"Overall market conditions still appear basically sound," assesses Greg Willett, director of research for Carrollton-based M/PF Research."Developers have done a good job holding recent apartment starts to a reasonable level so there won't be a flood of new product delivered in the immediate future."
Construction, primarily all class A, is at levels seen in mid-1997, Willett tells GlobeSt.com. At the Q3 close, construction crews were working on 13,082 units. That's a drop of 2,357 units from third quarter 2000, a year that ended with more than 24,000 completions.
It's a good amount of supply, but definitely "pales compared to the recent peak of deliveries," Willett explains. From 1996 to 2000, 17,000 units delivered each year.Northeastern Tarrant County is the most fertile construction ground, with more than 2,700 units under way in the suburbs of Euless, Grapevine, Keller, Haltom City and North Richland Hills. That corridor is still poised "to become a new important apartment marketplace," according to Willett. It's all thanks to large job centers and limited land in nearby established areas such as Las Colinas and Valley Ranch. Still the area with the proverbial brass ring is untested water for the type of demand that's sure to come in the next year or so.
Leasing activity is weak for the second consecutive quarter. The Q3 net demand was 1,400 units and the 12-month demand ending in September, 10,380 units. Some communities are giving away a month's free rent for a one-year signing.
It's not all a tenant's market, with rent up 3.5% and average occupancy riding at 94.6% despite the volume that's hit the market. The average monthly rent now stands at $709 while newer product is drawing $970.
Willett says this region is surviving far better than Phoenix, Denver, Austin, Atlanta and the San Francisco Bay Area. "It will still end up that occupancy is off, but it's not a big hit anywhere near what the other markets are taking," he says. "For institutional owners who want to be in real estate, multifamily is the most attractive product right now."
In the nitty gritty of the statistics, Fossil Creek in North Ft. Worth is by far the tightest market, with a 97.1% occupancy. Metro Ft. Worth stands at 96%. The high-tech crash has yet to trickle down to strapped occupancy in the Telecom Corridor. It's still hovering around 95% "It's surprising occupancy isn't really down," Willett says. "It's holding up better than I thought." Intown Dallas dropped 4.6% in the past quarter, but the dip to 90.7% is being blamed on a 603-unit high-rise that's recently come to market in the Turtle Creek area.
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