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Dallas Shedding Extra Bedrooms

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Bedroom in Leman Locke in London's Whitechapel
Bedroom in Leman Locke in London's Whitechapel

Dallas has historically built a wealth of two- and three-bedroom multifamily units. That is not the case this cycle.

Apartments built in this cycle have been about 60% one-bedroom units, 30% two-bedroom units and 5% three-bedroom units, CoStar Market Analytics data shows. That is a significant shift from the cycle 10 to 15 years ago, when 50% of apartments had one bedroom, 40% had two bedrooms and 10% had three bedrooms.

Studio apartments are essentially a new thing in Dallas. CoStar said they were "virtually non-existent pre-2000," but now make up 5% of new units.

The shift brings Dallas more in line with other major metros. Most urban areas around the country focus heavily on one-bedroom and studio apartments, which appeal to single millennials and help balance out higher land costs in dense neighborhoods. Building smaller units means developers can get their underwritten per square foot rent but residents pay less for their units, something that is increasingly more important for both parties as land prices in hot urban areas are rising and rent growth in Dallas is beating the national average and straining residents' wallets.

Because of that, it would be hard for developers to go back to larger units, but demand may start calling for them again. As millennials age, get married and have families, the trend toward more one-bedroom units could reverse course. The shift away from three-bedroom units could then delay the growth/diversification of a submarket, as is the case in Downtown Dallas, where families struggle to find housing. Only 38 multifamily complexes in Dallas' core have at least one three-bedroom unit, Downtown Dallas Inc. CEO Kourtny Garrett told Bisnow last year.