Dallas/Fort Worth's Multifamily Sector Steamrolls Toward Stellar Year

DALLAS-With Texas in the spotlight due to high-priced coastal markets, investment sales professionals for the multifamily sector say Dallas/Fort Worth is headed into a record-breaking year.

"Nationally investment sales are slowing down a little bit, which is helping Dallas/Fort Worth," Will Balthrope, senior director for locally based Cushman & Wakefield of Texas Inc., tells GlobeSt.com. "Because we're getting good reports on our fundamentals, all green lights--occupancy is up, rents are up, concessions are down--capital is flowing from the coasts toward Dallas."

What appeared to be a slowdown last quarter in the local market was actually brokers taking a breather from a record-setting third quarter and readying their calendars for a stellar 2006. "I would say Dallas will see more sales in '06 than it did in '05," Balthrope predicts. He and partner, Don Ostroff, also a C&W senior director, closed January with three sales for $60 million. And, their pipeline is such that they will be launching one new listing per week into the market for months to come. "We're seeing a huge increase in the offerings," Balthrope says.

Armand Charbonneau, vice president in Dallas for Houston-based Transwestern Commercial Services, says he and partner Mark Freeman sold all that they had on the market last year. Charbonneau says they are fielding 12 to 15 requests for listing proposals on a near-daily basis. "We can't keep up with it. We're starting to see sellers want to take advantage of the demand," he says, "but the market is not even close to satisfying the buyers' demand. The draw for Dallas is the value. It's still very much a seller's market."

One of the region's most active class C sales teams, the Barker Group at Marcus & Millichap Real Estate Investment Brokerage Co., is heading into February with 13 properties, representing $150 million, in the pipeline just for his team, one of several in the Dallas/Fort Worth office. "And, we're getting ready to bring more on," John Barker, senior associate and associate director of the firm's national multi-housing group.

Barker says pricing remains aggressive across the board although "we're still one of the lowest price-per-unit areas in the nation." His team's 22 sales last year closed at 95% of the list. Charbonneau and Freeman pulled in $108 million from a dozen deals in 2005. Balthrope and Ostroff closed $400 million in 23 sales with 6,000 units, mostly class A product that, for the most part, traded in Q3. And that's just three teams out of hundreds working the Dallas/Fort Worth territory, where $2.8 billion of properties sold last year, a 46% spike over 2004's volume, according to the New York City-based Real Capital Analytics Inc.

The research firm's year-end report showed brokers nationwide sold $26 billion of multifamily properties in 2005. Dallas/Fort Worth ranked eighth in the US with 153 sales, based on Real Capital Analytics' tracking of deals exceeding $5 million. Three of the seven markets that outpaced North Texas are in Florida, Balthrope points out.

"The Dallas investment market is getting a lot of attention from investors who are weary of the tip-top pricing on the coasts in markets where condo conversions have ruled the day for two years," Balthrope says.

The upshot will be listings, offers and closings will be on the rise for some time to come. Balthrope points to just one C&W listing as a case in point: five offers, close to the $13.5-million ask, have pre-empted the bid deadline by three weeks for the 160-unit Villages at Clear Springs at 2600 Clear Springs Dr. in Richardson.

"By all accounts, 2006 is poised to be another strong year in investment and apartment sales," Balthrope says. "Dallas/Fort Worth's market fundamentals, the number of buyers and the perception of the recovery will all result in more offers at higher prices."