Some Dallas/Fort Worth Submarkets Among Supply Leaders Since 2010

Dallas/Fort Worth has been the nation’s leader for construction activity during the current economic cycle, and a handful of local submarkets received big concentrations of those record-breaking deliveries. The Metroplex, and its key submarkets, will continue to grow at striking levels in the near term, according to the latest RealPage Asset Optimization webcast.

Since the economic cycle began in early 2010, the Dallas/Fort Worth area has received new market-rate apartments totaling roughly 139,600 units. That’s more than any other market in the country, and about 30% more than what was delivered in Houston, the nation’s second-busiest construction center.

Deliveries in Dallas/Fort Worth really picked up in 2017, when annual apartment supply reached the 24,000-unit mark, the strongest volumes this market has seen since the early to mid-1980s. As of early 2019, the market is still seeing those four-decade high levels. And looking forward, those numbers are expected to get even more extreme, as annual completions are scheduled to climb to 30,000 units by 1st quarter 2020.

About 81% of the additions seen in the current cycle were built on the Dallas side of the Metroplex, and some of the submarkets there were national leaders for supply. In fact, Dallas was the only market in the nation to land three submarkets in the top 15 for apartment completions during the current cycle. Additionally, two of those submarkets were in the suburbs, quite the feat on a list featuring mostly downturn, urban core areas.

Intown Dallas

Dallas’ upscale urban core, which encompasses both downtown Dallas and the Uptown area located across Woodall Rodgers Freeway, has been a hotbed of activity recently. Ranking #6 in the nation for apartment delivery volumes during the current economic cycle, Intown Dallas recorded the completion of over 14,000 units since early 2010. Only urban areas in Newark, Seattle, Washington, DC and Los Angeles saw more deliveries.

Intown Dallas accounted for 10.1% of the units delivered in North Texas in the current cycle. While deliveries here have slowed down quite a bit in recent quarters, the pipeline is still very full, with another 3,600 units currently under construction – 9.7% of the volumes scheduled in Dallas/Fort Worth in the near term.

All this construction activity has weighed on occupancy and rent positioning. Intown Dallas occupancy built notably in the first two years of the cycle, peaking near 96% by 3rd quarter 2012. When new supply volumes started picking up in 2013, occupancy started to show some signs of weakness. By early 2019, the rate had fallen to 93.3%, well below the decade average. Annual rent growth peaked a bit earlier, at 11.5% in 2011, then pretty much disappeared by mid-2016, and has yet to recover. Even with stagnant rent positing, the Dallas urban core still commands the priciest rates in the market at $1,722, though projects built in the recent construction boom are more expensive at $1,833.

Frisco

An affluent northern suburb about 30 miles from downtown Dallas, Frisco ranked ninth in the nation, with deliveries totaling roughly 12,300 units in the current cycle.

Frisco has developed into a suburban employment magnet in the past 10 or so years, and that economic expansion has helped spur activity here. The apartments built in the current cycle increased Frisco’s existing base by about two-thirds. Unlike what is happening in Intown Dallas, annual supply volumes in Frisco have yet to slow down, hovering between about 2,000 units and 3,000 units for nine consecutive quarters now. Moving ahead, another 3,400 more units are currently under way, with that stock accounting for 9.1% of scheduled supply in the market overall.

The occupancy slowdown in Frisco didn’t start getting serious until 2015, when rates dove from 96% to under 93% in the span of six months. Occupancy in 1st quarter 2019 was at 92.5%, a pale performance compared to historical norms. Rent growth momentum disappeared here starting in the early months of 2017 and has not yet returned. Still, monthly rents in Frisco remain some of the best in North Texas at just under $1,300, despite the sluggish price growth recently.

Allen/McKinney

Also located in the northern Dallas suburbs, Allen/McKinney, just south of Frisco, has seen about 10,300 apartments built in the current economic cycle, ranking #15 in the nation, after Chicago’s urban The Loop area. Like Frisco, Allen/McKinney has been built up with development of all types over the past decade or so. The area offers a more affordable location for those willing to commute a little further to employment options, with convenient access to US-75 and the Sam Rayburn Tollway.

Annual apartment supply was already at elevated volumes when the current cycle started, and deliveries peaked near 2,000 units in late 2010. Completions slowed for a few years after that until picking up again in 2017. In the year-ending 1st quarter 2019, a total of 1,862 units were delivered, and another 2,000 units are under construction.

Like Dallas’ other two big supply submarkets, Allen/McKinney saw occupancy fade and rent growth disappear in recent years. Occupancy was at 93.2% in early 2019, well under the decade average and down from the recent peak near 96% seen in 3rd quarter 2016. Year-over-year rent change is barely there at just 1%, a dull performance after prices were climbing almost 8% annually as recently as 4th quarter 2015. Monthly rents in Allen/McKinney are about in line with the North Texas norm at $1,169, a little more than $120 below the rates in neighboring Frisco.