What Makes the Dallas-Fort Worth Area So Attractive to Apartment Developers?

While the Dallas-Fort Worth region has experienced record-low inventory in the single-family real estate market and unprecedented growth in housing prices, another industry has prospered just the same. Many D-FW residents have seen the buildings popping up all over the place, but did you know the Dallas area is also a top destination for apartment developers?

According to data from commercial real estate insiders, Yardi Matrix, Dallas ranks No. 2 in the country for multifamily construction. With over 60,000 units under construction and more than 2,000 units completed since January, Dallas attracts nearly twice as much activity as cities such as Charlotte and Los Angeles, which are both in the top 10. This level of development demand has allowed Dallas to add more apartments than any other city in the last decade.

So, what’s caused this boom in multifamily development? We sat down with Scott Lawlor, Founder and CEO of Waypoint Residential, to get an insider opinion on the Dallas apartment boom.

Expert Insight From an Apartment Veteran

With $5.5 billion in capitalization and over 32 thousand units nationwide, Waypoint Residential is a major player in the apartment game. Founder and CEO, Scott Lawlor has been in the business for more than 37 years and has witnessed all manner of market trends. His company, like so many others, is optimistic about the opportunities in the North Texas multifamily sector. Although, it’s been a wild ride to get to this point.

“Since 2020, it’s been like a roller coaster,” said Lawlor. “In all my time in the business, I have rarely seen so much activity but also so much resilience. Right before COVID hit we had really strong market conditions, rents were growing, cap rates were low, and Dallas was at the height of that.”

Because Dallas had incredible demographics coming in from all over the country, developers were falling over themselves to establish assets.  

“Dallas is tremendously popular with capital,” said Lawlor. “If you interface growth rates with the size of the region, Dallas leads the league by far.”

Of course, then COVID hit in 2020. Around that time, many assumed the worst. They imagined rents would fall off, development would pause, and the economy would screech to a halt. Thankfully, none of that came to pass.

“In 2021, there was historic performance both for rents and cap rates,” Lawlor said. “We saw 20 percent market rental growth and 3 percent cap rates. It was really extraordinary. In 2022, we experienced the one-two punch of geopolitical turmoil and the beginning of the Fed’s tightening cycle. Those sort of gave the market pause but we still experienced decent growth.”

Dallas Remains Resilient

At the outset of 2023, things began to look up. Going into the year, many investors were optimistic until, well, the entire banking system almost crashed. Over the course of just five days, three U.S. banks, including the Silicon Valley Bank, failed. This triggered a hasty sell-off of global bank stock and sent investors running scared. 

“After that, there wasn’t enough market sentiment around the country to withstand another blow,” Lawlor said. “From a capital markets perspective, things became rather tough around most other markets.”

Not so for Dallas. With an abundance of new supply, relative ease of construction, and the demographics to prop up demand, this region has established enough resilience to withstand even the erratic and unpredictable market turns of the last couple of years.

“Broadly speaking, I’m confident that the second half of this year will be a lot better than the first few months,” Lawlor added.

In the last three years, we’ve seen even higher rates of population growth as people move to Dallas from all over the country. This has led to a total transformation in the way many developers view our region today.

“It’s really an extraordinary story,” said Lawlor. “There are some markets, like Raleigh or Austin, that are growing at a greater rate of speed. However, they’re a quarter of the size of DFW. Then, there are only three metros bigger than Dallas – New York, Chicago, and LA. None of them are really growing at all. Therefore, investment in Dallas is by far the most exciting prospect in multifamily development.”