Dallas/Fort Worth Multi-Housing

Transcription

1 Dallas/Fort Worth Multi-Housing Third Quarter 211 Quick Stats Total Occupancy 92.9% Rental Rates (C/SF/MTH) $.92 Absorption* 2,37 Under Construction* 5,333 Delivered Construction* 1,673 Change from last Yr. Qtr. *Units The arrows are trend indicators over the specified time period and do not represent a positive or negative value. (e.g., absorption could be negative, but still represent a positive trend over a specified period.) Hot Topics The Metroplex overall has witnessed positive performance for several quarters, but Dallas is beginning to show separation from Fort Worth market fundamentals Absorption stayed positive for the 1th straight quarter Occupancy rates continue to climb for the 3rd straight quarter Dallas/Ft. Worth s year-over-year employment growth ranks 4th compared to all other metropolitan areas in the country North Texas remains atop the country in terms of apartment delivery, but numbers are insubstantial compared to recent standards Dallas/Fort Worth multi-housing properties remain a top performer in the commercial real estate market and witnessed a 1th consecutive quarter of positive demand. By and large, Metroplex fundamentals have shown steady improvement across the board. Overall occupancy is on the cusp of 93% and rental rates are as high as they have ever been at $.92 per SF. However, the 3rd quarter headline goes to the Dallas area specifically, which for the first time is distinguishing itself from Fort Worth. In recent quarters, both Dallas and Fort Worth have shared the limelight from DFW s driving apartment market, but within the past three months Dallas has taken more of a leading role and attracted greater demand and higher occupancy levels. Overall, North Texas absorbed 2,37 units during the 3rd quarter. Dallas ended the quarter well ahead of Fort Worth, which in fact lost 52 apartment households. On an annual basis DFW absorbed 12,71 units, and while these figures are positive, they stand at only half of the markets demand performance from the fall of 21. As seen during the previous quarter, older properties are garnering a more prevalent percentage of absorption now that the top-tier property market has fully recovered. In fact, 45% of DFW s annual demand was claimed by properties built prior to 2. Third quarter supply totals reached their highest point thus far in 211 but still remain at Unemployment Rate 11.% 1.% 9.% 8.% 7.% 6.% 5.% historically low levels. The Metroplex was supplied with 1,673 new units for the quarter which brings the annual total to 5,189 units. This is enough to continue North Texas reign as the national leader of new apartment supply, however falls well below the market s average annual completion total of 13, units since 2. As was the case with absorption and occupancy, the Dallas area delivered new supply at a higher rate than Fort Worth. Dallas accounted for 4,338 units while Fort Worth supplied its lowest tally in 15 years with 851 units. Granted, with the construction pipeline decelerating the way that it has, lower levels of deliveries should be expected. One major reason for DFW s economic success has been the resurgence of the job market. Throughout the first half of the year, the Dallas/ Fort Worth area led the nation in employment growth and by May had added an annual total of 8, new jobs. Employment performance continued on at an impressive rate during the summer months and the Bureau of Labor Statistics lists September s year-over-year additions to be 5,2, which ranks fourth nationally behind Houston, New York City and Boston. Both DFW and the State of Texas maintained unemployment rates well below the national average. Dallas/Fort Worth unemployment stands at 8.4%, with the state average at 8.5%, and the national average at 9.1%. 4.% 3.% 4Q9 1Q1 2Q1 3Q1 4Q1 DFW Texas USA 211 CBRE

2 Market Statistics Market (See Map on back) Total Unit Count Rent C/SF/MO Occupancy Number of Units Absorbed Oct'1-Sep'11 Delivered Construction Unit Count Oct'1-Sep'11 Forcasted Delivered Unit Count Oct'11-Sep'12 (Under Construction) Intown Dallas 22,786 $ % 1, Oak Lawn/Park Cities 11,722 $ % 43 East Dallas 18,529 $ % (57) 84 Far East Dallas 16,725 $ % 39 Southeast Dallas 27,672 $ % Oak Cliff 13,567 $ % (1) 16 Northwest Dallas 15,175 $ % North Dallas 25,985 $ % 26 Northeast Dallas 29,77 $ % 1,18 Richardson 1,158 $ % Garland 14,528 $ % 1 Mesquite 14,324 $ % (16) South Dallas County 9,456 $ % Grand Prairie 14,96 $ % 21 Irving 28,176 $ % 61 Las Colinas/Coppell 18,911 $ % 4 33 Carrollton/FB/Addison 25,89 $ % Far North Dallas 28,75 $ % 1, Plano 29,369 $ % Lewisville Area 24,99 $ % 1, Denton 19,43 $ % Frisco/Prosper 8,226 $ % 27 Allen/McKinney 13,727 $ % Rockwall/Rowlett/Wylie 3,872 $ % Ellis County 3,699 $ % (5) Intown Fort Worth/University 11,878 $ % East Fort Worth 1,741 $ % Arlington 45,593 $ % (2) 183 South Fort Worth 8,122 $ % Southwest Fort Worth 2,46 $ % (2) Northwest Fort Worth 7,55 $ % 5 North Fort Worth 1,12 $ % N Richland Hills/Haltom City 9,39 $.8 9.7% (2) Hurst/Euless/Bedford 27,464 $ % 37 Grapevine Area 6,375 $ % 34 Johnson County 2,422 $ % (1) TOTAL Dallas 448,579 $ % 11,2 4,338 4,494 TOTAL Fort Worth 159,764 $ % 1, TOTAL DFW 68,343 $ % 12,71 5,189 5,333 Source: MPF Yieldstar Page CBRE DFW Multi-Housing Third Quarter 211

3 Total Occupancy 95.% 94.% 93.% 92.% 91.% 9.% 89.% 88.% 87.% Rental Rates (C/SF/MO) $.92 $.9 $.88 $.86 $.84 $.82 $.8 4Q9 1Q1 2Q1 3Q1 4Q1 Absorption (Units) 1, 6, () () (6,) 1Q6 2Q6 4Q9 1Q1 2Q1 3Q1 4Q1 4Q9 1Q1 2Q1 3Q1 4Q1 DFW s overall occupancy rate climbed to 92.9%, which represents the third consecutive quarter of positive performance. Occupancy has remained below 93% since 28 but looks to surmount that target by the end of 211. Construction activity has remained historically low over the past six quarters which put a tight lid on new supply and allowed for demand to build around the Metroplex. The second quarter of 211 witnessed the significant boost in demand that the market has been waiting for and occupancy levels took a large step in returning to pre-recessionary figures. Employment surges over the past year have brought on the demand necessary to lease up the latest deliveries as well as backfill less desirable, aged properties. On an annual basis, occupancy levels rose 1.4% and have now risen four points above the trough witnessed in 29. If performance such as this persists then pre-recessionary levels of 94.1% could be matched by mid-year 212. The second quarter was the highest performing quarter of the past decade which made it a tough act to follow. Therefore, this quarter s decline in demand activity could have been expected. Apartment demand was positive for the tenth consecutive quarter and benefitted from another strong showing in the job market, registering 2,37 units of absorption. This brings the year-to-date absorption total to over 12,5 units, which is a respectable amount, but roughly half of where absorption stood this time last year. Still, DFW is considered one of the strongest apartment markets in the country, especially on Dallas end, which accounted for 11,2 of the annual tally. In terms of class performance, the top tier property market has now made a full recovery and has revived fundamentals across the Metroplex. In addition, as class A properties become occupied, older units garner more attention from renters. Over the past year, 45% of the units absorbed in North Texas have been from properties built prior to 2. Throughout 21, lower tier properties were lagging behind newer product and a noticeable gap was forming between the two. For the time being that gap has lessened and supply and demand are finding an equilibrium. Rental rates were driven to their highest marks of the past decade by positive 3rd quarter demand, settling at $.92 PSF. This increase represents a 2% growth between June and September. It was only last quarter when rental rates made the jump to the $.9 price point for the first time in three years. Much like occupancy, the recognizable rental rate growth is being driven by the Dallas market. Prices grew 2.2% in Dallas over the quarter and grew 4.1% on an annual basis. Fort Worth rates performed at a lesser rate; 1.4% quarter-over-quarter and 3.6% annual growth, both of which are still solid percentages. Concessions were reported in nearly 45% of apartment inventory, concluding that discounts still remain a fundamental aspect for increasing demand. That being said, concessions are being offered at much lower rates than those offered during the peak of 21 when discounts were available in 6%- 7% of the market. Not surprisingly, the largest increases in rental rates occurred in Dallas submarkets, with Rockwall/Rowlett/Wylie topping the list at 1.5% growth. Page CBRE DFW Multi-Housing Third Quarter 211

4 Under Construction (SF) Under Construction 2, 16, 1 1Q5 2Q5 3Q5 4Q5 1Q6 2Q6 4Q9 1Q1 2Q1 3Q1 4Q1 Supply & Demand (Units) 25, 2, 15, 1, 5, (5,) (1,) Under Construction Delivered Construction 7, 6, 5, 3, 1, 1Q6 1Q1 3Q1 Capital Markets Supply Demand DFW doubled the number of new units delivered over the last quarter, yet produced only half as many as the third quarter of 21. A total of 1,673 new units came onto the market during the summer months which brings annual deliveries to 5,189. The simplest way to put the diminishing supply line into perspective would be to compare this annual total to that of the year prior. By September of 21, the twelve-month total of new supply stood at over 17, new units, which represents a 7% decrease for this year s added supply numbers. Considering that the Metroplex still leads the nation in apartment deliveries, this only goes to show how well multi-housing properties fared during 21. The Dallas region supplied 4,338 of the 5,189 units over the current year, with Fort Worth making up the difference. Richardson led the way for the Metroplex with 5 units completed, while Allen/McKinney, Lewisville and Denton added 2 units a piece. Construction volume dropped slightly from 5,67 to 5,333 and is forecasted to remain conservative moving into 212. New delivery totals will begin to see increases once the construction pipeline opens up once more. Quarterly Under Construction (SF) 5, 4,5 3,5 3, 2,5 1,5 1, 5 Quarterly 11mth Trailing 1Q6 1Q1 3Q1 Multi-housing properties witnessed another solid quarter and have already matched sales figures for all of 21. Dallas/Fort Worth s ongoing employment boom is proving to be an attraction for investors and has made the city a national leader in the apartment community. So far this year, 79 properties representing a total of $1,467,75,429 have traded hands in DFW, compared to 6 transactions this time last year. According to Real Capital Analytics, cap rates currently stand at approximately 7.1% in the Metroplex, which remains one of the most active markets in the country and continues to outperform some of the most dynamic metros around the nation. On a national level, $13.3B worth of property transactions have occurred which brings the yearly total to $36.2B. This total already exceeds the full year s sales for 21 and represents gains of approximately 7% over the same period in 21. Portfolio transactions have made a comeback with 15 deals representing over $1M each closing since this past April. Prior to this year, only 15 portfolio transactions of that size occurred in all of 29 and 21. The national apartment market has distinguished itself from other commercial property types with competitive debt markets and a development pipeline that is flourishing in several parts of the country. Tertiary markets are receiving more and more attention as investor confidence grows from strong market fundamentals. Cap rates in these secondary markets are beginning to fall sharply as investors continue to seek out these properties. Currently, tertiary cap rates stand at 7.5% while primary market cap rates hover near 6.5%. Sources: Real Capital Analytics, MPF Yieldstar & CBRE Econometric Advisors 1 16, 1 1 1, 6, 11mth Trailing Page CBRE DFW Multi-Housing Third Quarter 211

5 DFW Multi-Housing Select Top Multi-housing Sale Transactions Units Submarket Property Address 5 Richardson Brick Row 744 Brick Row 234 Lewisville Hebron 121 Station I 88 Union Station Pkwy 2 Burleson Encore at Alsbury 135 Alsbury Blvd 18 Allen The Aspen at Twin Creeks I 48 Bray Central Dr 124 Rockwall Sonoma Court 97 Yellow Jacket Ln Submarket Map Universe Includes all attached dwellings with five or more units leased through a central management company or agent. Sample Data in this report were collected for 371,674 apartment units (69% of all existing units in the Dallas/ Fort Worth area) during June 27. The survey area includes Dallas, Tarrant and portions of Denton, Collin and Ellis Counties. Submarket A geographic sector containing similar projects that typically compete for the same type of resident. Absorption The increase in physically occupied units from one period to another in communities under construction. Units are not counted as absorbed until the period that the entire property is completed. Occupancy The measure of the current relationship between supply and demand. Rental Rates High and low rents for each unit type are averaged, then weighted by the number of occupied units of that type. 211 M/PF Research, Inc. Area Offices DOWNTOWN DALLAS 21 McKinney Avenue Suite 7 Dallas, Texas Dallas Area 1 Intown Dallas 2 Oak Lawn/Park Cities 3 East Dallas 4 Far East Dallas 5 Southeast Dallas 6 Oak Cliff 7 Northwest Dallas 8 North Dallas 9 Northeast Dallas 1 Richardson 11 Garland 12 Mesquite 13 South Dallas County Dallas Area 14 Grand Prairie 15 Irving 16 Las Colinas/Coppell 17 Carrollton/FB/Addison 18 Far North Dallas 19 Plano 2 Lewisville Area 21 Denton 22 Frisco/Prosper 23 Allen/McKinney 24 Rockwall/Rowlett/Wylie 25 Ellis County Fort Worth Area 26 Intown Fort Worth/University 27 East Fort Worth 28 Arlington 29 South Fort Worth 3 Southwest Fort Worth 31 Northwest Fort Worth 32 North Fort Worth 33 N Richland Hills/Haltom City 34 Hurst/Euless/Bedford 35 Grapevine Area 36 Johnson County FORT WORTH 31 Commerce Street Suite 24 Fort Worth, Texas ARLINGTON 2221 East Lamar Blvd. Suite 17 Arlington, Texas Copyright 211 CBRE Statistics contained herein may represent a different data set than that used to generate National Vacancy and Availability Index statistics published by CBRE s Corporate Communications Department or CBRE s research and econometric forecasting unit, CBRE Econometric Advisors. Information herein has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by CBRE clients, and cannot be reproduced without prior written permission of CBRE.