Greg Willett, M/PF's director of research products, tells GlobeSt.com that none of the Northeast or Atlantic markets came up on the radar screen although Washington, DC has been a good performer of late. The problem, he says, lies in a big block of units that delivered at yearend 2001 in the DC region.
Willett's crystal ball predictions are based on job growth, supply and incoming completions. Dallas-Fort Worth will bring out 8,821 units this year, down from prior years but still far ahead of the other markets that Willett believes will turn around before the rest of the nation. "Dallas is used to a lot of new supply," he explains, adding it won't catapult the region into an overbuilt situation because of job growth, historically far higher than elsewhere. Willett's optimism prevails despite occupancy dropping to 92.9% in the fourth quarter 2001 due to move-outs.
Houston will see another 5,435 units added to its supply this year. The Inland Empire will get just 689 units; Oakland-East Bay, 1,919; Broward County, 1,952; and Tampa. 4,342.
So what makes these markets the "dream team" of the industry? Long-term histories of solid job growth and peak deliveries concurrent when jobs were at a high in 1999-2000, Willett points out. Still, 2002 will be a year of weak demand overall as business stays soft until the latter part of the year. "Even in markets where they're bringing down construction, demand is not going to keep up," he believes. "There's not an immediate turnaround for any market." The scenario looks best for the Inland Empire. "It really looks like it will be the first to break out of the pack," he says.
Willett cautions even those metros with the brightest outlooks could face challenges down the road. Tampa Bay's rent is sluggish and will remain so in the near term. In Dallas-Fort Worth, substantial new supply in 2003 is a cause for concern. And Houston, which successfully diversified its economy, has been hit in just about every deep pocket, from energy to airlines.
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