A new report from ApartmentData.com shows rental rate growth in Dallas-Fort Worth has risen by nearly 19% over the past 12 months, outpacing both Houston and San Antonio and only slightly behind Austin.
The pace of growth is being driven by several factors, said Ric Campo, CEO and chairman of the board for Camden Property Trust, a multifamily developer with 52 Texas properties and more than 6,000 units in DFW. Record-high job growth in the Metroplex is straining available housing, and new properties can’t be built fast enough to meet demand, he said.
“It’s definitely fairly unprecedented,” he said. “We’ve seen snapbacks from recessions, but not like 20%.”
Rent growth slowed temporarily in early 2020 when many property owners chose to freeze rents during the pandemic. Some also saw a drop-off in occupancy in those early months, but by the fall, occupancy had rebounded, and many companies resumed increases. Rents have been trending up ever since, Campo said.
“What happened in April 2021 was there was almost a light switch that went off in the business,” he said. “People just came out of the woodwork. You had this incredible demand that has continued through today.”
According to ApartmentData’s report, occupancy in DFW closed out Q1 2022 at 93.4%, but Campo said his properties are averaging 97.3%. The average rental rate in DFW is $1.63 per SF, or $1,433 per month. The hottest submarkets include West Plano/Frisco/East Lewisville and Las Colinas/Valley Ranch/Coppell, where annualized growth landed at about 16% and 17%, respectively.
“That’s where the jobs are,” Campo said. “Suburban properties are doing really well.”
It is still cheaper to rent an apartment in Dallas than Austin, but the gap is beginning to narrow. The average rental price in Austin is $1.83 per SF or $1,602 per month. Job growth and development activity in Austin rivals Dallas, but the average household income is higher, Campo said.
In Houston, however, job growth has been less dramatic due to a sluggish recovery of the energy market. This has caused rents to grow at a slower pace of around 13.4% over the last 12 months. Rents in Houston landed at $1.36 per SF at the end of Q1, or $1,212 per month.
DFW rent has increased dramatically; however, Campo said residents have more money to spend on housing than they have in the past. According to the Bureau of Labor Statistics, wages and salaries for private industry workers in DFW increased by 4.6% in 2021, which is up from the 3.6% recorded a year prior. Texans also spend much less on rent than apartment dwellers in other parts of the country, Campo said.
“When you get down to it, 20% is high, but on the other hand it’s being driven by demand and low supply,” he said. “It’s a great market for multifamily. Consumers are having to pay more, but they have the money to pay.”
Apartment List’s monthly national data report for April shows year-over-year rent growth stands at 17.1%, with most of the hike occurring last spring and summer. Over the first three months of 2022, national rents have increased just 1.8%.
“On the supply side, our national vacancy index is continuing to slowly inch up, indicating a gradual easing of the tight market conditions that have characterized the rental market over the past year,” report authors Chris Salviati, Igor Popov, Rob Warnock and Lilla Szini wrote. “Our vacancy index hit 4.6 percent this month, continuing a seven month streak of increases after bottoming out at 3.8 percent last August.”
April rents increased in 93 of the nation’s 100 largest cities, with Sun Belt markets in Florida and Arizona leading the way.
The cost of rent in DFW began to level off in October, and while Campo predicts rates will continue to increase, the pace of growth should slow as the number of new jobs added to the Metroplex begins to stabilize. There are 19,731 units under construction and more than 70,000 proposed, according to ApartmentData.
“Rent is not going down, but it will go up at a slower rate,” he said. “Next year, maybe it’s a 10% increase, but until supply meets demand, it’s going to be higher than normal.”