Q3 2022 Multifamily Real Estate Report: Dallas, TX
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Even though supply and demand slowed in Dallas’s multifamily market in Q3, its overall market growth outpaced nearly every other major market in the country.
Rents have continued to trend upwards, even with a slight elevation of vacancies to 5% this quarter.
Sale prices have held steady, and transaction activity is on pace to match 2021’s strong performance.
Even with economic turbulence and unemployment potentially slowing growth, Dallas added nearly 150,000 jobs in just the first half of 2022, seeing the highest increase in the country.
General Area Overview & Demographics
Dallas, TX, is the third-largest city in the state and one of the fastest-growing metropolitan areas in the country.
Dallas has become home to over 1.3 million people and is a hub for business, culture, education, and entertainment. Dallas has a large and diverse population, with significant Mexican American, African American, and other Latino populations. Dallas also has a large Asian American population that makes up about 10% of the total population.
The Dallas economy is driven by professional and business services, trade and transportation, education and health services, government jobs, financial activities, and leisure/hospitality industries.
Dallas has seen strong job growth over the past year in these sectors as well as others, such as technology services. Dallas boasts an educated workforce, with more than 35% of adults having earned an associate’s degree or higher.
Dallas, TX, is home to warm and sunny weather year-round, with hot summers and temperatures rising above 90°F (32°C). Dallas experiences a wide range of different climates throughout the year. In the winter, Dallas gets cold fronts from northern Canada that bring temperatures down to freezing.
Dallas has something for everyone, from its downtown cityscape to its sprawling suburban neighborhoods. Dallas is bursting with entertainment, culture, and activities that will keep you busy all day long.
Dallas’s downtown area is home to various cultural attractions such as the Dallas Museum of Art, Dallas Arboretum and Botanical Garden, Dallas Holocaust Museum, Lone Star Park, and more.
Summary of Dallas Multifamily Real Estate Performance in Q3 2022
After seeing a slight increase over Q2’s vacancies, the vacancy rate for multifamily real estate in Dallas has gotten closer to its long-term average.
Rents are being driven higher by rapid employment growth, particularly in high-wage sectors of the economy that have created a more affluent renter pool.
With high-earning job markets in Dallas’s economy seeing rapidly increased employment, rents are being pushed higher.
Even with deliveries lagging a bit during this quarter, the construction pipeline is on the rise. It’s projected that the speed at which projects are completed will rise starting in Q4.
What are multifamily rents like in Dallas?
Rents advanced 3.4% in Q3 2022, reaching $1,540 per month.
The overall average asking rent is about $1,550 per month this quarter, a 3.4% increase from Q2.
Renters can expect to pay on average $1.74 per square foot per month, with Class A properties seeing rates as high as $2.10 per square foot.
The market has seen its largest quarter-over-quarter increase yet, with rents for three-bedroom apartments increasing by nearly 68%.
Purchase & Leasing Activity
Transaction activity decreased by 12% compared to Q2, and sales velocity also decreased slightly for Dallas’s multifamily properties.
That said, deals involving 400+ unit properties held steady quarter-over-quarter.
Properties with high occupancy saw deals at about $250,000 per unit, while older properties transacted upwards of $150,000 per unit.
With year-to-date transaction volume by the dollar being nearly 50% higher than the next major market, multifamily real estate in Dallas is still on track to remain the leader in investment activity.
Notable Multifamily Real Estate Deals in Dallas in Q3 2022
There were several deals for Dallas multifamily properties this quarter.
- Bader Development acquired Moda for $63 million;
- The Jacobson Co. acquired Atlantica at Burleson for $57 million;
- GVA Real Estate Investments acquired Mission Eagle Pointe for $54 million; and
- Red Hill Realty Investors acquired Pecan Creek for $52 million.
These are a few among other transactions that took place for multifamily real estate in Dallas.
New Multifamily Real Estate Development Activity in Dallas in Q3 2022
During Q3 2022, nearly 6,000 units were delivered, bringing the total completed units through the first nine months of the year to 15,645
Year-to-date completions will be a little over 15,600 units, with 6,000 of those being delivered this quarter. Overall, the total is a 27% decrease from the same period last year.
However, units under construction are up over 40%, with more than 63,000 units in the pipeline to be completed.
It’s expected that 2022 will end 15% below where project completions were last year.
Market Forecast for Dallas’s Multifamily Real Estate Market
Dallas’s multifamily market experienced a slight cooldown in Q3 2022, but it’s expected to continue at a positive pace into 2023.
Even with completions being lower than last year, the number of units under construction is an indicator that 2023 will see that reverse.
Supply and demand for rental units will remain high as Dallas’s labor market continues to be a desirable place for high-income earners looking for new opportunities.
Transaction volume should continue at a healthy pace moving into 2023.
Takeaways for Multifamily Real Estate Investors
Investors seem to be quite bullish about the opportunity multifamily real estate in Dallas presents.
With an ever-expanding labor market, rising population, and surrounding cities like Fort Worth and Plano growing more and more each year, Dallas has all the indicators that it will continue to be a promising multifamily market for investors.
Each investor will need to conduct their own research to determine what decisions are best moving into 2023.
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