This article originally ran in the June, 2017 issue of Rooflines, a monthly publication published by the Apartment Association of Greater Dallas and is the official publication of AAGD.
In the last few years we’ve been at ground zero of the multifamily new construction explosion. Of the multifamily units currently under construction in the United States, one in seven is in Texas. Of the Texas units under construction, nearly one in three is in the North Texas metroplex.
From the end of 2014 through April of this year, the Dallas-Fort Worth metro area has added more than 66,000 units to the market. Fortunately, for the most part absorption has kept pace and average occupancy has consistently remained above 92% overall; and above 94% for stabilized (non-lease-up) properties.
However, we are starting to see some vulnerability at the top end of the market. Furthermore, it will take some time to absorb the new units coming online in the next several quarters. Currently the are over 40,000 units in Lease-Up or Construction/Lease-Up. An additional 47,000 units are in the projects that have broken ground yet have not started leasing. So the pipeline of units online or coming online over the next 18-24 months is almost 8,000 units.
If we manage to get the absorption rates of 2014 then those units could be absorbed over the next three years. At current rate of absorption, however, it will take 4-5 years to absorb all those units.
The good news is that new supply in the pipeline peaked in 2016. While properties under construction and in lease-up are at a decade level highs in DFW, these were projects started more than 20 months ago for the most part. The pace of new additions is slowing and the number of units planned for future construction is at a four year low.
About 30,000 units are currently being planned for future projects – which is nearly half of the figure at this time last year. Perhaps developers are finally adopting a wait-and-see attitude to see how quickly current projects stabilize. That, or maybe just construction fatigue! Either way it should give the market a welcome respite to “catch up” to all the new product on the market.