CRE Opinion

DFW Multifamily Market Hits Record-Breaking Benchmarks

Newmark exec Brian O'Boyle Sr. says "trading prices have reached impressive levels, and cap rates remain low, some in the 3.5 to 3.75 percent."

In my 42-year career of exclusively selling multifamily product, I have never seen our market achieve the levels that it has risen to today.

Driven by a vibrant and competitive job market, low interest rates, excellent infrastructure, and perceived upside, buyers have been flocking in mass to Dallas-Fort Worth. Record-breaking benchmarks are being set for both rent and sale prices.

Eighteen months ago, amid the first wave of the pandemic, market research generally predicted flat rents and marginal sales activity at best. While sellers were guarded, buyers proceeded even more cautiously. Fast forward to Summer 2021, where sellers are anxious to market their assets for year-end closing in light of potential tax law changes, and buyers’ competition has reached a frenzied level.

Within the last six months, record rent level increases have been procured, and lease trade-out reports that compare unit rents to new tenant leases show staggering increased levels between 10 and 20 percent. Vacancies continue to tighten, concessions in the marketplace have all but disappeared, and new construction supply is struggling to keep up with solid demand.

Since Labor Day, a significant increase in the number of deals has hit the market. Likewise, the equity market for new development is robust, with suburban, lower-cost product in good school districts continuing to be the sweet spot.

Competition is at an all-time high, trading prices have reached impressive levels, and cap rates remain low, some in the 3.5 to 3.75 percent range.

The level of appreciation is also noteworthy as some Class B product trading is as high as $180,000 per unit. I also think some new suburban construction product will likely cross the $300,000 per unit threshold in the near term. Class C product is currently in the 4 percent cap rate range.

Projected year-end transaction numbers will likely set new records. I predict there won’t be any let-up in the near term, as market fundamentals will continue to show strength and resiliency. It’s a great time to be a member of the Dallas-Fort Worth multifamily industry!

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