I don’t normally write about anything but office and warehouse properties since those are the ones which most of my clients lease or buy. But many of their employees live in apartments so I thought they might be interested in what’s going on the Dallas Fort Worth market.
Earlier this week I heard a presentation by Greg Willet, the chief economist for MPF Research, which is a company owned by RealPage which produces property management software for the owners of apartment properties. That software gives RealPage the ability to collect an incredible amount of data which their MPF Research arm can then analyze and provide insight into the market at any given time.
To say the least, DFW apartment owners are having a very good time right now. Occupancies are high. Rents are going up. And credit quality of renters is the highest it’s ever been. Here are some interesting facts provided by Mr. Willett. For new renters (not including people just renewing their leases) in non-subsidized housing:
1. Average age is in the mid-30’s.
2. Average household income is $85,000.
3. Renters aren’t just leasing apartments until they are ready to buy a house. Renting is becoming a permanent or at least much longer lifestyle.
In the 6 years from 2010 to present,
1. 100,000 more apartments absorbed. Absorption is just the net change in the total number of apartments leased.
2. 65,000 have been built.
3. Occupancy is at 95.5%.
4.Rents have increased by 22.4%.
5. 53% renew their leases compared to a historic average in the mid-40’s.
But what about the future? That’s where it gets a little scary for developers as they may be overbuilding. There are 38,400 apartments under construction right now while only 15,000 were absorbed in 2015.
High-rise apartment buildings are where it is most out of whack. There are about 3,400 apartments in high-rise buildings now. But there are 13 properties under construction with another 3,000 units. And behind that are another 12 properties with yet another 3,000 units which are almost certainly about to break ground. While this market is looking good to developers with rents in the $3.00 per square foot per month range, it’s unclear how deep the renter supply is for those rental rates. How many people can afford $3,000 a month for a 1,000 square foot apartment?
With the extreme shortage of single-family homes, I wanted to know if Mr. Willett had any research showing the supply and demand of the total market for housing units. Unfortunately, he doesn’t, but it would certainly seem logical that many people moving to DFW are leasing apartments instead of buying homes simply because they can’t find them to buy right now.
Stay tuned. It will certainly change in the future.
Bob Gibbons is a Real Estate Advisor & Tenant Advocate with REATA Commercial Realty, Inc. which is a tenant advisory firm based in Plano, Texas. Bob serves companies in Plano, Frisco, McKinney, Allen, Richardson, Addison, Dallas and the surrounding areas and specializes in companies which lease or buy office and warehouse properties.