The Dallas/Fort Worth multifamily market continued to grow in the fourth quarter of 2013. Asking rents edged up and the vacancy rates declined, creating a favorable context for multifamily to thrive. Effective rents climbed 4.1 percent to $861 per month in 2013, building on a 3.5 percent gain during the previous year, according to Marcus & Millichap’s Fourth Quarter Apartment Market Report.
In the Dallas half of the Metroplex, apartment vacancy plunged 80 basis points during the past year to 5.3 percent in the third quarter. Fort Worth followed a similar trend yet with more modest gains as vacancy retreated 20 basis points to 6.4 percent.
All regions of the metro area have posted positive net absorption in 2013, with North Dallas and Central Dallas emerging as DFW’s top performing submarkets. Fueled by a growing demand for living space near the Central Business District, construction activity has heightened particularly in the Uptown/Oak Lawn area where effective rents reached $1,542 per month. Determined to capitalize on demand, Houston-based The Hanover Co. opened luxury apartment community in Uptown Dallas last year. Dubbed Hanover Cityplace Apartments, the amenity-rich complex is located at the crossroads of the West Village, Cityplace and Knox Henderson districts, within close proximity to lifestyle hubs like Victory Park, Klyde Warren Park and the Dallas Arts District.
Both local and out-of-state investors developed an interest in DFW’s robust multifamily market, entailing a 40 percent increase in transaction velocity. Much of the rise occurred in the Class C segment, which recorded a 50 percent advance in velocity during the most recent 12-month period, as Marcus & Millichap data shows.
The positive momentum is expected to continue all throughout 2014, mainly prompted by a prospering local economy and consistent job growth. The Metroplex will add 113,900 jobs this year, lifting payrolls 3.6 percent. In 2013, employers fostered the creation of 112,700 positions.
While jobs will come from a variety of industries, many of the new employment opportunities will be brought about by companies setting up service centers. Associa Inc., for example, will bring 700 new jobs into Dallas-Fort Worth as part of the firm’s national consolidation strategy. Kohl’s Department Stores anticipates its new customer service operations center at 17655/17657 Waterview Parkway to eventually employ 1,500 people, with hiring starting this spring.
Moreover, Bloomington, Illinois-based State Farm will soon begin to take occupancy of its new regional hub in Richardson, in a much anticipated move that will allow the company to boost its Dallas-area employment to 8,000 workers. Attracted by the area’s talented labor pool as well as its business-friendly climate, the insurance company inked a deal to lease approximately 2 million square feet at CityLine, KDC’s $1.5 billion transit-oriented, mixed-use project currently under development in Richardson, near Plano.
A mix of high-paying and blue-collar positions corroborated with the area’s growing demographics will generate demand for new multifamily product across all tiers. Approximately 19,000 rentals are projected to come online in 2014, driving inventory up 2.9 percent. By year end, Marcus & Millichap says rents will hit $895 per month.
Charts courtesy of CoStar Group, Inc., Real Capital Analytics via Marcus & Millichap 2014 Annual Report.