Apartment leasing hits a 3-year high in quarter

[gc]

Apartment leasing hits a 3-year high in quarter
Demand outpaces construction in D-FW; rents continue to fall
08:45 PM CDT on Monday, October 6, 2003
By STEVE BROWN / The Dallas Morning News
http://www.dallasnews.com/sharedcontent/dallas/business/stories/100703dnbusapartment.26a7c.html

A jump in apartment rentals has narrowed the gap between supply and demand.

Apartment leasing activity hit a three-year high in the third quarter, with 4,990 additional units rented.

That's more than the 4,398 new apartments completed during the three months ending in September, according to statistics released Monday by Dallas apartment analyst M/PF Research Inc.

"With demand slightly ahead of deliveries, occupancy edged up 0.1 point between June and September to 90.3 percent," Greg Willett, vice president of research, said in the report.

"While occupancy appears to be stabilizing, rents are still going down."

Average monthly apartment rent fell by 3.4 percent in the third quarter to $683. And that number probably doesn't include all the freebies that landlords are using to attract tenants.

"We know some concessions aren't being reported to us," Mr. Willett said.

Giveaways may have fueled the jump in apartment leasing this summer, he said.

"Landlords are telling me traffic is up notably, but they are having a hard time closing the deal," he said. "People are going from community to community hunting the best rates."

Higher interest rates may also be keeping some potential buyers in rental units.

"Part of it is also seasonal – the second and third quarters are always the strongest for demand," Mr. Willett said.

Even with the strong third-quarter performance, apartment construction is still slightly ahead of net leasing for the first nine months of the year. And an additional 10,800 units are in the development pipeline, according to M/PF Research.

"Dallas-Fort Worth now appears roughly at the bottom of its occupancy cycle, though the prospects for meaningful improvement in the near term are slim, given ongoing construction," Mr. Willett said.

Some neighborhoods continue to outperform the overall rental market.

The highest occupancy levels at the end of September were in Richardson (93.4 percent), Las Colinas (93.1 percent) and east Irving (92.8 percent).

The central Dallas market, which includes the booming Uptown area, was about 91.6 percent occupied at the end of the quarter.

Central Dallas also had the highest average apartment rent in North Texas at $1,148 a month.

The weakest rental neighborhoods are in the Highlands district, where average occupancy is only 84.1 percent.

Highlands stretches from Central Expressway to Northwest Highway in northeast Dallas.

E-mail stevebrown@dallasnews.com

[gc]

D-FW apartments filling up again
Las Colinas/Valley Ranch leads in mid-year occupancy rate, Southeast Dallas is worst
Christine Perez - Senior Writer
http://dallas.bizjournals.com/dallas/stories/2004/07/05/story1.html?page=1

Apartment leasing activity in Dallas-Fort Worth is bouncing back after two poor years, a new report from ALN Systems Inc. says. The study found that 4,359 units were absorbed during the first six months of 2004, a 105% increase over the 2,127 units leased during the same period last year. Most of the activity occurred during the second quarter, with 3,699 units absorbed -- a whopping 461% jump over first-quarter results, when 660 units were leased.

With the much-anticipated rise in interest rates, the flight from apartments to single-family homes has finally cooled, industry observers say. Still, even with the gains in absorption -- a prime indicator of demand -- occupancy has remained flat. This is due to the development of new multifamily projects, said Wayne Williams, president of Carrollton-based ALN. "Overall apartment occupancy has remained below 90% for the last seven quarters, hovering between 87.9% and 89.1%," he said. "The occupancy level will be tested over the coming six months, with the possibility of more than 9,000 units being completed during all of 2004."

Construction schedules and weather conditions could push that number to 11,121 units, which would be the highest level of new supply since 1999, when 27,000 units were added to the market, Williams said. ALN Systems has been analyzing the local multifamily market since 1991. It covers more than 5,800 North Texas properties totaling 1.2 million units. The company also studies the Austin, Houston and San Antonio markets, and recently expanded into Florida and Arizona. Locally, the top-performing apartment submarket was Las Colinas/Valley Ranch, with a mid-year occupancy rate of 93.8%. North Fort Worth came in at 90.9%, with Central Fort Worth, South Fort Worth and the North Dallas Tollway submarkets all showing an occupancy of 90.8%.

The worst performers were Southeast Dallas, with a pitiful mid-year occupancy rate of 78.8%, followed by Skillman/Audelia (83.5%), Bachman Lake (84.9%), Denton (85.5%) and West Fort Worth (85.5%). ALN's study also looked at occupancy conditions based on the age of the properties. Newer projects, those built since 1997, showed an overall occupancy rate of 87.5%, up 3% from last June. Properties built between 1987 and 1996 had the highest occupancy level, at 92.7%, up 1% over last year. Occupancy at complexes built between 1975 and 1986 dropped slightly to 88.7%; those built prior to 1975 saw a 2.4% loss, falling to an overall occupancy of 88.4%.

Over the past several years, low interest rates have lured people out of apartments, said Richard Keeling, senior vice president at Henry S. Miller Commercial. "Renters in Class A apartments went into new homes, those in Class B properties moved up to the As, and Class C renters went into the Bs," he said. "In terms of rental rates and occupancies, there has been a domino effect all the way down the line."

Fewer concessions

In terms of absorption numbers, the top-performing submarkets were Lewisville/Coppell, with 806 units absorbed; McKinney/Allen Frisco, 751 units absorbed; and North Dallas/Farmers Branch, 664 units absorbed. Submarkets losing tenants included Park Lane/Greenville Avenue, with a net loss of 897 units; West Fort Worth, with 561 units lost; and North Arlington, which showed a net loss of 268 units. Marketwide rental rates remained stable at an average of $0.84 per square foot per month. The most expensive units are in Central Dallas, at $1.18 per square foot, much higher than the rate bargain-hunters are paying in East Fort Worth, which showed an average of $0.68 per square foot.

Keeling said he's beginning to see a falloff in concessions, which have cut into property owners' profits over the last several years. "It has been the Achilles heel, with most owners just breaking even," he said. Despite the lackluster performance, the investment sales market for multifamily properties has remained strong, with buyers paying record prices. "There has been a phenomenal increase in price per unit," Keeling said. "It just boggles the mind. People buying properties are betting on the come, just like at the craps table. The returns are not there at this time, but the value is going to appreciate."

Brian O'Boyle with O'Boyle Properties has sold 21 properties totaling 6,750 units for about $300 million so far this year. "We are still seeing a tremendous amount of activity from investors," he said. "We're starting to see a gradual improvement in the performance of the properties, in terms of rents collected. It's not a dramatic improvement, but it is a step in the right direction." The best news, O'Boyle said, has been the creation of new jobs. This means continued demand for apartments, which will bring even more multifamily buyers to the table, he said. "We started seeing solid gains in new jobs in March, with 9,000 jobs added in Dallas and 3,000 in Fort Worth," he said. "A lot of buyers feel the market has bottomed out. They see a significant amount of upside over the next five years. Long-term, Dallas is a great bet."

[Kelley USA]

I may have missed it- but it appears the article makes no mention of Uptown... I thought Uptown was one of the hottest markets- but didn't even crack the top 3...

[gc]

I thought the same...

[Kelley USA]

So I'm assuming that the Uptown occupancy is less than 90%... Still not bad- but where are the vacancies at? From what I understand the new properties are close to 98% occupancy. Could it be the older properties, like the Post Properties (even though they are not that old), are just not as attractive to renters seeking the new shiny digs of West Village, Bryson and Marquis...

[Lakewooder]

Some of the area divisions they use don't make too much sense. Where is the dividing line between Greenville/Park Lane and Skillman / Audelia, e.g.? Also they usually count all of East Dallas as one area, when there are vast differences between each side of White Rock Lake, Old East Dallas, Fitzhugh, Deep Ellum, etc...

I own about a dozen rental properties, almost all single family (Lakewood, Old East Dallas and Cochran Heights), and I can tell you that I've had a much easier time renting things this year over last year. In fact it's almost like 3-4 years ago when I had several people each wanting the same property.

I'm still making a lot of improvements, but I'm probably not going to jump the gun on raising the rents (except the darn Dallas County Appraisal District keeps upping the appraisals and therefore my property taxes).

[bloodandpopcorn]

I'd assume that if there is a Central Fort Worth there is also a Central Dallas, and it may include properties with extremely high vacancy rates, making Uptown/Downtown's continual improvements unnoticable. Who knows.

[freewaytincan]

Okay, I see the Richardson occupancy. Don't start on that. I can feel it coming.

[noelamador]

Cooling rents fail to chill construction
12,000 apartments are going up now, and more are planned, despite weaker market
11:19 PM CST on Wednesday, November 10, 2004
By STEVE BROWN / The Dallas Morning News

Dallas-Fort Worth leads the country in apartment construction, even after three years of slumping occupancy and rents. Analysts say the rental market won't recover until developers stop building, but that isn't likely to happen soon. Almost 12,000 apartments are under construction, and more are planned. "We are just building too much," Greg Willett of M/PF Research Inc. told apartment owners, developers and brokers Wednesday. "We aren't adjusting how much we are building, and that's what it takes to get conditions back on track."

During each of the last three years, developers have built more than 10,000 units in North Texas. At the same time, average rents have fallen by as much as 4 percent each year and vacancy rates have climbed to about 10 percent. M/PF Research predicts that 9,000 more units will be completed in D-FW by a year from now. Vacancy rates are forecast to be virtually unchanged. But construction isn't the only thing causing an oversupply. Thousands of renters have left the apartment market to buy homes. "Forty to 50 percent of our turnover is people buying homes," said Bob Buzbee of Trammell Crow Residential.

Homeownership rates have grown to record levels, thanks to low mortgage rates. "There has been a stunning growth in homeownership the last five years, and it has killed apartment demand," said researcher William Wheaton. Developers, of course, see things in a more positive light. "We are building into what we see as a recovering economy," said Kevin Wisdom of ZOM Texas, which has two projects under construction in Uptown. Mr. Buzbee said Trammell Crow Residential is also gearing up to do additional projects here.

Developers and landlords have plenty of complaints about the market. The fourth quarter is generally slow for apartment rentals, and this year may be worse. "In many of our markets, but particularly in Texas, we have seen a dramatic decrease in traffic," said Sue Ansel of Gables Residential Trust. Customer traffic at Gables' leasing centers is off about 22 percent from a year ago. But more leases have been signed, she said. Apartment landlords are finding they have to sell freebies as much as a place to live. "With 90 percent of the calls you get, the first thing they ask is what are your specials," said Jim Kjolhede of Archon Residential Management.

Apartment owners in North Texas are still seeing 60 percent to 70 percent move-out rates from tenants, and many of them are leaving to get incentives at other properties. "I think rent increases are going to be slow to come," Mr. Buzbee said.

[tamtagon]

Analysts say the rental market won't recover until developers stop building, but that isn't likely to happen soon.

Okay, when analysts say the market needs to recover, they are specifically telling the public that the building owners are not making as much money as they want. For the other 99% of the population, the rental market in DFW is expected to continue to be excellent.

Lower cost of living has historically been one of the most attractive selling points in attracting businesses and families to DFW. To say the market needs a recovery period is inaccurate; the appartment market will need to recover only when people stop moving into the area, but that isn't likely to happen soon.

[dallastophoenix]

^ i agree.

[Lakewooder]

http://www.dallasnews.com/sharedcontent/dws/dn/latestnews/stories/010308dnbusdfwapartmentmarket.250c852.html

Dallas-Fort Worth apartment leasing, rents rise 2:11 PM CT

03:00 PM CST on Wednesday, January 2, 2008
By STEVE BROWN / The Dallas Morning News
stevebrown@dallasnews.com

An unexpected boost in recent apartment leasing gave Dallas-Fort Worth landlords something to smile about entering the new year.

Rents also edged to a record high - another positive sign for the local rental market.

Thanks to a total of about 1,000 net leasing in the fourth quarter, 2007 ended up with an overall increase of 8,240 apartment rentals for the year. That's about 10 percent below leasing in 2006 but higher than had been anticipated, according to the latest report out Wednesday by apartment analyst M/PF YieldStar.

The fourth quarter is typically a slow leasing period, said M/PF vice president Gregg Willett. But not this year.

"Demand is proving solid, helped by still healthy growth in the local economy and the fact that lenders remain hesitant to approve mortgages for would-be first-time home buyers," Mr. Willett said.

Net rentals were strong enough to easily outpace the 7,155 new apartment units added to the market in Dallas-Fort Worth last year.

Indeed, because of the record apartment tear downs - 6,668 units - the apartment market size actually increased by less than 500 units.

"Such tiny growth in the apartment base has happened only once before over the course of the past three decades," Mr. Willett said.

The market was strong enough that developers were able to increase average rents by 4 percent in 2007. Rents were up in every area of the city.

"Recent increases pushed the average monthly rent for an apartment to $741 as of December," he said.

No doubt that was because apartment vacancy levels have dwindled to less than 6 percent. At the end of September, overall occupancy in North Texas was 94.1 percent.

"Occupancy climbed 1.3 points during the past year, finishing at the highest year-end rate recorded since 2000," Mr. Willett said.

Looking ahead, a lot will depend on how the current housing market slump plays out.

"Lenders at some point are going to relax the temporarily too-stringent standards required for first-time home purchase," Mr. Willett said. "Loss of renters to home purchase, then, could come back into play as an influence on apartment market fundaments in a big way."

That would be bad news for apartment developers, who had almost 14,000 additional units under construction in the Dallas-Fort Worth area at the start of 2008.

"That's the second biggest block of new product on the way anywhere in the country, only trailing the 15,123 apartments under construction in Houston," Mr. Willett. "By far the biggest chunk of ongoing building in North Texas is in the Dallas urban core, where construction of 3,142 apartments is occurring."