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Overview of the Multifamily Property Landscape in the United States

In a remarkable surge during 2021, the multifamily housing sector in the U.S. witnessed the commencement of over 462,000 new units. This momentum continued into the following year, with an additional 531,000 units. By mid-2023, the sector is on track to surpass 500,000 new starts, a level of activity not seen since the mid-1980s. This boom is underlined by a nationwide housing shortfall exceeding three million units, coupled with accumulated demand due to the significant underproduction in the years following the Great Recession.

For Commercial Real Estate (CRE) investors, the multifamily segment remains a top choice, despite a noticeable cooling from its peak period of 2021-2022. Factors such as heightened interest rates and a plateau in construction have led to modest national rent growth rates of 3.5%-4%, an increase in vacancy rates above 6%, and a 15% decline in unit absorption year-over-year. In contrast, the industrial sector faces reduced investment amid economic uncertainties, and retail investment remains lackluster due to inflation impacts. The national office sector is undergoing a significant reshuffling post-pandemic.

Dallas – Fort Worth Mid-Year 2023 Multifamily Report

The Dallas-Fort Worth (DFW) Metroplex has emerged as a key player in the American economy, particularly in the multifamily housing sector. The region has attracted a significant population influx, with over 1.2 million people moving to the area from 2010 to 2020. Despite a slight slowdown during the pandemic years, the growth trend has remained strong, with DFW leading the nation in metropolitan area growth in 2022.

Employment in DFW has been robust, with nearly 4.3 million people engaged in non-farm jobs. The local economy, supported by a mix of Fortune 500 companies and diverse industrial sectors, rivals major metropolitan areas like Washington D.C. and San Francisco-Oakland in size.

DFW Multifamily Market Dynamics

DFW's multifamily market has been a leader in new unit production over the past decade. Despite a dip in 2022, the region is expected to experience a substantial rebound in 2023, with over 32,000 new units anticipated. This demand is fueled by a combination of factors including in-migration, comparatively affordable housing costs, and strong job growth.

However, the sales volume in the multifamily brokerage market has seen a decline from its peak in 2021, largely due to increased mortgage interest rates. The median capitalization (cap) rate for multifamily transactions in DFW has risen, reflecting a shift in investor sentiment.

Despite these challenges, DFW's multifamily sector continues to be buoyed by substantial job creation and population growth. However, concerns about rental affordability persist, with a significant portion of renters being cost-burdened. This presents an opportunity for the development of rent-restricted apartments to meet the strong demand.

Source: Colliers, REIS, MMCG

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