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California Buyers Continue to Look to D-FW Multifamily

CoStar Market Insights: Pricing, Yields and Demographic Growth Seen as Driving Factors
May 7, 2018
One key trend driving Dallas-Fort Worth commercial real estate this economic cycle has been the migration of companies, and individuals, from California to the metroplex. Corporations cite low business costs, low taxes and a pro-business environment as reasons for relocating to the Lone Star State. Similarly, the combination of relatively low housing costs, abundant job opportunities and no state income tax make Texas attractive for individuals and families.

While the Toyota’s and Charles Schwab’s of the world garner the headlines for their major relocations, Californian interest in Texas goes beyond those market movers. For example, California investors priced out of their own metros are increasingly looking at Texas, and D-FW in particular, for opportunities.

From 2010 to 2017, California buyers were responsible for about 23 percent of all multifamily units acquired by an out-of-state buyer in Dallas-Fort Worth. New York came in second at 17 percent, while Illinois (9 percent), Florida (7 percent) and Georgia (6 percent) rounded out the top five.

Analogous to the advantages cited by corporations and individuals for moving to Texas, investors note Texas’ strong demographic drivers, relatively high yields and rent growth outlook and less-expensive acquisition costs as reasons for buying Texas multifamily assets. For perspective, average pricing in San Jose is about $400,000 per unit, while in D-FW it’s about $130,000 per unit. Average cap rates in Silicon Valley are roughly 200 basis points below those in D-FW.

Just last week, CoStar co-hosted an event in San Jose aimed at educating Bay Area investors on the major Texas multifamily markets. More than 100 investors attended the presentation--a strong indicator of the type of attention Texas multifamily is receiving from smaller or mid-sized investment firms in northern California. Recent events could push even more investors to look outside California, most notably, the prospect of Costa-Hawkins repeal this November.

It’s difficult to predict future investment trends, but the significant pricing and cap rate differences, demographic and job growth trends and external political factors should continue to drive California investors to Texas in the coming years.


CoStar Market Insights provides a snapshot of recent real estate trends. The CoStar Market Analytics team monitors commercial and multifamily real estate across 390 metro areas, with a granular understanding of the projects, players and economic trends that move these markets.

Learn how CoStar Market Analytics can add to your market knowledge, helping to minimize risk and maximize returns.

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