equity investors are much more cautious about putting money in new developments, says JLL.
Still, national and international corporations are under ongoing pressure to relocate headquarters in order to be more competitive, grow and generate more profits. Dallas-Fort Worth remains one of the preferred destinations due to a variety of factors: low taxes, availability of skilled labor, geographical location, affordable housing and infrastructure among other factors.
“There’s no question that new development is our headwind as far as North Texas multifamily investment, but relief from new supply is in sight. Our state’s economic drivers, strong fundamentals and continued growth position in the Dallas-Fort Worth metroplex are fueling the most active and attractive investor markets in the country,” Mast tells GlobeSt.com. “This continues to feed our region’s multifamily product, elevating it an almost fever pitch, thanks to strategic investment and development maximizing investor returns.”