More apartments are under construction in the Dallas/Fort Worth area than anywhere else in the nation, according to a new report. So far the unprecedented jump in apartment building isn't causing industry analysts to panic. But if the economy stumbles for any reason, a big market correction could occur.
The volume of new apartments hitting the market in North Texas at midyear is about seven times larger than five years ago, according to MPF Research. With more than 50,000 units under construction, almost 10% of all the apartments being built in the United States are in the D/FW Metroplex.
"It's the largest share we have probably ever seen for any individual market in the country," said Greg Willett, MPF Research vice president.
The fastest growing areas include in-town Dallas, where more than 6,000 units are being built and Frisco, where more than 5,000 new apartments are under construction.
A rise in job creation in North Texas this year has helped apartment developers fill up the thousands of new units opening in the area.
Less than five percent of D/FW apartments are currently empty. "We are at record occupancy and it's leasing as fast as it's done," Willett said. To date, net apartment leasing in the area has totaled 7,722 units, about the same as in the first half of 2015.
Overall, apartment rents are up by more than six percent in the last year. For the first time, average apartment rents in D/FW have topped $1,000 a month. Average rents in the newest apartments are $1,448.
Analysts believe the apartment building boom will continue in the Dallas/Fort Worth area over the next couple of years. The question is whether the balance between supply and demand will continue.
Typically, as new units are constructed, old apartment complexes lose tenants. Newer properties also usually offer move-in concessions, further distressing Class B and C apartments.
In the current market, owners must look for every opportunity to keep their property values from becoming over inflated. Managing an apartment property's tax expense is crucial to maintaining a competitive edge.