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DALLAS-Steadily rising vacancy and slowing job growth caused Dallas/Fort Worth to fall three places in Marcus & Millichap’s 2009 National Apartment Index. The Metroplex fell to 26th place, from 23rd last year. Nonetheless, despite less than robust growth in the near term, the report says the local apartment market is positioned to rebound from the national economic slowdown quickly, with renewed population growth as early as the end of the year ultimately expanding renter demand.

The index is a snapshot analysis that ranks 43 apartment markets based on their cumulative weighted-average scores for a series of 12-month forward-looking supply-and-demand indicators, including forecast employment change, vacancy, construction, housing affordability and rents. Taking into account both the predicted level and degree of change over the forecast period, the index is designed to indicate relative supply and demand conditions at the market level.

The report says Dallas/Fort Worth job growth in will be modest in ’09. Following a five-year stretch where the Metroplex added approximately 340,000 new positions, it is expected to add just 3,600 positions this year, a bare 0.1% increase. At the same time, the report points out, apartment development, though down from last year, will add 6,700 new units, increasing the inventory by 1.4%. Last year, builders added 10,800 apartments.

As a result, Marcus & Millichap expects the local vacancy rate to rise 180 basis points to 9.2% by year end due to the combination of weaker renter demand and increased supply. It reports supply-side pressure pushed vacancy up 130 basis points in ’08. In turn, it says, asking rents are projected to finish the year at $798 per month, a 1.4% gain, while effective rents are projected to increase 0.3% to $723 per month.

According to apartment consultant M/PF YieldStar of Carrollton, TX More than 20,000 apartments are under development in the DFW region. Given the current economic climate, it’s highly doubtful all those units will go into construction, but M/PF analyst Chandra Gajjar says probably more will be built than the market can handle in the near term. On the other hand, she adds, the region’s overall economic strength makes it likely that surplus units will be absorbed more quickly than they would be in other markets.

In regard to submarkets, Marcus & Millichap says slowed business expansion near intermodal transfer facilities south of Dallas and near Alliance Airport in Fort Worth is likely to weaken renter demand for apartments in those areas. On the other hand, it says in-migration will bolster demand in Denton County and the Plano/Allen/McKinney area. Additionally, the report says assets near DART stations are anticipated to receive a lot of interest, while owners of properties adjacent to the Oaklawn/Uptown/CBD submarket, where occupancy is tight and rents are out of reach, may benefit from demand for more affordable housing alternatives.

Both Marcus & Millichap and M/PF contend apartment investment activity in Dallas/Fort Worth will be brisker than the nation as a whole due to healthy long-term growth prospects and cap rates in the mid-7% to low-8% range. The former says institutional and REIT activity could pick up during the second half of the year as the apartment building boom comes to a close and suburban fundamentals begin to stabilize.

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