There is a lot for a multifamily investor to like about Dallas. The metro area has seen a steady influx of new companies, new offices, and new jobs for the past decade—and there is no sign that this influx is letting up. In the last five years alone, Frontier Communications (2023), Caterpillar (2022), AECOM (2021), and CBRE (2020) have all moved their corporate headquarters to Dallas, and the area has become a major U.S. financial hub, second only to New York. JP Morgan Chase now has more employees in Texas than in New York, Goldman Sachs is building a $500 million corporate tower (to house its second largest office), and a new Wells Fargo campus in Irving is scheduled to open in 2025.
The decisions by these corporate giants and thousands of smaller companies to locate in Dallas have made it the fastest growing metro in the nation. According to the latest U.S. Census data, the Dallas-Fort Worth-Arlington metropolitan statistical area (MSA) gained almost half a million people between July 2020 and July 2023, more than any other area.
Development and jobs keep coming. Google is in the midst of building a new $600 million data center in Red Oak, its second in Dallas. The Teachers Insurance and Annuity Association of America (TIAA) announced in August that it is moving 1,000 jobs from New York City to a new corporate office in Frisco, and in May, Subaru of America revealed plans to relocate its central regional office from Illinois to Coppell.
Most of the newcomers filling these positions will likely be renters. According to SmartAsset, monthly housing costs for homeowners are 1.6 times more than monthly rent plus utilities in Dallas, and that ratio is not expected to decline in a meaningful way in the near future. Although home prices have dropped slightly in recent months from record highs, stubbornly high mortgage rates and skyrocketing insurance costs mean that it costs more than ever to own. The increased costs of homeownership also suggests that the natural progression from renting to owning among current Dallas residents will slow, further elevating demand.
Supply and Demand Tending Toward Equilibrium
The constant stream of new development puts Dallas’ supply issues in perspective. Dallas saw more than 10,600 apartment units delivered in the first half of 2024—and it looks like the area is on track to reach or exceed record 2018 deliveries. As a result, fundamentals have softened, with the apartment vacancy in the high 6% range and rents declining. Most of this new supply consists of high-end Class A units, and operating metrics for Class B and C apartments have held up well.
Transactions are down, although significantly far less than the national average. In Dallas, the average quarterly transaction volume from 2023 to mid-2024 decreased by 19% compared with the average from 2015 through 2019, according to Real Capital Analytics. Nationally, the decrease was 28%.
Even with additional inventory delivered in 2025, excess supply should burn off within the next 12 months, as strong demand produces robust absorption. While there are numerous multifamily projects in the planning stage, the actual construction pipeline has contracted. In the past year, only the most established developers have been able to secure construction loans, given soft operating conditions and elevated construction costs.
Thanks to cap rates rising to the mid-5% range, the pace of transactions is already picking up. With ample capital waiting in the wings, Class A properties are now joining the Class B and C properties that dominated sales earlier in the year. In recent months, for instance, 300-unit properties have changed hands in Dallas Uptown and the northern suburbs of Princeton and Denton. And this is only a taste of what the market has in store. With occupancy on the way up and rents following suit, transactions should continue to pick up steam in the coming year.
Dallas Heads North
Each year, North Dallas edges closer to the Oklahoma border—and the next few years will be no exception. It is certainly true that some investors are seeing the potential of office and hospitality conversions in downtown Dallas. This year, developers welcomed the first tenants to The Sinclair, formerly the Energy Plaza office tower. In its new configuration, the 49-story property has 293 luxury apartments as well as a smaller amount of high-end office space. And this fall, developers announced the conversion of the Ambassador Hotel into a 300-unit apartment community.
Nonetheless, the bulk of multifamily activity in coming years will occur in North Dallas—and increasingly the northern reaches of North Dallas. Spurred by the Professional Golf Association (PGA) of America’s headquarters relocation, Frisco now has a number of mega-projects going through the approval process, including Firefly Park with 230 townhomes and 1,970 mid- and high-rise apartments; a 1,039-unit project being developed by Zarky Development; and The Mix, a mixed-use development that will include 3,299 multifamily units.
Developers are also steadily looking even further north. Texas Republic Management purchased a 375-acre mixed-use tract along the planned Dallas North Tollway extension in Grayson County. Further north in the county, Texas Instruments and GlobiTech are investing billions in semiconductor chip plants. Additionally, apartment development is included in the master plan for Lake Texoma, which, as the name suggests, straddles the Oklahoma line.
Stay One Step Ahead
Dallas is on track to absorb its excess supply in 2025, and companies with money to invest have demonstrated their conviction that it will continue to be one of the most vibrant and profitable commercial real estate markets in the country. The projected yearlong hiatus between excess inventory tailing off in 2025 and construction resuming in 2026 creates an ideal opportunity for investors to enter this attractive market at a favorable moment.
