Multifamily Sector's Demand Marks Second Best Showing in 20 Years

"For the first time in several years, the amount of construction that we're seeing in Dallas/Fort Worth makes sense," Greg Willett, vice president of research and analysis for the Carrollton, TX-based M/PF YieldStar, tells GlobeSt.com. "They finally got the message." On average, builders deliver 10,000 apartments annually, but this year most likely will add just 7,000 units, give or take just a bit, he says. "You're going to have to go back to 1993-94 to see something like that," he says.

There were 9,819 units rising at the third quarter's close, but only two-thirds will deliver this year, Willett says. To date this year, 2,400 units have come on line. The hot pockets are Las Colinas, where 1,785 units will deliver in the near term and in-town Dallas, which has 1,306 units under way.

Gulf Coast hurricane evacuees had just a moderate impact on North Texas markets. Willett says absorption totaled 5,960 units from July through the end of September. And with the newcomers, he's projecting that the historical Q4 slump could be averted.

Year-to-date demand is 21,000 units. The 20-year record, set in 2000, was 26,000 units. "We won't beat 26,000," he says. "But again, there's been a huge jump in momentum from where we had been in the past few years."

The influx of evacuees helped neighborhoods like the Highlands area, Mesquite, Southwest Dallas and the far northeast plus West Irving, hubs for 1970s and 1980s product. The end result is the first uptick in several years. The 1970s-era complexes are now 88.8% filled and 1980s product has hit 92.5%, research shows.

Class A units have reached 95.4% for 1990s-era development while apartments built in the past five years are 94.4% occupied. Pockets with 95% or higher occupancies are East and West Plano, Las Colinas, North Ellis County, Fort Worth's in-town, Museum District and northern submarkets. In-town Dallas, a leader until recently, slipped to 92.6%, due in large part to the number of units coming on line.

Despite the overall uptick, rent growth didn't keep pace. "It actually lost steam over the past few months," Willett says in the report. September's average, $686 per month, mirrors last year's prices. He attributes the slump to a seasonal end of leasing activity and a concerted effort by owners not to appear to be price gouging evacuees.