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ALN Apartment Monthly News
On January 24 I was fortunate enough to be invited
as a guest speaker at the State of the Industry
Luncheon hosted by the Apartment Associations of
Greater Dallas and Tarrant County. The other speakers
included Dr. Bernard Weinstein, an economist affiliated
with the SMU Cox School of Business, and Steve
Brown, the Real Estate Editor for the Dallas Morning
News.
Dr. Weinstein spoke first and gave a very informative
and entertaining presentation on “Going from the
Great Recession to the Great Stagnation”. Among the
items he pointed out were that the construction
industry is at a historic low. Building permits for
Single and Multifamily housing were at record low
minimums. Also, for the last ten year real income is
down for each quintile of American households, not
just the middle class.
I then gave my presentation. You can download the
powerpoint slides from the market news links off our
web site at http://alndata.com. I started off by
pointing out that in 2010 the DFW area had a
remarkably good year for occupancy gains. Over
23,000 Units were absorbed in 2010, yet owners had
failed to capitalize on the opportunity to raise rents.
Rents in 2010 only rose 2.1%
I had predicted that in 2011 rents would rise even as
occupancy couldn‟t match the gains of 2010. Sure
DFW State of the Industry Recap by Wayne Williams
President, ALN Apartment Data
January 2012 Volume 21, Issue 1
2611 Westgrove
Carrollton, Texas 75006
Phone: 1.800.643.6416
Fax: 1.800.649.6251
Email: [email protected]
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enough in 2011, the DFW
market absorbed 15,600 units
wh ich brough t ove ra l l
occupancy up to 91.6%.
Effective rents however rose
5.8% to an average of $782
per units. On the Dallas side
Effective Rents were up over
6% averaging $814 per unit
while on the Fort Worth side
Effective rents were up 4.6%
to $701 per unit.
In January 2011 there were 29
properties with 7400 units still
in Lease-up, mostly from the
deals developed prior to the
downturn. By January 2012
there were only 19 properties
in Lease-up with 4300 units, a
very low number. Only 5,100
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net new units came online in 2011, another very low
number.
I had forecast in the beginning of 2011 that it would be
a repositioning year for economic mix. By that I meant
that during the downturn we had a lot of new supply
going vacant. These were typically Class A properties.
Those owners and managers at the time had to ‟buy‟
occupancy and discount heavily and take whatever they
could get to keep up their occupancy numbers.
Therefore residents who would not normally qualify for
Class A units now could. Residents who would not
normally qualify for Class B properties could qualify for
those and so on.
During 2011 I forecasted the cycle would go the other
way. As occupancy levels leveled off toward maximum
occupancy, higher tier properties would raise rents,
forcing less qualified residents to choose lower tier
properties and so on. Sure enough in 2011 Class A
properties reached almost 95% occupancy at the end of
the 3rdquarter before dipping down to 93%. Effective
rents in Class A properties rose throughout the year to
end up at $1253 per unit. Class B properties also had
occupancy gain, even finishing the year with higher
occupancy than the Class A properties. By 2012 Class B
properties were at 93.9% occupancy with Effective
rents averaging $840 per unit.
(Continued on page 3)
ALN Apartment Monthly News
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Market Statistics
On a monthly basis, ALN surveys all apartment communities in each of the 23 markets that we cover and an average of 92% of these surveys
are successfully completed. The above statistics reflect only Conventional, Midrise, and High-Rise apartment communities. In addition, unless
otherwise noted, these statistics do not included Income Restricted, Student Housing, or Senior Independent Housing.
In-depth, property level research and data is available for all property types (including Senior and Income Restricted) through ALN OnLine,
which includes Market and Effective Rents, Occupancy, Floor Plan & Unit Mix information, Market & Submarket statistics, Market Surveys,
Historical Trends & Customizable Reports. By using ALN OnLine, you are able to see monthly fluctuations in any submarket you need which will
greatly enhance your ability to respond to changes quickly and efficiently.
Why Does ALN Update Monthly?
Most data providers update their data quarterly. For some, that is often enough. However, this industry moves way too
quickly and many opportunities are missed when waiting on slow reacting data providers to catch up with your market. Only
ALN can provide you with monthly updated data on 23 markets throughout the southern U.S.
ALN Apartment Monthly News
DFW Recap (from P.1)
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and Plano were not far behind with 9.1% and
8.0% Effective Rent growth, respectively.
I also noted that we are coming up on the
30th anniversary of the big 80‟s housing boom
in DFW. From 1982 to 1986 almost 200,000
units were added to the market. Those
properties account for almost a third of our
market! That is a lot of aging property. Some
of those properties have not aged well.
In the near future we are going to have to
think about how this aged product will reflect
on our market. If those properties deteriorate
to the point where they are considered Class
D properties that is going to drag down our
market.
Almost as if we planned it, Steve Brown gave
a presentation on the type of product that we
are seeing these days, a far cry from the
product that was being constructed 30 years
ago. The finish outs on the new products are
outstanding. It seems that at least in the
urban centers, renters are willing to give up
space for more luxurious common areas and
quality finish-outs. Residents are no longer
choosing renting over buying as a last resort,
but rather as a lifestyle preference. He quoted
an industry member that calculated the
average renter in their properties made $65,000
per year. He also pointed out that the new
products are commanding serious money. A new
Class A property now charges rent that is $300
more per month than the average home
mortgage payment. Right now people are
choosing renting over buying but the pendulum
could swing back again if rental prices go up too
much. The worry that the glut of foreclosed
homes and condos, the so-called „shadow
market‟ , would affect rents and occupancy has
passed, at least in the DFW area, but could
become a factor if rental prices expand too
quickly.
With only 8900 units currently in some phase of
construction we will see another year of very
small inventory added to the market.
Consequently 2012 looks to be another solid year
for rental gains.
I would like to thank the organizers from the
Greater Dallas and Tarrant County Apartment
Associations for letting me speak and I encourage
you to attend any functions like this in your own
area. I found it entertaining and insightful to
hear from industry professionals on the
multifamily economic picture — and hopefully
they did the same!
While the occupancy gains in Class A and B
properties slowed in 2011 compared to 2010,
in class C properties occupancy rose in 2011 at
a faster pace than 2010. Rental gains were not
as strong in 2011 suggesting that the class C
properties are about a year behind the Class A
and B properties in raising rents during this
recovery. Class C properties now average
about $625 per unit and the Class C properties
are averaging 90.8% occupancy.
Class D properties still have a way to go to see
any benefit from this recovery. It‟s going to
take full employment to get the bottom tier
properties showing any large signs of
occupancy or rental growth. Currently Class D
properties are at 84.6% Occupancy and $539
per unit. Less than half of what the class A‟s
get!
As for submarkets, all of the submarkets
performed better than the year before with the
exception of Mesquite/Balch Springs. Both
Rents and Occupancy were flat in the Mesquite
Balch Springs submarket. The well performing
submarkets were in the Far North Dallas Area
and the Oak Lawn/ Downtown area of Dallas.
The Preston/Frankford submarket saw rents
rise by over 10% for the year and Carrollton
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