Texas Has Land, But Ironically Land Restrictions Make DFW A Tough Multifamily Market
NAA studied markets across the U.S. and found DFW remains generally accessible to multifamilly developers when compared to other cities.
Still, the area's apartment developers fight the headwinds of limited access to land, infrastructure constraints and density restrictions, all of which ultimately take a toll on affordability, NAA said.
“Survey respondents in this sprawling metro cite land availability as the greatest restriction. Also cited is infrastructure constraints relative to availability, impact fees and traffic, plus general density restrictions tied to lot, height and parking limits.”
DFW tends to fare better on construction barriers that traditionally challenge other U.S. markets, such as environmental limitations, community involvement and the entitlement process.
But the DFW apartment market, while overall healthy, is showing signs of impending affordability issues.
The Metroplex needs 227,000 rental units by 2030 to meet growing demand from an expanding population, NAA said.
Forty percent of DFW residents face a high rent burden, and the median DFW income of $45,800 is just slightly above the income level of $44,960 required to pay for the area's average monthly rent of $1,125, according to NAA.
With DFW facing a potential shortage of affordable multifamly product, a new report from Cushman & Wakefield suggests the area's 52 designated opportunity zones may offer the best locations for new development.
Cushman & Wakefield Executive Managing Director Beth Lambert believes the multifamily asset class will arrive in DFW opportunity zones first, especially in remote zones where little development has taken place thus far.
“You’re not going to see these remote areas with hotels; there’s just not demand for that,” she said. “What usually comes first is the rooftops, and then all the things that support the rooftops — needs-based retail such as grocery stores.”
Cushman is watching the momentum of 138 large CRE funds. All of the funds studied intend to invest in multiple asset classes, with multifamily topping the list.
“Most funds have national mandates and intend to invest in multiple product types: 82% of capital for multifamily investments (including senior, student and workforce housing), 60% for office and 49% for retail,” Cushman & Wakefield wrote in its report.