After six months of lame leasing at the start of the year, Dallas-Fort Worth's apartment market saw a surge in rental demand during the third quarter.

Net apartment leasing totaled about 3,680 units in the D-FW area during the just-completed quarter.

That's a huge improvement from the first half of 2008, when the market saw a net decline in overall occupancy.

"There was decent demand for the first time since the third quarter of last year," said Greg Willett, vice president of research and analysis for M/PF YieldStar. "D-FW occupancy is up a little bit, and rent growth is holding steady.

"The sustained rent growth is counter to the pattern elsewhere, with the national numbers exhibiting a big slowdown."

The increase in rentals during the third quarter was enough to push overall occupancy in the area to 93.2 percent.

And average rents rose 2.9 percent to a record $766.

Construction is booming, too.

M/PF said that developers in North Texas broke ground on 14 projects with about 4,400 units during the third quarter.

That pushes apartment building in the area above 20,000 units.

Mr. Willett said development is at the point "where it starts to be concerning, even in periods when the economy is in lots better shape than is seen now."

"Construction starts continue to be surprisingly aggressive, especially given that every developer you talk to will tell you that financing is nearly impossible to get."

Even with the strong leasing during the previous three months, net apartment leasing is up by only about 300 units for the year.

During early 2008, many potential apartment renters took advantage of the rental home market in the area.

"For-lease single-family homes are continuing to take a bigger than typical share of total rental absorption, but at least in the third quarter they didn't manage to grab all the demand," Mr. Willett said.

"Furthermore, with home sales down so significantly this year, loss of renters to purchase currently isn't the big challenge it normally is in the Dallas-Fort Worth market."

New home sales are down by about a third, and pre-owned home purchases are off close to 15 percent this year from 2007.

So far this year, developers have completed just under 8,000 apartments in the D-FW area.

But with teardowns of hundreds of older apartments, the new construction's impact has been muted.