Dallas’ apartment boom continues, but the cranes are slowing. Here’s why

The grinding scrape of cranes and the shouts of hard-hatted workers have been heard more often in Dallas-Fort Worth than anywhere in the country over the last 10 years.

They’re building apartments.

And even as folks flock to the area at a breakneck pace, there are more than enough units to welcome them.

There’s an oversupply of apartments in D-FW right now. Some units sit unoccupied, and rents have fallen slightly over the last year.

Supply is expected to hit its peak sometime within the next year. But experts said the oversupply is a short-term issue.

The machines have slowed. Fewer apartments will be built as costs increase, and the units will be filled as the region grows. Investors, developers, and others who stand to make money are betting on the long run.

“Everyone’s playing that waiting game in the hopes that time will solve this problem,” said Sriram Villupuram, a finance and real estate professor at the University of Texas at Arlington.

The buildup in the Dallas metro area over the last decade has been immense.

Since 2014, more than 181,000 apartments have been built — a whopping 35.5% increase in a huge market, according to data from Richardson-based property management software firm RealPage.

That building hasn’t been evenly spread across the region.

Frisco, the Rockwall/Rowlett/Wylie area, the Allen/McKinney area and the southeastern Kaufman County markets have seen apartment inventories double over the last ten years.

But North Irving, Mesquite, Far East Dallas and Far North Dallas have added few new units in the same period, according to the data.

Prices have dropped over the last year, but rents remain well above what they were before the COVID-19 pandemic.

As of April 30, the average rent for an apartment in D-FW is $1,468, a 4% year-over-year drop, according to a report from MRI ApartmentData, a firm that tracks apartment trends in the 13 Sun Belt markets.

The same firm reported average rents of $1,116 in September 2018.

The April 2024 occupancy rate in D-FW is 89%, and more than 38,000 units recently opened.

Another roughly 35,000 apartments are under construction, and developers are proposing more than 80,000 additional units, according to the MRI data.

The oversupply is a trend MRI is seeing not just in Dallas but in other major Sun Belt cities — like Atlanta, Orlando, Houston, Austin, Nashville and San Antonio.

“It’s just bad timing for the moment,” said Bruce McClenny, an industry principal at MRI ApartmentData. “The current oversupply of apartments is just another chapter in the supply-demand extremes initiated during the COVID pandemic.”

Roughly 26,000 units entered the D-FW market with very little leasing going on from March to June 2020. But in 2021, apartment demand boomed as the national economy reopened and work-from-home flourished. Rents increased by nearly 19% over the year, according to MRI’s data.

In response to that boom, developers built more apartments nationwide than they had in half a century. It takes about two years for a project to run from conception to completion, and those apartments began finishing in 2023 and 2024, McClenny said.

Job growth in D-FW continues to impress, but it isn’t at the same level as 2021. Slowing demand coupled with surging supply led to the drops in annual rent, he said.

McClenny said the 4% rent drop was “pretty dramatic.”

If occupancy levels creep up, complexes might offer additional concessions like two months of free rent, he said.

”That’s coming into play in some of these markets … especially in the higher-end markets, the urban markets,” he said. “That could happen.”

However, Villupuram said he is surprised rents aren’t lower with these occupancy rates. The drops may not be happening because construction costs were high, and lenders aren’t knocking down doors to collect on debt.

“Ten percent in a podunk market is okay, but in the 10 years I’ve lived in Dallas-Fort Worth, 10% is unheard of,” he said.

The oversupply problem will continue as more projects are finished. Rents could drop a little more, but construction will slow.

Rising interest rates for construction loans and construction delays are causing the slowdown. Oversupply is playing a factor as well.

Annual supply is expected to peak in D-FW at the end of the year at roughly 38,000 units. Construction delays may push the peak back a quarter or two. The high point is expected to come anywhere between end of 2024 and summer 2025, said Carl Whitaker, RealPage’s chief economist.

New supply will drop off as developers build fewer units, and the building has already slowed….