Dallas-Fort Worth Leads for U.S. Multifamily Investment with a Record-Breaking Start to 2022
Strong Multifamily Fundamentals and Rent Increases Benefit Red-Hot Sun-Belt Markets
12 May 2022
The U.S. multifamily sector saw strong momentum at the start of 2022, with robust demographic trends underpinning record leasing activity, rent growth and investment during the first quarter, according to CBRE’s latest report.
Dallas-Fort Worth led all metros for multifamily investment over the past four quarters with $29.2 billion in volume—a year-over-year increase of 201.3%. Rents grew an average of 18.5% year-over-year as the volume of net absorption (6,400 units) accounted for 6.2% of the total multifamily inventory.
“Sound fundamentals are what attracts capital to the marketplace and DFW is positioned better than almost every metro in the country from that perspective,” said , vice chairman with CBRE’s Multifamily Investment Sales team. “Elevated levels of liquidity paired with the strong and sustainable demand will make DFW’s apartment investment sale market more resilient in times of economic and capital markets disruption.”
The overall economy is a large factor in DFW’s continued multifamily growth. “The stock market continues to be volatile, and investors are looking to deploy more capital into hard assets with shorter lease terms during this time of elevated inflation,” said Kevin O’Boyle, senior vice president with CBRE. “DFW is at the top of most investors’ radars as we’re seeing continued outperformance with 18.6% rent growth year-over-year and compressed vacancies at an average of less than 3%.”
“The U.S. multifamily capital market is experiencing a shift from the coastal markets, which historically had outpaced rent growth and lower cap rates, to the Sunbelt, which is now in high-growth mode for the foreseeable future,” added Johnathan Makus, senior vice president with CBRE. “We anticipate that apartment absorption will continue to outpace new supply as the market continues to be undersupplied with the large influx of corporates and new residents relocating to DFW.”
Investment in the multifamily sector increased by 56% year-over-year to $63 billion in Q1 2022—the strongest first quarter on record and bringing the trailing 4-quarter total to $374 billion. Multifamily accounted for 37% of total commercial real estate investment volume in Q1 2022, followed by office at 21% and industrial at 20%.
The multifamily market set a record four-quarter absorption total of 695,100 units in Q1 2022—up 12% from the previous quarter and 77% higher than the previous annual record of 393,000 units in 2000. Net absorption of 96,500 units was the highest Q1 2022 total since 2000.
The overall multifamily vacancy rate fell by 20 basis points (bps) quarter-over-quarter and 2.5 percentage points year-over-year to a record-low 2.3%. Average net effective rent increased by 15.5% year-over-year to $2,007 per month. Average rents now exceed their pre-pandemic levels in all but two of the 69 markets tracked by CBRE (San Francisco and San Jose).
New construction deliveries of 66,400 units in Q1 2022 brought the four-quarter total to 292,500—the highest amount since 1987. With more than 400,000 units currently under construction, 2022 deliveries are expected to eclipse 2021.
Q1 2022 Market Highlights:
- Dallas/Ft. Worth was the leading metro for multifamily investment over the past four quarters with $29.2 billion in total volume—double the amount from a year ago and accounting for 7.8% of the U.S. total. Atlanta had the second highest total of $21.4 billion, up by 150.1% from Q1 2021, followed by New York with $17.7 billion.
- New York, Houston, Dallas, Austin and Washington, D.C. were the top five markets for new deliveries over the past four quarters, accounting for 28.7% of the national annual total and 29.8% in Q1 2022. Texas markets were among the most active over the past four quarters, with 59,700 units delivered and 122,300 units absorbed in Houston, Dallas/Ft. Worth, Austin and San Antonio.
- The top markets for net absorption in Q1 2022 were New York (17,200), Houston (6,700), Chicago (5,900), Dallas (4,600) and Washington, D.C. (4,000).
- All 69 markets tracked by CBRE had positive rent growth year-over-year, with the increase reaching double digits in 56 markets. Average rents now exceed their pre-pandemic levels in all but two of the markets tracked by CBRE.
- Seventeen markets had vacancy rates below 2.0%, led by Newark (1.0%), Madison, WI (1.1%) and Providence (1.2%). Only 11 markets had vacancy rates above 3.0%, down from 20 in Q4 2021. Those that dropped below 3% in Q1 2022 were Seattle (2.9%), San Jose (2.9%) and Chicago (2.8%).
Read the full report here.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.