MARKET SNAPSHOT: Employment Boom Continues Across D/FW Metroplex, Leading to Tight Apartment Conditions and Renewed Construction
By Philip Shea, Associate Editor
The Dallas-Fort Worth metro area saw job gains of nearly three percent this year, which is far above the national average of 1.7 percent. According to Marcus & Millichap, the biggest gains came in the trade, transportation and utilities sector, which is likely to continue to make strides well into 2013. Additionally, residential development is fueling retail expansion and local warehouse/distribution operations, indicating that overall economic growth is likely to continue into the near future.
The recent job gains have led to a considerable plunge in vacancies over the past year, with metrowide vacancy falling 180 basis points to 5.5 percent. In keeping with trends in other markets, Class A products saw even lower vacancy—at 4.7 percent. Class B/C units, however, saw the most dramatic year-over-year change, with the respective rate falling 220 basis points to 6.4 percent.
Marcus & Millichap notes, however, that vacancy improvement is likely to decelerate over the next few quarters as a wave of new supply comes online. After delivering 3,800 units to the Dallas-Fort Worth area over the past year, developers are currently working on 12,500 apartments, with 5,800 of those expected to be completed by the end of the year.
Until more supply is delivered, however, rents should continue to increase—albeit at a modest pace—throughout the Metroplex. Average asking rents increased 3.2 percent to $810 per month between the third quarters of 2011 and 2012, this while effective rent rose 3.8 percent to $730 per month.
The submarket with the highest prices, by far, was the central downtown area—with average effective rent coming in at $1,585 per month. The Oaklawn/Uptown area also posted impressive rents, the average being $1,182, while also sporting an overall vacancy rate of 3.5 percent.
The Arlington area, meanwhile, continued to see poorer performance in fundamentals, with average rents from $537 to $617 per month and vacancies from 5.7 percent to 6.4 percent.
Marcus & Millichap notes that while home sales rose 20 percent over the last year, foreclosure activity also increased more than 10 percent, indicating that the post-recession preference for renting may continue for a bit longer. However, as foreclosure activity recedes and new multifamily construction accelerates, apartment operators may indeed have to begin offering concessions in the foreseeable future.
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