Growth and affordability: Is DFW the next Los Angeles?
With a constantly flow of corporate relocations, it’s no secret that North Texas is expanding rapidly. And with an influx of California companies and residents, the region is seeing similar growth to one of its rival cities on the West Coast.
According to research from the JLL DFW Research team, Dallas-Fort Worth is seeing a level of growth similar to the raw population gains Los Angeles recorded between the 1970s and 1990s, around the same time DFW was suffering from the Texas’ oil bust. At that time, LA was tacking on roughly 100,000 more residents than North Texas annually. Show Full Story
But by the start of the 1990s, migration started to shift. As Los Angeles became more crowded and prices for residential and commercial real estate rose, DFW’s affordability started attracting growth.
Today, North Texas’ population is still roughly half of Los Angeles’, but it’s adding more residents than the city of Angels, JLL reports, at 120,000 new residents each year.
That growth raises questions around whether DFW will follow LA in terms of affordability. As residents leave higher real estate costs in California – which are as high as $74.64 per square foot for commercial space in San Francisco – will they trigger higher prices in North Texas?
It’s possible, says JLL Research Vice President Walter Bialas. But the region has taken adopted a growth-friendly attitude, paving the way for new companies and residents with efforts like cooperation between cities; improving mass transit and roadways; and creating family-friendly spaces with residential, retail, restaurant and entertainment options.
So while more demand will inevitably affect pricing, North Texas is better positioned than other metros, like Los Angeles, to absorb growth.
“I think we are in for continued rent and price appreciation in DFW, as well as a more stable outlook and not the historic wide up and down cycles that DFW experienced,” Bialas added. “At this point, with 7 million-plus people, we are looking like a more mature market that is a bit more predictable than the old boom-bust days.”
So far, in addition to offering a high quality of life, North Texas’ residential real estate has remained affordable. Rental rates are 63 percent cheaper in Dallas than in New York, and rates are 69 percent cheaper in Fort Worth than in San Francisco.
To stay that way, Bialas says local developers should focus on infilling existing residential areas and expanding to emerging markets.
Commercially, builders are benefitting from the boom in demand. North Texas office building represents 7.14 percent of total construction across the country. According to JLL, Dallas and Fort Worth rank sixth and 10th, respectively, in total U.S. office construction.
Prices are expected to rise among commercial real estate offerings in North Texas, but metros across the country are also seeing increases, Bialas said. That means DFW is likely to stay relatively affordable.
These growth patterns are expected to continue in North Texas for the foreseeable future. And the region can take lessons learned from Los Angeles to continue to be affordable and business friendly.
“LA had been the state where companies migrated to for a good business environment, the weather, etc.,” Bialas said. “Ultimately, they lost their edge in being a place to do business easily and high taxes set the stage for companies to see opportunities elsewhere, like DFW.”