Dallas might not appear to be the kind of town younger adults would flock to. While there are jobs aplenty, they aren’t always the kind of jobs that appeal to people trying to optimize their career choices. While the cost of living is fairly low, the same could be said, and more strenuously, for Houston or Austin or pretty much anywhere else in Texas.
But appearances deceive. The building boom goes on, the jobs flood in, and the younger workers flood in after them. The art and nightlife scenes surge from one end of the Dallas-Fort Worth metropolitan area to the other, and the construction is literally non-stop.
This town has known booms and busts and, at this moment, the boom is definitely on.
Good place to start
Last year, RealPage reports, Dallas eclipsed its cross-state rival Houston for the distinction of hosting the most new-home construction in America over the course of the current cycle. (You can’t say “nearby rival”. Texas is unbelievably big. In terms of landmass, it’s France with a side of Switzerland.)
Dallas, the financial capital of the Southwest, also hosts major headquarters operations for State Farm, Liberty Mutual, Toyota, JPMorgan Chase, and Fannie Mae.
“The metro remained a national leader in job creation last year, with the addition of 102,500 positions for a 2.6% expansion, 90 basis points above the U.S. figure,” according to Yardi Matrix. “Charles Schwab broke ground on a 70-acre office campus estimated to house some 8,600 employees once completed, while Infosys Ltd.’s tech innovation hub in Richardson is set to hire 500 people by 2020.”
Dallas’ economy continues to expand. As job growth increases, Dallas will benefit from strong (positive) net migration trends. Improvement in the single-family market is a viable threat to the rental market, however, the metro has one of the highest proportions of residents in the prime renter cohort (aged 20-34), which should keep renter demand strong as new residents come to the area.
Over the long term, apartment supply should remain on pace with demand due to favorable demographics driven by Dallas’ healthy economy, strong in-migration trends, and healthy amounts of new supply. Affordable housing and potential oversupply are things to keep track of as they could hinder the metro’s expansion.
Turn of the Millennials
Millennials — and now Generation Z — have picked up the scent. The prime renter cohort population in the Dallas-Fort Worth metro, those ages 20 to 34, is expected to expand by 1.7% through 2023, according to Fannie Mae. A survey reported by the Dallas Morning News names the Dallas-Fort Worth area the third-best American metro — trailing only Houston and Atlanta — by overall value to Millennials.
“Anecdotally, it seems to me that many [of Dallas’s Millennials] would actually rather live in Austin than Big D, if given the choice,” then-28-year-old Eric Webb wrote for the Statesman, Austin’s local paper a couple years back. “There’s something a bit cooler about the land of South by Southwest and breakfast tacos than the home of a highway knot called the ‘mixmaster.’ However, something has drawn a not insignificant number of my fellow twentysomethings up to the northern hinterlands of Interstate 35, and I don’t think it’s Six Flags.” Webb didn’t come up with an answer, just an observation. Perhaps in the time since that story appeared, he read the Moody’s report stating that Dallas offers twice as many technology jobs as Austin, which is a far better-reputed tech hub.
But that only goes so far toward understanding Dallas’s Millennial appeal. There really is a lot going on around Dallas that attracts younger residents. Northwood Hills is known for its Belt Line restaurant row, which is long on good eating and short on pretension, according to Move Matcher. And of course, there’s the walkable hub of Intown, or the nearby artsy bastions of Bryan Place and Deep Ellum. Over in Fort Worth, Magnolia Avenue offers much the same vibe. Still, many Millennials eventually end up in such traditionally suburban areas as Lake Highlands to start families.
Room to the North and West
Dallas was the only market in the nation to land three submarkets in the top 15 for apartment completions during the current cycle,” Kim O’Brien writes in RealPage. “Additionally, two of those submarkets were in the suburbs, quite the feat on a list featuring mostly downtown, urban core areas.” Kim referred specifically to Frisco and Allen/McKinney, which are north of Plano, in addition to Intown. Actually, Intown is starting to lag in comparison with its exurbs, if not in comparison with other urban cores.
Builders are also paying close attention to the so-called Mid-Cities, the population clusters that fill the gap between Dallas and its nearest neighbor (again, Texas is huge) Fort Worth, 30 miles to the west. Mid-Cities submarkets of note for new residents include North Arlington, North Irving, South Irving, Haltom City/Meacham, Hurst/Euless/Bedford, Central Arlington and Northeast Fort Worth/North Richland Hills. While still within the Dallas city limits Bishop Arts District, a major Millennial hub, serves as the gateway to the Mid-Cities.
Wide, Deep Market
“The “value-add” product remains the most sought-after. Because of this hunger and the lack of available properties, deals in the Class B and C sectors have achieved record pricing levels,” according to ARA Newmark’s Brian O’Boyle. “In the last four quarters, the metro basically absorbed all the units that were delivered, but over the next four quarters, I am expecting absorptions to lag slightly behind the deliveries”.
This isn’t necessarily bad news long-term for the multifamily market. Dallas remains one of those towns where it is still measurably cheaper to rent than to pay a mortgage. According to Yardi Matrix, mortgage payments currently account for 20% of aggregate income, while rents account for 17%. So it looks like it will be a long time before the Dallas multifamily market finds itself in retreat. It will, eventually. Boom-bust-boom-bust-boom is just how the Lone Star State rolls. But all indications suggest that Big D is a long way from that tipping point today.
Dallas at a Glance
- Construction (spring 2019 estimate): 28,000 units underway, 33,000 more planned
- Vacancy rate (year-end 2018): 6.5%, rising steadily since 2015 and now exceeding the national average
- Annual rent (year-end 2018): $1,180, up 1.0% year-over-year
Source: Fannie Mae
Sharestates Recently Funded Projects in Dallas
Sharestates has been forging new relationships with borrowers in the Dallas metro area and recently funded a few noteworthy projects there. Click the button below to view some recently funded Sharestates projects in the Dallas area!