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Downtown Dallas and Fort Worth apartment vacancies are rising as new units are built

June 27,2023

See full Dallas Morning News article by Steve Brown here.

Apartments in Dallas-Fort Worth downtown markets are still showing higher vacancy rates and rentals than in the suburbs.

But this time, it has more to do with construction than COVID.

During the pandemic, renters in many metro areas streamed out of downtowns to lower-density locations in the suburbs. With pandemic effects fading, downtowns have seen a rebound in office, residential and retail users.

But central business district rentals in both Dallas and Fort Worth still have higher vacancy rates, according to a new report by Partners Real Estate.

“For Dallas and Fort Worth, it’s mostly been lopsided when it comes to the vacancy rate in the apartment category, with the downtown areas continuing to struggle in comparison to their suburban counterparts,” according to the report.

Overall vacancy for apartments built in the downtown Dallas area since 2019 is at 9.9%. In downtown Fort Worth, vacancies in the newest units are almost 17%, Partners Real Estate estimates.

Vacancy rates in the newest suburban D-FW rental units are less than 9%, according to the study. “Most of the properties in the suburbs delivered during the same time period have performed much more strongly,” the analysts said.

One factor could be the slow return to office in city centers following COVID’s work-at-home shift. About 60% of Dallas-area office employees are back in the workplace as of the latest estimates.

But higher apartment vacancies downtown probably have as much to do with construction.

“There’s been ample demand for apartments in the urban cores of Dallas and Fort Worth, but even more supply,” said Jay Parsons, chief economist at Richardson-based RealPage. “Apartment vacancy in both was less than 5% early last year before it started climbing.”

RealPage’s estimates exclude properties that either just opened or are in initial leasing.

Multiple new downtown Dallas apartment projects are in the works — both in new buildings and converted office space. New projects include the 333-unit Modera St. Paul tower and the 100-unit Pearl Lofts — both near the Dallas Farmers Market.

Downtown Dallas Inc. estimates there are now 50 downtown apartment properties with more than 14,500 residents. More rental units are in the development pipeline.

RealPage estimates that in the downtown Dallas area there are more than 1,700 apartments being built and another 800 are going up in downtown Fort Worth.

D-FW leads the country in building with more than 70,000 apartments on the way.