5 Reasons to Invest In Dallas-Fort Worth
Dallas-Fort Worth (DFW) is the fifth-largest metropolitan area in the U.S. and consistently ranks among the top metros for job growth in the country. Many experts deem DFW as the sixth best market for overall real estate prospects and the second best city in the Texas real estate market. Before COVID-19, the U.S. economy was experiencing the longest expansion on record, and DFW was at the top of the list. Overall, the DFW economy has faced short-term disruption from the pandemic and is expected to continue its growth trajectory. A flurry of economic development-wins in the DFW metro has defined the last decade. Over time, DFW’s economic fabric has become more diversified with a global reach that closely resembles the broader U.S. economy.
#1- Leading Multifamily Absorption Rates
Prior to the outbreak, DFW had reported strong economic momentum, which provided a boon to the apartment market. The DFW multifamily market reported lower absorption levels and weaker rent growth through the first half of 2020, caused by the pandemic-induced recession. Still, absorption levels lead the country, and the first rent cuts are concentrated at the top end of the market. Strong economic underpinnings have fostered a healthy apartment market. Despite a steady flow of new properties coming to the market, the renter pool continues to absorb new units at a steady pace. Continued supply makes DFW one of the fastest-growing, but also balanced multifamily markets in the nation. Since 2010, the market has added about 145,000 new multifamily units, and a growing inventory of almost 25 percent, the most of any market in the country. Vacancy rates have drifted higher but at a measured pace. DFW multifamily market has fared better than other markets in previous downturns.
#2- An Evolving Retail Market
With 437 million square feet of retail space, DFW is the fourth largest market in the United States. In recent years, absorption has more than kept pace with supply. From the disruption in technology to changing consumer preferences, the retail space in DFW is devoted to the consumption of goods and services and continues to evolve. DFW has cemented itself as a market leader for retail, restaurants, and entertainment. With the creation of dynamic lifestyle centers, walkable mixed-use, and the reimaged outdated and inefficient industrial spaces into some of the trendiest restaurants and boutique shops in the nation, DFW will be sure to thrive again post-pandemic. At the end of 2019, many Class A and B spaced infilled with fitness and entertainment concepts.
#3- Ongoing Office Construction
Amid increasing vacancy rates, the DFW market continues to deliver office square footage. Construction activity remains robust, with six million square feet delivered in 2019 and 7.3 million square feet currently underway. The DFW office market sits at 16.7 percent. The overall rental rate, holding over $27 per square foot, is a lagging indicator in the market showing signs of vacancy rate increases and negative absorption. Absorption for the market currently stands at a negative 1.2 million square feet. In the first half of the year, the market experienced 8.1 million square feet of leasing activity, with numerous suburbs of the metro performing well. Even with the new construction, vacancies should remain stable due to a significant portion of space being preleased as relocations and expansions in the DFW market continue.
#4- Emerging Industrial Market
Thanks in part to the metro’s incredible job and population growth, DFW industrial demand makes the metro a top emerging market. The industrial sector is actively growing as big-box retailers and distribution firms acquire a large amount of square footage. A big reason for DFW industrial construction is due to the available and relatively affordable land, which positions the market above others that lack the available developable land. DFW continues to deliver a large amount of industrial supply, averaging over 20 million square feet of net new supply annually over the past few years. More recently, DFW has begun building industrial properties closer to urban consumers to provide cheaper and faster delivery to urban masses. Following record level supplies in 2019, 29.5 million square feet is underway with 70 percent available for lease, and 34 million square feet has been absorbed in the previous 12 months. DFW currently holds a seven percent vacancy rate with demand for speculative projects and a few substantial build-to-suits. Driving volume in 2020 is portfolio deals, the most recent being a $13.4 billion portfolio sale. As the most active in terms of construction, DFW still experienced a four percent rent growth, leasing all major metros.
#5- Increase in Population & Job Growth
The metro has averaged over 100,000 new jobs in recent years, with annualized growth near three percent. The region led the nation in employment growth in 2019, adding about 81,800 jobs. The abundant job opportunities have spurred significant population growth, gaining more residents than any other metropolitan area. Due to the region’s low cost of doing business and highly skilled labor, companies across various sectors have relocated or expanded operations to the area, keeping the metroplex on its continued growth curve. The expansions seen in DFW is impressive, and as a whole, the metro will continue to benefit from more companies and talented professionals.
With significant opportunities come greater challenges, especially with the COVID-19-related uncertainty. However, these challenges can be overcome, and developers, investors, brokers, and landlords will succeed in areas with growing populations. Markets like DFW will only continue to attract talent and companies, and as such, the capital pursuing deals in this city will follow, driving down yields. With COVID-19 altering day-to-day life, impacting society, the economy, and by extension, CRE, Matthews™ is here as your resource. Please contact a specialized Matthews™ agent for more information on the Dallas-Fort Worth market.