Dallas Fort Worth Economic Trends First Half 2015 … · Plano/Allen/McKinney submarket will be positioned to serve more than 1,000 out-of-state transplants relocating to Toyota Motor

Data and images pertaining to employment, income, permits, population, rents, single-family housing, and occupancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 2017 are estimated values, while 2018 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

DALLAS-FORT WORTH

For the second-consecutive year, more than 100,000 jobs were created in the Dallas-Fort Worth metro area. Employment increased 2.9% annually with 103,700 new workers in 2017, a deceleration from 3.8% growth in the prior year. Despite the slowdown, job growth was still more than twice the national rate of expansion in 2017. While all employment sectors grew, staffing in five sectors swelled by more than 3%. Much of the growth was in the Plano/Allen/McKinney submarket, where multiple corporate and regional relocations and expansions made a profound impact on the local economy. Over the past two years, multifamily developers feverishly added new stock to the submarket in anticipation of thousands of new workers arriving in the area. In 2017, more than 20% of the 24,411 new apartments in the Metroplex came online in the Plano/Allen/McKinney submarket. Metrowide, the new inventory outpaced absorption by 22%, which led to a 50-basis-point annual decrease in occupancy to 94.7% in December. Meanwhile, average effective rent increased 2.7% to $1,102 per month.

2017 REVIEW

Driven by accelerating household formation and job growth, apartment absorption is forecast to surpass deliveries in 2018. Builders are scheduled to complete approximately 100 apartment communities this year. The completions, coupled with more than 20 additional properties underway, will result in deliveries topping 28,100 units. Apartment absorption is estimated to exceed 30,200 units. The enormous leasing activity is projected to drive occupancy up 50 basis points to 95.2%. Operators will capitalize on the vigorous demand by raising effective rent 3.5% during the year. By December, effective rent is forecast to reach an average of $1,140 per month. Developers are expected to request permits for 28,185 apartments in 2018, 3% greater than 2017.

This year the local job growth rate is again expected to outpace most metro areas in the country. Employers are projected to add 114,100 new workers to payrolls this year, a 3.1% year-over-year increase. A significant amount of this growth will originate within major developments Legacy West District, $5 Billion Mile, and Arlington Stadium District. Over the long term, other massive projects including Dallas Midtown and Hidden Ridge in Irving will also become sizable centers of employment.

2018 PREVIEW

2.9% YOY

EMPLOYMENT103,700

2.7% YOY

$1,102

50 BPS YOY

94.7%

27.4% YOY

CONSTRUCTION24,411 Units

60 BPS YOY

UNEMPLOYMENT RATE3.4%

MARKET FACTS

POPULATION7,449,400 $65,745

HOUSEHOLDS2,662,300 20.1%

*Estimate; **Forecast | Source: Berkadia, Moody’s Analytics

CAP RATE | PRICE PER UNIT

*Estimate | Source: Berkadia, Real Capital Analystics

SALES ACTIVITY INDEX

*Estimate | Source: Berkadia, Real Capital Analystics

EMPLOYMENT CHANGE

YE 2017 2.0% YOY YE 2017 2.0% YOY YE 2017 1.9% YOY YE 2017 10 BPS YOY

Ind

ex

Valu

e (

Base

Ye

ar

20

10 =

10

0)

94.5%

94.7%

94.9%

95.1%

95.3%

95.5%

$700

$800

$900

$1,000

$1,100

$1,200

2014 2015 2016 2017* 2018**

Rent & Vacancy

$25,000

$50,000

$75,000

$100,000

$125,000

5.0%

5.5%

6.0%

6.5%

7.0%

2013 2014 2015 2016 2017*

Cap Rate & PPU

-200,000

-100,000

0

100,000

200,000

2009 2010 2011 2012 2013 2014 2015 2016 2017* 2018**

Employment

12,000

16,000

20,000

24,000

28,000

32,000

2014 2015 2016 2017* 2018**

Permits & Deliveries

0

100

200

300

400

2013 2014 2015 2016 2017*

Sales Index

MEDIANHOUSEHOLD

INCOME

RENTSHARE OFWALLET

*Estimate; **Forecast | Source: Berkadia, Axiometrics, Moody’s Analytics


EFFECTIVE RENT AND OCCUPANCY ABSORPTION AND DELIVERIES

2017 PERFORMANCE HIGHLIGHTS

EFFECTIVE RENT

OCCUPANCY

19,996 UnitsABSORPTION

Data and images pertaining to employment, income, permits, population, rents, single-family housing, and vacancy are year-end figures. Absorption, construction, and apartment sales figures are full-year totals. Numbers for 2016 are estimated values, while 2017 figures are forecast projections. Apartment market data criteria and methodologies vary by market.

DALLAS-FORT WORTH

Multifamily completions in the Metroplex increased for the fifth-consecutive year in 2016. Builders delivered 18,290 apartments, a 2% year-over-year increase. More than one-third of new multifamily inventory came online in the neighboring submarkets of Plano/Allen/McKinney, Lewisville, and Denton County/Other. Approximately 16% of metrowide absorption was in the Plano/Allen/McKinney submarket, fueled by an influx of 1,200 transplants from southern California, New York, and Kentucky to the temporary site of Toyota Motor Corporation’s North American headquarters in Plano. Robust apartment demand across the metro kept vacancy at 4.6%, the same as one year prior. Asking rent advanced 4.5% annually to $1,097 per month by December. Operators held concessions at 0.5% of asking rent, the same as year-end 2015. The favorable apartment fundamentals were supported by job growth of 3.1% in 2016. Local employers augmented payrolls as 107,300 jobs were created. Trade, transportation, and utilities sector employment surged 5.1% with 40,200 new hires.

2016 REVIEW

Employment is projected to expand 3.1% again in 2017 as companies hire 110,700 workers. New apartment stock in the Plano/Allen/McKinney submarket will be positioned to serve more than 1,000 out-of-state transplants relocating to Toyota Motor Corporation’s new North American headquarters, in addition to 1,000 new workers from within the metro. Additionally, Liberty Mutual will hire the first of 2,400 new workers this year. Metrowide job growth will keep apartment absorption robust, though leasing activity will trail the addition of 29,630 apartments. Consequently, vacancy will rise 20 basis points to 4.8% by year-end. Asking rent is forecast to rise 4% to $1,141 per month, while concessions increase 50 basis points to 1% of asking rent. Sustained economic vitality will provide multifamily buyers with numerous investment options. Institutional-grade properties are scattered throughout the metro, with values varying by location, though prices are predominantly between $160,000 and $200,000 per unit and cap rates primarily in the mid-4% to low-5% range. The more aggressive investors are targeting 1960s- through 1980s-vintage stock. Prices for 1960s-era assets range mostly from $40,000 to $60,000 per unit, while 1970s/1980s inventory is typically $10,000 to $20,000 higher per unit.

2017 PREVIEW2016 PERFORMANCE HIGHLIGHTS

3.1% YOY

EMPLOYMENT107,300

4.5% YOY

ASKING RENT$1,097

0 BPS YOY

VACANCY4.6%

2.0% YOY

CONSTRUCTION18,290 Units

60 BPS YOY

UNEMPLOYMENT RATE3.5%

0 BPS YOY

CONCESSIONS0.5%

MARKET FACTS

POPULATION7,320,300 $61,509

HOUSEHOLDS2,648,700 21.4%

ASKING RENT AND VACANCY


CAP RATE | PRICE PER UNIT

*Estimate | Source: Berkadia, CoStar Group

SALES ACTIVITY INDEX


EMPLOYMENT CHANGE

YE 2016 2.0% YOY YE 2016 2.0% YOY YE 2016 1.2% YOY YE 2016 70 BPS YOY

Ind

ex

Valu

e (

Base

Ye

ar

20

10 =

10

0)

PERMITS AND DELIVERIES

4.5%

5.0%

5.5%

6.0%

$900

$1,000

$1,100

$1,200

2013 2014 2015 2016* 2017**

Rent & Vacancy

$50,000

$75,000

$100,000

$125,000

6.0%

6.5%

7.0%

7.5%

2012 2013 2014 2015 2016*

Cap Rate & PPU

-120,000

-60,000

0

60,000

120,000

180,000

2008 2009 2010 2011 2012 2013 2014 2015 2016* 2017**

Employment

0

10,000

20,000

30,000

2013 2014 2015 2016* 2017**

Permits & Deliveries

0

100

200

300

2012 2013 2014 2015 2016*

Sales Index

MEDIANHOUSEHOLD

INCOME

RENTSHARE OFWALLET



3.0%

4.0%

5.0%

6.0%

$800

$900

$1,000

$1,100

2012 2013 2014 2015* 2016**

As the local labor market neared full employment, job growth decelerated from 4.1% in 2014 to a 2.7% rate last year as employers recruited 88,900 workers. The trade, transportation and utilities sector grew 3.4% with 24,900 jobs. The segment was boosted by more than 2,000 new hires at the Nebraska Furniture Mart in The Colony and 400 positions filled at the Amazon fulfillment center in Haslet. Studio Movie Grill opened a new theater in The Colony midyear, hiring 200 workers. The new jobs were part of a 5.2% expansion in the leisure and hospitality industry, where 18,900 positions were added. The broad spectrum of job creation in the Metroplex buoyed apartment demand. Apartment inventory surged 3% with the addition of 19,220 units. Absorption soared beyond deliveries, however, driving vacancy down 80 basis points to 4.3% by year-end. Meanwhile, asking rents appreciated 5.7% to $1,046 per month.

2015 review

Employers are expected to hire 78,900 workers this year, 2.3% annual expansion. Development at Braniff Center at Dallas Love Field will create 1,200 aviation and retail jobs through 2021, while Conifer Health Solutions fills 600 positions, boosting health services employment. Job growth will fuel robust apartment demand, resulting in vacancy falling 40 basis points to 3.9%. As availability tightens, operators will increase monthly rents 4.8% to $1,096. In the multifamily investment arena, buyers will find a wide variety of investment opportunities. Value-add buyers will continue to target 1970s- and 1980s-vintage stock. Though prices will vary in this segment, investors should expect most Class B product priced above $60,000 per unit, while Class C communities will trade between $40,000 and $60,000 per door. Alternately, Class A investors should expect per-unit values between $120,000 and $150,000 among a large portion of institutional-sized properties. In the suburbs, best-in-class communities can command $165,000 to $185,000 per unit, while infill assets can reach as high as $350,000 per unit.

2016 Preview2015 Performance highlights

2.7% YoY

emPloYment88,900

5.7% YoY

asking rents$1,046

-80 BPs YoY

vacancY4.3%

-100 BPs YoY

UnemPloYment rate3.5%

-40 BPs YoY

concessions0.4%

market facts

PoPUlation7,174,000

meDianhoUseholD

income$60,300

hoUseholDs2,606,400

rentshare ofwallet20.8%

-150,000

-75,000

0

75,000

150,000

2007 2008 2009 2010 2011 2012 2013 2014 2015* 2016**

asking rents anD vacancY


$55,000

$65,000

$75,000

$85,000

$95,000

6.0%

6.5%

7.0%

7.5%

2011 2012 2013 2014 2015*

caP rate | Price Per Unit


0

100

200

300

2011 2012 2013 2014 2015*

sales activitY inDeX


0

6,000

12,000

18,000

24,000

2012 2013 2014 2015* 2016**

Ye 2015 2.1% YoY Ye 2015 2.8% YoY Ye 2015 2.0% YoY

ind

ex

valu

e (

Base

Ye

ar

20

10 =

10

0)

40.0% YoY

constrUction19,220 Units

Ye 2015 70 BPs YoY



Permits anD Deliveries

Dallas-fort worth

emPloYment change

Data and images pertaining to employment, income, permits, population, rents, single-family housing and vacancy are year-end figures. Absorption, construction and apartment sales figures are full-year totals. Numbers for 2015 are estimated values, while 2016 figures are forecast projections. The sales information represents transactions of apartment properties with 20 or more units and sales price of $1 million or more. Apartment market data criteria and methodologies vary by market.

DALLAS | FT. WORTHECONOMIC TRENDS | 1H 2015

JOBSGAINED | LOST

*Y-O-Y March 2015

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*

83,600 95,100 78,300

(29,500) (110,000)

58,700 73,400 89,900 95,900

130,000 116,900

METRO

2014 TOTAL POPULATION

7,025,800

2014EMPLOYMENT BASE

3,339,300

Berkadia.com | ApartmentUpdate.com

DALLAS OFFICE | 972.458.7300

EMPLOYMENT GROWTH

UNEMPLOYMENT RATE ECONOMIC NEWS

The Dallas-Fort Worth economy remained vibrant in the last fourquarters as all employment sectors expanded. Local businessesadded 116,900 workers to payrolls through March of this year, a3.6% annual gain. The trade, transportation and utilities segmentexpanded 4.5% with 32,200 jobs created. Significant additionswere also recorded in the professional and business servicessector as 26,400 workers were hired, a 4.7% increase.

Several large corporate expansions over the next few years willensure sturdy apartment demand in the Metroplex. Among themost notable is the addition of several hundred workers followingcompletion of Liberty Mutual's call center hub in Plano, with thepotential for up to 5,000 new jobs by 2017. In the trade,transportation and utilities sector, UPS will create 670 jobsamong its Fort Worth and McKinney distribution centers by 2017.Meanwhile, cloud infrastructure provider SoftLayer plans to hire250 workers this year, while IT services company HCLTechnologies will add 200 jobs through 2017.

EMPLOYMENT DISTRIBUTION* EMPLOYMENT SECTOR TRENDS*

a Berkshire Hathaway and Leucadia National company For sources & disclaimer: apartmentupdate.com/sources

http://www.berkadiarea.com/http://www.apartmentupdate.com/

DALLAS | FT. WORTH ECONOMIC TRENDS | 1H 2015

MEDIAN HH INCOME* POPULATION GROWTH*

Household earnings rose 1.9% in the last four quarters, reaching$59,800 per year in March. During the prior year, the medianhousehold income increased 2.9%.

At the end of 2014, the metrowide population topped sevenmillion people. In March of this year, the population was 7.1million, a 2.1% increase over the same period in 2014. Thepopulation is projected to grow 2.1% annually through 2020.

Berkadia.com | ApartmentUpdate.com

DALLAS OFFICE | 972.458.7300

MEDIAN HOME PRICE

Single-family home prices advanced 4.2% since the first quarter of2014, reaching $196,000 in March. The rate of price appreciationdecelerated from the 8.1% increase in the prior 12-month period.

Healthy job growth spurred demand for single-family homes. Salesvelocity totaled 148,200 annualized transactions in March of thisyear, a 7% annual gain, and the greatest activity since mid-2006.

RENT VS. OWN

Since 2005, the average monthly mortgage increased 1.3% whilethe average rent advanced 12.6%. By the end of the first quarter ofthis year, average rent was $112 greater per month thanhomeownership.

Metrowide vacancy plunged 100 basis points in the last 12 monthsto 4.8% in the first quarter, fueled by leasing activity that outpacednew supply by 37.9%. During this time, asking rents advanced4.5% to $984 per month. Meanwhile, effective rents reached $974per month, a 4.7% annual gain.

HOUSING PERMITS

First-quarter multifamily permitting activity was up sharply from thesame period in 2014. Requests were submitted for 4,760 permits inthe first three months of this year, a 33.2% annual increase.Year-to-date activity is on pace to exceed 19,000 permits by theend of 2015.

From 2010 to 2014, developers requested an average of 20,020single-family permits. In March of this year, 26,380 annualizedpermits were issued, a 9.7% year-over-year increase.

a Berkshire Hathaway and Leucadia National company For sources & disclaimer: apartmentupdate.com/sources

http://www.berkadiarea.com/http://www.apartmentupdate.com/

Documents

Dallas Fort Worth Economic Trends First Half 2015 … · Plano/Allen/McKinney submarket will be positioned to serve more than 1,000 out-of-state transplants relocating to Toyota Motor