The old saying “everything’s big in Texas” is certainly true when it comes to apartment development. Dallas has seen explosive growth in its multifamily market over the past few years and development is continuing its near record-high pace in 2018.
Demographics and a strong economy are painting a compelling picture throughout the Dallas/Fort Worth Metroplex with annual population growth that has been topping 80,000+ for the past few years, and more than 200 new people continue to move into the metro each day. The growing population along with high employment and job growth have been a boon for apartment developers. Forbes has ranked the Dallas metro as the No. 1 city for job growth for the past two years, and the metro added 91,700 jobs in 2017.
Data varies on the exact volume of new apartment units that have been delivered and are underway, but all sources agree that Dallas has been one of the most active apartment construction markets in the U.S. for the past three years. Approximately 65,000 apartment units have been completed since the beginning of 2012 with an additional 24,000 units underway as of first quarter, according to a Winter 2018 Outlook Report by Fannie Mae. The three most active submarkets based on construction underway at the start of the year include:
- Plano/Allen/McKinney – 17 projects totaling 5,319 units
- Central Dallas: 8 projects totaling 4,731 units
- North Irving: 6 projects totaling 2,952 units
Vacancies have ticked slightly higher as the market works to absorb the new space added to the market. However, another factor that bodes well for demand is that the robust job market is attracting Millennials that are still in that prime renter target market. Given that backdrop, investors remain bullish on acquisitions. According to Reonomy data, nearly $4.8 billion in apartment properties traded in Dallas County last year across more than 1200 different transactions. The top five sales included:
- 17671 Addison Road, Dallas $188 million
- 1920 Tarrant Road, Grand Prairie $185 million
- 14665 Preston Road, Dallas $101 million
- 4719 Cole Ave., Dallas $93.8 million
- 4878 Alcott St., Dallas $67.9 million
Population growth also is fueling retail expansion. According to Marcus & Millichap, developers completed more than 5.3 million square feet of retail space last year with construction expected to slow to 3.7 million square feet this year. Despite ongoing in-fill activity in the urban core, developers are focused on big opportunities on the Dallas ‘burbs.
For example, Centurion American broke ground last year on its $1 billion mixed-use development in the North Dallas suburb of Farmers Branch. When it is fully built out, the 275-acre project will include more than 800 single-family homes, 2,250 apartments, retail stores, restaurants, a boutique hotel, 48-acre office park, an amphitheater and a boardwalk entertainment district. The local developer also acquired 94 acres in South Dallas earlier this year where it is planning to build a mixed-use development that will include townhomes, apartments, retail and entertainment.
In Reonomy, we also looked at sales prices in 2017 for top retail sales in Dallas. The top 5 sales include:
- 3800 Irving Blvd, Dallas $91.84 million
- 3233 Fort Worth Ave, Dallas $75.63 million
- 10332 Ferguson Rd, Dallas $31.15 million
- 2203 Gus Thomasson Rd, Dallas $31.15 million
- 2525 W Wheatland Rd, Dallas $25 million
The question is how long Dallas can keep its economic engine running? Some of the factors that support continued strength include its diverse economy. Unlike Houston, which rides the highs and lows in the oil & gas industry, Dallas is seeing growth across sectors that include energy, finance and business services with several Fortune 500 firms that include the likes of American Airlines, Kimberly-Clark and Tenet Healthcare among others.
Dallas also is one of 20 metros still in the running for the Amazon HQ2 location, which if selected, could bring an additional 50,000 jobs to the region over the next several years. One of the new mixed-use developments that hopes to nab Amazon as a key anchor tenant is the “Dallas Smart District” taking shape downtown. With or without Amazon, Dallas-based Hoque Global is moving forward with plans for the 20-acre mixed-use development in the heart of the city that would run for several contiguous blocks between the Dallas Convention Center and Canton Street.
The master plan for the Dallas Smart District includes Class A office, residential, retail and hotel along with green space. Hoque Global is teaming up with KDC, who has built major corporate campuses in the metro for State Farm and Toyota. Developers expect to break ground later this fall on the 1 million-square-foot phase one that will reportedly include office space, a hotel, grocery store, food hall and open green space. Such lofty plans continue to prove that developers are continuing to dream – and build big – in Dallas.
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