BY: MARK ALLEN
Rent Growth is Slowing, but Still Strong Historically
Looking at the trailing four months of year-over-year rent growth in Dallas-Ft. Worth, we can generally see a slowing across all years of construction. It’s also important to note that this four-month trend is coming out of peak leasing season and into the slow velocity season. I’ll be interested to recheck the trend in March and June of 2023 to see if it’s still on a downward trajectory. I’ve found that usually, 1960s/70s vintage lags 1980s and newer vintage; as 1980s and newer vintage starts to slow, 1960s/70s vintage outpaces and then begins to follow and slow. For example, at the end of 2021, we noticed 1980s – 00s construction had the highest rent growth as a percentage, and now it’s the 60s and 70s vintage.
As the media is hyping up negative rent growth across the country, we’re not seeing that in Dallas-Ft. Worth. Slowing down from 18% annualized rent growth to 10% growth is likely healthy; and remember, historical rent growth averages are around 2-3%, so even if we’re growing at 4-6% that’s well above the historical averages. Although the data isn’t shown in the report, ironically, the top submarkets for rent growth are in workforce housing locations with household median incomes below $50,00, such as: Bachman Lake, East White Rock/Buckner, North Irving, Lake Highlands, etc. The high rent growth in these submarkets is due to high sales velocity – As properties trade hands, new ownership is renovating properties and increasing effective and market rents.