DFW, Houston Multifamily Markets Top Worst of 58 List

Houston holds a slight lead in the neck-and-neck race for the weakest apartment market while shouldering a construction pipeline that has raised a red flag. "Dallas' amount of construction is aggressive," Greg Willett, vice president of M/PF's research products, tells GlobeSt.com, "but it's not way over the top. Houston is out of control."

Not only is Houston bringing out far more product than demand dictates, but its overall occupancy is 88.7% or the worst in M/PF's survey of 58 cities. "Being at the bottom in occupancy and the top of the list in construction is not a good relationship to have," Willett says. Other leading weak markets are Indianapolis, Atlanta, Austin, Denver and Greenville, SC.

The Dallas occupancy is 88.9% so it's not far behind Houston, except it's marking better strides with deliveries and starts. There are 11,891 units planned, of which a "significant block" has just broken ground so some won't hit the DFW market until early 2005. There are 8,300 units projected to deliver this year, with two submarkets, Lewisville and Intown Dallas, ticketed to exceed 1,000 deliveries apiece.

The DFW last year added 11,391 units in an anorexic market with an absorption appetite of just 4,800 apartments and fourth-quarter move-outs far higher than the historic seasonal change. Tenants emptied 4,400 units in comparison to 1,000 to 2,000 posted in prior fourth quarters, Willett says. Again, home-buying opportunities and trade-ups get the blame for the changes in addresses.

Fort Worth, a stronger market than most throughout the downturn, is now ramping up on the concessions front in a sign that its property owners too are feeling the pinch. M/PF reports 13% of Fort Worth properties are offering concessions whereas 49% of Dallas complexes are discounting to get keys to turn. On the average, rent is being shaved 11%, according to the research.