Home > Uncategorized > DFW Multifamily Market Leads Nation

DFW Multifamily Market Leads Nation

Brian O’Boyle

Like the 2011 NBA Champion Dallas Mavericks, our market is red hot. According to the U.S. Bureau of Labor Statistics, Texas leads the nation in job growth—with Dallas-Fort Worth coming in No. 1 and Houston right behind us.

Dallas also leads the nation in multifamily deliveries. It’s always great to watch the pendulum swing this way and experience the excitement that accompanies a recovering market as it once again inches toward growth and prosperity.

Last year the North Texas market set a record for absorbed units—the highest calendar year total in 10 years. This was a direct result of the huge number of job gains in our market. Since April of 2010 the state has seen an increase of 254,000 jobs and, according to the May 2001 Texas Labor Market Review, year-to-date job gains in Dallas-Fort Worth total 63,400. This is huge, as it will further solidify the absorption of upper- and lower-tier product in our market.

Multifamily buyers, sellers, and developers have taken note. Land is being tied up, as strong fundamentals are making it easier to raise equity. Sellers are throwing their hats in the ring and exclusively listing their properties for full, national exposure. Buyers are revising their underwriting to reflect purchases on annualized 30-to-60 day trends. Non-refundable earnest money at contract execution has also made a reappearance—something we haven’t seen in years!

Cap rates are compressing. We recently closed a suburban late-2000s vintage project at a 5.3 percent cap. Also, we’re beginning to see some sales prices exceeding replacement cost. 1990s vintage product is making its way to the closing table as “value-add” candidates. We expect to see this become the norm as the product ages and the cycle continues.

Finally, Dallas continues to receive very positive nationwide press, and we’re finding that buyers are redirecting their focus to not only to the core local market, but our proximate secondary and tertiary markets as well. Denton, Sherman, Denison, and Athens are experiencing activity and join Tyler, Longview, and Abilene as “go to” destinations for investing. In short, the entire region is bustling as the country’s crippled economy inches toward recovery.

Brian O’Boyle is founder and managing broker of Apartment Realty Advisors’ Dallas office.

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