MARKETVIEW Dallas/Fort Worth Multifamily, Q3 2017 Deliveries and starts see midyear gains; occupancy up 40 bps Occupancy Rate 95.63% Avg. Rental Rate $1.20 PSF Construction Starts 7,175 Delivered 5,937 Absorption 5,631 Figure 1: DFW Multifamily Market (000s) 12 10 8 6 4 2 *Arrows indicate trend from previous quarter. Occupancy Rate (%) 96.0 95.5 95.0 94.5 94.0 93.5 93.0 0 92.5 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Source: CBRE Research, Axiometrics, Q3 2017. Starts Absorption Delivered Construction Occupancy Multifamily rental demand during the past 90 days in Dallas/Fort Worth fell slightly from a record-setting Q2 2017, but grew in comparison to last year s Q3 2016. Driven by job growth in the northern suburbs of Plano, Allen, McKinney and Richardson, Q3 2017 net absorption reached 5,631 units across the total metro area. Deliveries in Q3 2017 increased to 5,937 units, balancing with absorption to leave the occupancy rate stable at 95.6%, slightly lower than the previous quarter. Rents rose to a greater extent across Fort Worth than they did across the Dallas area, though both regions pushed the overall monthly rent up to $1.20 per sq. ft. This continued to reflect strong multifamily demand in the booming North cluster, though Denton, Oak Lawn, and Northwest Fort Worth submarkets have also remained robust. Whether demand will be able to keep pace with supply and support occupancy and rent growth remains to be seen, hinging on sustained job growth in professional services and hospitality, or unexpected gains elsewhere such as transportation. With 8,722 units projected to be delivered in Q4 2017 and a total of 40,801 units in the pipeline under construction, job growth needs to stay strong to balance supply. Through Q3 2017, the Metroplex claimed more blockbuster corporate arrivals, headlined by the relocation of Toyota s North American headquarters to Plano. But the rate of corporate relocations and expansions to North Texas is beginning to taper which means the final tally for new payrolls during Q4 2017 may be slower in 2017 than highs seen in recent prior years. Q3 2017 CBRE Research 2017 CBRE, Inc. 1
MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY Figure 2: Market Overview Submarket Property Count Unit Count Source: CBRE Research, Axiometrics, Q3 2017. Weighted Mthly Rent ($/SF) Occupancy (%) Net Absorption Under Construction CENTRAL East Dallas 46 10,089 1.57 94.55 356 2,268 306 North White Rock 85 25,324 1.32 94.27 245 1,665 348 Oaklawn 83 19,401 1.83 94.13 437 4,282 345 South White Rock/I-30 39 9,922 1.09 94.41-79 - 0 Delivered Central Total 253 64,736 1.48 94.29 959 8,215 999 NORTH Collin County/Other 10 2,579 1.32 94.45 96 118 80 Far North 105 30,893 1.28 95.05 467 733 345 North 29 6,891 1.52 93.47 76 1,383 147 Plano/Allen/McKinney 157 45,693 1.32 94.66 1358 6,345 1,149 Richardson 44 12,689 1.30 94.13 863 2,788 725 North Total 345 98,745 1.32 94.63 2860 11,367 2446 NORTHEAST Far Northeast 27 7,725 1.08 94.89-76 - 0 Garland 57 11,892 1.16 95.52 281 1,706 266 Hunt County 7 912 0.93 95.61-13 87 89 Northeast Total 91 20,529 1.12 95.29 192 1,793 355 EAST Kaufman County 4 792 1.20 97.66 43-0 Rockwall County 6 1,288 1.46 96.19 7 447 0 East Total 10 2,080 1.36 96.75 50 447 0 SOUTHEAST Mesquite/Seagoville 31 7,981 1.09 95.31-92 - 0 Southeast Dallas 19 3,531 0.93 93.66-126 - 0 Southeast Total 50 11,512 1.04 94.80-218 - 0 SOUTH Ellis County 20 2,489 1.16 97.32-17 - 0 South 7 1,674 0.97 92.28-36 205 0 South County 28 5,944 1.10 95.73-89 111 0 South Total 55 10,107 1.09 95.55-142 316 0 SOUTHWEST Grand Prairie 24 5,430 1.12 95.65-90 150 0 Southwest Dallas 53 13,555 1.12 95.33 55 1,770 96 Southwest Total 77 18,985 1.12 95.42-35 1,920 96 WEST South Irving 20 4,506 1.13 94.47-115 - 0 West Total 20 4,506 1.13 94.47-115 - 0 NORTHWEST Carrollton/Addison/Coppell 101 27,455 1.28 95.80 41 1,437 0 Denton County/Other 60 13,278 1.31 95.29 817 3,039 507 Far Northwest/Farmers Branch 42 10,484 1.26 95.96-23 888 0 Lewisville 87 27,423 1.27 95.17 401 624 255 North Irving 112 35,077 1.32 95.25 249 1,683 352 Northwest 40 9,458 1.49 94.32 196 797 183 Northwest Total 442 123,175 1.31 95.35 1681 8,468 1297 NORTHEAST Grapevine 27 6,941 1.39 95.46-29 704 0 Hurst/Bedford/Euless 76 17,259 1.19 95.79-15 - 0 Northeast 69 17,045 1.17 95.14 57 1,087 119 Tarrant County/Other 6 1,594 1.30 96.42 29-0 Central Total 178 42,839 1.22 95.50 42 1,791 119 EAST Central Arlington 64 11,425 1.06 95.47-90 - 0 I-820 32 6,272 0.97 93.78-102 - 0 North Arlington 109 26,691 1.19 94.83 21 392 119 East Total 205 44,388 1.13 94.85-171 392 119 SOUTH Southeast 66 15,317 1.17 95.39 38 1,816 119 Johnson County 7 1,070 1.17 96.72 9 250 0 Southwest 109 22,951 1.10 95.19-9 975 87 South Total 182 39,338 1.13 95.31 38 3,041 206 SOUTHWEST Hood County 1 134 1.05 100.00 59-0 Southwest Total 1 134 1.05 100.00 59-0 WEST Parker County 7 1,076 1.15 95.89-30 - 0 West Total 7 1,076 1.15 95.89-30 - 0 NORTHWEST Northwest 57 10,982 1.24 94.93 461 3,051 300 DALLAS TOTAL FORT WORTH TOTAL DALLAS/FORT WORTH TOTAL Northwest Total 57 10,982 1.24 94.93 461 3,051 300 1,343 354,375 1.22 95.17 5,232 32,526 5,193 353 75,981 1.17 96.08 756 7,725 764 1,696 430,356 1.20 95.63 5,988 40,251 5,957 Q3 2017 CBRE Research 2017 CBRE, Inc. 2
MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY Figure 3: New Supply and Job Growth (000s) 25 20 15 10-5 9 8 7 6 5 4 3 2 1 0 Q1 2016 1996 (000s) 1997 Figure 4: Deliveries Q3 2016 1998 Q1 2017 1999 Deliveries Q3 2017 2000 Q1 2018 2001 2002 Source: CBRE Research, Moody s Analytics, Q3 2017. Q3 2018 Projected Deliveries 2003 Q1 2019 2004 Q3 2019 2005 New Supply 2006 2007 Figure 5: Rent Growth Growth (%) 3 2 1 0-1 -2-3 -4-5 2008 2009 2010 Y-O-Y Job Growth 2011 2012 2013 2014 2015 2016 Growth (%) 2017 YTD 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: CBRE Research, Axiometrics, Q3 2017. Source: CBRE Research, Axiometrics, Q3 2017. Dallas Fort Worth 6 4 2 0-2 -4-6 Figure 6: Select Sale Transactions Property Year Built Address City Sierra Park 656 1984 11611 Ferguson Rd Dallas Silverbrook I&II 642 1983 2934 Alouette Dr Grand Prarie Verandahs at Cliffside 538 1986 1705 NE Green Oaks Blvd Arlington Hyde Park at Valley Ranch 524 1985 10201 N McArthur Blvd Irving The Link Apartments 514 1971 9450 Forest Springs Dr Dallas Preston Hollow Village 512 2017 Walnut Hill Ln Dallas Mercer Crossing I & II 509 2014 11700 Luna Rd Dallas Legacy At Valley Ranch 504 1999 7902 N Macarthur Blvd Irving Eagle Crest Apartment Homes 495 1982 4013 W Northgate Dr Irving Village Oaks 488 1972 3550 E Overton Dallas Source: CBRE Research, Real Capital Analytics, Q3 2017. Q3 2017 CBRE Research 2017 CBRE, Inc. 3
MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY CONTACTS CBRE OFFICES Robert C. Kramp Director, Research & Analysis robert.kramp@cbre.com CBRE Dallas 2100 McKinney Ave., Suite 700 Dallas, TX 75201 E. Michelle Miller Research Operations Manager michelle.miller@cbre.com Edward Tszeng Research Coordinator edward.tszeng@cbre.com To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/research-and-reports. Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
MARKETVIEW Dallas/Fort Worth Multifamily, Q2 2017 Slowing deliveries see higher occupancy, new renter move-ins Occupancy Rate 95.70% Avg. Rental Rate $1.17 PSF Construction Starts 3,469 Delivered 4,659 Absorption 9,659 *Arrows indicate trend from previous quarter. Figure 1: DFW Multifamily Market (000s) Occupancy Rate (%) 12 96.0 10 95.5 95.0 8 94.5 6 94.0 4 93.5 2 93.0 0 92.5 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Starts Absorption Delivered Construction Occupancy Source: CBRE Research, Axiometrics, Q2 2017. As both construction starts and deliveries per month, respectively both reflecting strong experience a decline, absorption registered nearly multifamily demand for each area. The two a three-fold increase in Q2 2017. Construction metro divisions average a $1.17 per sq. ft./month starts dropped nearly 5,000 units from the prior rental rate for the combined multifamily DFW quarter and deliveries went from more than 7,100 market. units in Q1 2017 to just shy of 4,700 in Q2 2017. The North cluster of Dallas had the strongest So far this year, 11,822 units came online combined absorption of nearly 3,000 units during throughout the Metroplex and the area will see the past 90 days with Plano/Allen/McKinney alone over 38,000 units through the end of 2019. Yearto-date job growth measured a 3.2% increase, the contributing over 1,600 units. On the Fort Worth side, the Southwest submarket witnessed demand third highest in the past 17 years. The pipeline of 510 units, making it higher than any other dynamic led to a 70-basis-point (bps) rise in individual submarket in Tarrant County. Lastly, occupancy, resulting in 95.7% at midyear. Oaklawn in Central Dallas scored the highest Breaking it down further, Fort Worth holds a rents at $1.82 per sq. ft./month followed by East 95.9% occupancy while Dallas is at a 95.6% rate. Dallas at $1.55 per sq. ft./month. With the DFW area maintaining high occupancy Interestingly, every submarket in DFW recorded rates, Dallas rents overall are $1.21 per sq. an overall occupancy north of 92% during the ft./month and Fort Worth at $1.13 per sq. ft. midyear reporting period. Q2 2017 CBRE Research 2017 CBRE, Inc. 1
MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY Figure 2: Market Overview Submarket Property Count Unit Count Weighted Mthly Rent ($/SF) Occupancy (%) Net Absorption Under Construction Delivered CENTRAL East Dallas 44 9,489 1.55 94.61 460 2,938 412 North White Rock 78 24,184 1.33 94.90 383 2,301 466 Oaklawn 82 19,158 1.82 93.77 951 4,345 925 South White Rock/I-30 38 9,398 1.08 95.35 84 - - Central Total 242 62,229 1.48 94.66 1,878 9,584 1,803 NORTH Collin County/Other 10 2,597 1.34 94.25 136 158 - Far North 98 28,879 1.26 94.92 503 1,496 522 North 28 6,795 1.47 94.08 88 1,253 - Plano/Allen/McKinney 151 44,134 1.30 94.44 1,635 7,735 1,532 Richardson 43 12,182 1.27 94.08 568 4,076 634 North Total 330 94,587 1.30 94.35 2,930 14,718 2,688 NORTHEAST Far Northeast 25 7,296 1.07 95.41 25 - - Garland 50 10,452 1.16 95.67 159 2,072 120 Hunt County 5 621 0.94 98.20 63 176 75 Northeast Total 80 18,369 1.12 96.43 248 2,248 195 EAST Kaufman County 3 584 1.21 98.30 19 - - Rockwall County 6 1,288 1.40 95.82 38 447 - East Total 9 1,872 1.34 97.06 57 447 - SOUTHEAST Mesquite/Seagoville 30 7,645 1.11 95.90 90 - - Southeast Dallas 16 2,957 0.94 95.17 95 - - Southeast Total 46 10,602 1.06 95.54 185 - - SOUTH Ellis County 18 2,209 1.15 97.60 23 - - South 7 1,674 0.99 92.66 71 102 - South County 25 5,500 1.10 96.67 66 111 - South Total 50 9,383 1.09 95.64 160 213 - SOUTHWEST Grand Prairie 20 4,612 1.11 96.67 194 150 - Southwest Dallas 50 13,025 1.11 95.71 184 1,651 178 Southwest Total 70 17,637 1.11 96.19 378 1,801 178 WEST South Irving 14 3,286 1.14 95.44 13 - - West Total 14 3,286 1.14 95.44 13 - - NORTHWEST Carrollton/Addison/Coppell 99 26,791 1.26 95.71 88 1,052 - Denton County/Other 58 13,237 1.30 94.86 728 3,226 539 Far Northwest/Farmers Branch 39 9,973 1.27 95.90 95 424 33 Lewisville 81 25,397 1.25 94.89 239 1,530 257 North Irving 99 31,714 1.31 95.56 249 2,235 248 Northwest 37 9,009 1.46 94.69 354 1,467 361 Northwest Total 413 116,121 1.29 95.27 1,752 9,934 1,438 NORTHEAST Grapevine 25 6,353 1.37 96.17 343 704 - Hurst/Bedford/Euless 68 15,600 1.20 95.93 82 - - Northeast 69 17,045 1.15 95.74 69 940 40 Tarrant County/Other 6 1,594 1.27 95.04 45-30 Central Total 168 40,592 1.21 95.72 539 1,644 70 EAST Central Arlington 61 10,492 1.04 96.25 125 - - I-820 27 5,338 0.96 94.68-28 - - North Arlington 103 24,675 1.17 95.28 209 671 159 East Total 191 40,505 1.11 95.40 306 671 - SOUTH Southeast 6 918 1.20 95.77 269 250 - Johnson County 63 14,165 1.15 95.96 15 1,390 104 Southwest 108 22,878 1.09 95.49 510 933 278 South Total 177 37,961 1.12 95.74 794 2,573 382 SOUTHWEST Hood County 1 134 1.03 96.30 53 - - Southwest Total 1 134 1.03 96.30 53 - - WEST Parker County 7 1,076 1.13 97.55 19 - - West Total 7 1,076 1.13 97.55 19 - - NORTHWEST Northwest 55 10,729 1.21 94.43 380 2,359 321 Northwest Total 55 10,729 1.21 94.43 380 2,359 321 DALLAS TOTAL 1,254 334,086 1.21 95.55 7,601 23,474 4,251 FORT WORTH TOTAL 599 130,997 1.13 95.86 2,091 4,215 408 DALLAS/FORT WORTH TOTAL 1,853 465,083 1.17 95.70 9,692 27,689 4,659 Source: CBRE Research, Axiometrics, Q2 2017. Q2 2017 CBRE Research 2017 CBRE, Inc. 2
MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY Figure 3: New Supply and Job Growth (000s) 25 20 15 10-5 9 8 7 6 5 4 3 2 1 0 1996 (000s) Q1 2017 Q2 2017 1997 Figure 4: Deliveries Q3 2017 1998 Q4 2017 1999 Q1 2018 Deliveries 2000 Q2 2018 2001 Q3 2018 Q4 2018 2002 Source: CBRE Research, Moody s Analytics, Q2 2017. Q1 2019 Projected Deliveries 2003 Q2 2019 2004 Q3 2019 2005 New Supply Q4 2019 2006 2007 2008 2009 2010 Y-O-Y Job Growth Figure 5: Rent Growth Growth (%) Source: CBRE Research, Axiometrics, Q2 2017. Source: CBRE Research, Axiometrics, Q2 2017. 1.0 0.5 0.0-0.5-1.0-1.5-2.0-2.5-3.0 2007 2008 2009 2011 2010 2012 2011 Dallas 2013 2012 2014 2013 2015 2014 2016 2015 Fort Worth Growth (%) 2016 2017 YTD 2017 6 4 2 0-2 -4-6 Figure 6: Select Sale Transactions Property Year Built Address City Mandolin 486 2001 2525 Hwy 360 Euless Benton Pointe 456 1999 205 Benton Drive Allen Northrock of Lake Highlands 362 2015 6808 Skillman Dallas Forum at Denton Station 348 2009 201 Inman Street Denton Maple District Lofts 342 2016 5415 Maple Avenue Dallas Alta Market Central 300 2016 3700 Mapleshade Lane Plano Lansbrook at Twin Creeks 288 2002 505 Benton Drive Allen Dominion Town Center 276 2003 1300 Keller Parkway Keller Lot A 233 2015 1250 State Street Richardson The Davis Building 183 1926 1309 Main Street Dallas Source: CBRE Research, Real Capital Analytics, Q2 2017. Q2 2017 CBRE Research 2017 CBRE, Inc. 3
MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY CONTACTS CBRE OFFICES Robert C. Kramp Director, Research & Analysis robert.kramp@cbre.com CBRE Dallas 2100 McKinney Ave., Suite 700 Dallas, TX 75201 E. Michelle Miller Research Operations Manager michelle.miller@cbre.com To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/research-and-reports. Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
MARKETVIEW Dallas/Fort Worth Multifamily, Q1 2017 Growing pipeline brings flux to Dallas/Fort Worth Occupancy Rate 94.7% Avg. Rental Rate $1.23 PSF Construction Starts 7,161 Delivered 7,163 Absorption 3,934 Figure 1: DFW Multifamily Market (000s) 8 *Arrows indicate trend from previous quarter. Occupancy Rate (%) 96.0 7 6 5 4 3 2 1 95.5 95.0 94.5 94.0 93.5 93.0 0 92.5 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Source: CBRE Research, Axiometrics, Q1 2017. Starts Absorption Delivered Construction Occupancy Apartment analysts and developers remain optimistic that continued job growth in DFW will mitigate the additional supply. Dallas/Fort Worth delivered 7,163 units in Q1 2017, down slightly from last quarter which set a market record. Plano/Allen/McKinney reported the highest levels of new supply at 1,486 units, making it the most active submarket in DFW this quarter. North Texas is second only to New York City in apartment deliveries scheduled for 2017, according to Axiometrics. With the arrival of these deliveries, occupancy has slumped under 95.0% for the first time since Q1 2015. Properties in lease-up continue to offer concessions including one -month of free rent. In Dallas, overall effective rent increased 20 basis points (bps) to $1.27 per sq. ft., largely due to the amount of Class A product being added to the market. In Fort Worth, rents grew 40 bps to $1.14 per sq. ft., an annual growth rate of 5.4%. Construction starts totaled 7,151 units, a 49.6% increase over Q1 2016 starts. Gross absorption for Q1 2017 was 3,934 units with Plano/Allen/ McKinney, Oaklawn, and Carrollton/Addison/ Coppell submarkets leading the way. DFW posted the highest population growth in the U.S., adding 143,435 new residents in 2016. DFW also showed robust employment gains with 4.0% year-over-year growth through January 2017, which was second only to Orlando which expanded employment by an impressive 4.6%. DFW continues to attract corporate relocations and job seekers due to its south central location and pro-business environment. Q1 2017 CBRE Research 2017 CBRE, Inc. 1
MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY Figure 2: Market Overview Submarket Source: CBRE Research, Axiometrics, Q1 2017. Property Count Unit Count Mthly Rent ($/SF/Mth) Occupancy (%) Under Construction Delivered Absorbed DALLAS CENTRAL East Dallas 47 10,125 1.53 93.8 3,043 219 25 North White Rock 86 25,979 1.26 94.9 2,777 715 217 Oaklawn 86 19,783 1.79 93.7 4,940 736 492 South White Rock/I-30 38 9,398 1.06 94.8 59 Total 257 65,285 1.43 94.3 10,760 1,670 793 NORTH Collin County/Other 10 2,597 1.27 91.7 158 Far North 111 32,737 1.25 94.8 1,742 261 111 North 27 6,587 1.41 94.0 1,257 143 136 Plano/Allen/McKinney 160 47,054 1.29 94.2 7,998 1,486 595 Richardson 44 12,422 1.25 93.8 4,257 571 146 Total 352 10,1397 1.28 94.3 15,412 2,461 988 NORTHEAST Far Northeast 26 7,474 1.05 95.0 Garland 53 11,590 1.12 95.4 1,148 138 244 Hunt County 5 621 0.92 98.3 176 132 Total 84 19,685 1.09 95.4 1,324 270 244 EAST Kaufman County 3 584 1.18 97.5 62 123 Rockwall County 6 1,288 1.37 93.9 447 Total 9 1,872 1.31 95.0 447 62 123 SOUTHEAST Mesquite/Seagoville 33 8,188 1.08 95.0 Southeast Dallas 16 3,125 0.91 93.9 Total 49 11,313 1.03 94.7 SOUTH Ellis County 18 2,209 1.13 97.0 South 8 2,034 0.98 92.6 102 39 South County 25 5,500 1.07 96.0 Total 51 9,743 1.07 95.5 102 39 SOUTHWEST Grand Prairie 21 4,727 1.09 96.3 150 Southwest Dallas 50 13,065 1.09 95.7 2,003 324 120 Total 71 17,792 1.09 95.9 2,153 324 120 WEST South Irving 16 4,030 1.11 95.0 Total 16 4,030 1.11 95.0 NORTHWEST Carrollton/Addison/Coppell 106 28,779 1.24 95.0 818 Denton County/Other 60 13,789 1.26 94.2 4,124 613 447 Far Northwest/Farmers Branch 39 9,973 1.24 95.4 1,289 99 141 Lewisville 89 28,015 1.23 94.8 1,952 248 262 North Irving 105 33,619 1.27 94.6 2,170 113 233 Northwest 36 8,952 1.45 94.7 1,424 356 170 Total 435 123,127 1.26 94.8 11,777 1,429 1,253 FORT WORTH NORTHEAST Grapevine 27 6,917 1.34 95.8 1,172 Hurst/Bedford/Euless 73 16,770 1.18 95.3 Northeast 75 18,734 1.13 95.5 759 113 46 Tarrant County/Other 6 1,594 1.26 94.1 90 45 33 Total 181 44,015 1.19 95.4 2,021 158 79 EAST Central Arlington 63 11,184 1.04 95.4 244 1 I-820 29 5,558 0.93 94.6 North Arlington 112 27,728 1.15 94.8 671 53 4 Total 204 44,470 1.10 94.9 915 53 5 SOUTH Southeast 69 16,315 1.13 95.1 1,545 206 160 Johnson County 6 918 1.18 95.2 Southwest 113 24,468 1.08 94.4 1,138 397 118 Total 188 41,701 1.11 94.7 2,683 603 278 SOUTHWEST Hood County 1 134 0.98 93.0 Total 1 134 0.98 93.0 WEST Parker County 7 1,076 1.11 96.5 Total 7 1,076 1.11 96.5 NORTHWEST Northwest 60 11,810 1.21 94.0 1,809 133 12 Total 60 11,810 1.21 94.0 1,809 133 12 DALLAS TOTAL 1,324 354,244 1.27 94.7 23,474 6,216 3,560 FORT WORTH TOTAL 641 143,206 1.14 94.9 4,215 947 374 DALLAS/FORT WORTH TOTAL 1,965 497,450 1.23 94.7 27,689 7,163 3,934 Q1 2017 CBRE Research 2017 CBRE, Inc. 2
MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY Figure 3: New Supply and Job Growth (000s) Growth (%) 25 6 20 4 2 15 0 10-2 5-4 - -6 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 New Supply Y-O-Y Job Growth Source: CBRE Research, Moody s Analytics, Q1 2017. Figure 4: Deliveries Figure 5: Rent Growth (000s) Growth (%) 9 3.0 8 2.0 7 1.0 6 0.0 5-1.0 4-2.0 3-3.0 2-4.0 1-5.0 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Deliveries Projected Deliveries Dallas Fort Worth Source: CBRE Research, Axiometrics, Q1 2017. Source: CBRE Research, Axiometrics, Q1 2017. 2017 YTD Figure 6: Select Sale Transactions Property Year Built Address City Mandolin 486 2001 2525 Hwy 360 Euless Benton Pointe 456 1999 205 Benton Drive Allen Northrock of Lake Highlands 362 2015 6808 Skillman Dallas Forum at Denton Station 348 2009 201 Inman Street Denton Maple District Lofts 342 2016 5415 Maple Avenue Dallas Alta Market Central 300 2016 3700 Mapleshade Lane Plano Lansbrook at Twin Creeks 288 2002 505 Benton Drive Allen Dominion Town Center 276 2003 1300 Keller Parkway Keller Lot A 233 2015 1250 State Street Richardson The Davis Building 183 1926 1309 Main Street Dallas Source: CBRE Research, Real Capital Analytics, Q1 2017. Q1 2017 CBRE Research 2017 CBRE, Inc. 3
MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY CONTACTS CBRE OFFICES Robert C. Kramp Director, Research & Analysis robert.kramp@cbre.com CBRE Dallas 2100 McKinney Ave., Suite 700 Dallas, TX 75201 E. Michelle Miller Research Operations Manager michelle.miller@cbre.com Robert Siddall Research Coordinator +1 214 979 6589 robert.siddall@cbre.com To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/research-and-reports. Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
MARKETVIEW Dallas/Fort Worth Multifamily, Q4 2016 High construction numbers disrupt DFW apartment metrics Vacancy Rate 4.8% Under Construction 4,683 Net Absorption 3,180 Completions 6,499 *Arrows indicate change from previous quarter. Figure 1: DFW Multifamily Market (000s) Occupancy Rate 8 96.0% 7 95.5% 6 95.0% 5 4 94.5% 3 94.0% 2 93.5% 1 0 93.0% Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Under Construction Absorption Delivered Construction Occupancy Source: Axiometrics, CBRE Research, Q4 2016. Delivered units swelled by 23% to hit a new record of 6,499 completions during the final quarter. In the past 180 days, deliveries exceeded the 5,000 unit threshold with the Denton, Oaklawn, and Plano/Allen/McKinney submarkets accounting for 44% of them. Absorption balanced out to 3,180 units in Q4 2016 with Plano/Allen/McKinney leading the way with 471 units freshly occupied. Under construction continued to swing with 33% less units underway than in Q3 2016. Metroplex vacancy increased to 4.8%, rising40 basis point (bps) over Q3 2016. Class A properties had the sharpest effective rent decline, stumbling 1.7% with Oaklawn home to the highest average rents at $1.55 per sq. ft. POPULATION GAINS DRIVE DEMAND The key market indicators of occupancy, absorption and construction slowed as supply catches up to demand. However, sustained population growth coupled with the dearth of affordable single family homes translate into a positive demand rental outlook across DFW, especially in the North Central Expressway corridor. For developers this means that the rise in construction costs, along with higher equity requirements, will begin to put a burden on future starts, stabilizing the construction pipeline but only for a short time: DFW s residential population is expected to increase 9.0% by 2021, equating to one new person in DFW every 4.3 minutes. Q4 2016 CBRE Research 2017 CBRE, Inc. 1
MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY Figure 2: Deliveries (000s) 10 8 6 4 2 0 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Deliveries Projected Deliveries Source: Axiometrics, CBRE Research, Q4 2016. Figure 3: Avg. Effective Rent $ per sq. ft. 1.75 1.50 1.25 1.00 2018 FINAL DELIVERIES GROW AS CONSTRUCTION TAPERS According to Axiometrics, 18,476 multifamily units were delivered in 2016, a 4% increase over 2015 deliveries. In Q4 2016, 6,499 units were completed marking the highest quarter for deliveries on record. Of the delivered units in DFW, 1,332 units were in the Plano/Allen/McKinney submarket, bringing the submarket total to 2,933 units delivered in 2016. This marks the most active submarket for multifamily development in 2016. One of the major projects is the 284-unit Jefferson Stonebriar by JPI, which delivered 213 units in Q4 2016. Columbus Realty Partners made a major play in this submarket as well, with the 311-unit Grand at Legacy West that delivered 186 units in Q4 2016. Dallas will see the largest volume of new apartments of any metro with 24,258 units planning to deliver in 2017. Despite this record, the pipeline is expected to slow in the second half of 2017 as the urban skyline begins to take a different shape. It remains to be seen what developers will do in response to high construction costs and tightening financing requirements looking ahead. 0.75 Source: Axiometrics, CBRE Research, Q4 2016. Figure 4: Occupancy Rate % Occupied 96.0 95.5 95.0 94.5 94.0 93.5 93.0 92.5 92.0 Class A Class B Class C Class A Class B Class C 2011 Dallas 2012 Dallas 2013 Source: Axiometrics, CBRE Research, Q4 2016. 2014 Fort Worth Fort Worth 2015 Q4 2016 OCCUPANCY STALLS AS DEMAND HITS A SPEED BUMP Demand for rental units slowed as absorption lagged behind deliveries with 3,180 units absorbed in Q4 2016 compared to 4,077 units in Q3 2016. In Dallas, overall effective rent decreased by 0.9% from $1.28 per sq. ft. in Q3 2016 to $1.27 per sq. ft. Class A rents also decreased over this time to $1.58 per sq. ft., a 1.7% decrease over last quarter and the largest decline of all property classes in DFW. The effective rent growth in Dallas for 2016 rose 4.0% in total, compared to 2.6% nationally. The effective rent in Fort Worth remained relatively stable at $1.16 per sq. ft. in Q4 2016, finishing the year at 5.7% rental rate growth. Occupancy in Dallas decreased 40 basis points to 95.1% in Q4 2016, which is down 20 bps from a year ago. In Fort Worth, occupancy decreased 20 bps, bringing it to within 10 bps of 2015 occupancy levels. The occupancy rates of Dallas and Fort Worth were both above the national average of 94.7% at year-end 2016. Q4 2016 CBRE Research 2017 CBRE, Inc. 2
MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY Figure 5: Absorption and Job Growth (000s) 15,000 10,000 5,000 % Job Growth 5 4 3 2 1 0 Source: Texas Workforce Commission, CBRE Research, Q4 2016. TEXAS HUB FOR STATE JOB CREATION As a result of the economic diversity surrounding the DFW market, the metro area continued to experience a high demand for apartment units which has helped stabilized the increased supply levels. Newly constructed properties have begun to offer concessions of up to one month free upfront to entice potential renters. The robust pipeline in DFW is likely in response to tight single-family market conditions where months of inventory has stayed near record lows, while the average sale price has hit $295,000, according to The Real Estate Center at Texas A&M University. North Texas home sales swelled in December, increasing by 8.7% from a year earlier. Driven by the speculative interest rate hikes in the year ahead, the record low supply of single-family Figure 6: Unemployment and Jobs Unemployment Rate (%) 10 9 8 7 6 5 4 3 2 1 0 2010 2011 2012 2013 2014 2015 2016 Absorption Y-o-Y Job Growth Source: Moody s Analytics, CBRE Research, Q4 2016. homes has caused the gap to widen between buying and renting for North Texans. According to the U.S. Bureau of Labor Statistics, nonfarm payrolls in DFW increased 3.4% yearover-year, coming in just shy of 3.6 million jobs at the close of Q4 2016. Unemployment dipped to 4.1% and 3.2% in Dallas and Fort Worth, respectively, while the national unemployment rate ended the year at 4.6%. DFW residents are a strong consumer force with a median household income estimated at $61,644 annually. According to Moody s Analytics, personal income growth is expected to rise 5.0% in 2017, bolstered by favorable migration trends and close proximity to several major corporate headquarters. Job Count (M) 4 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Total DFW Jobs U.S. Texas DFW 0 3 2 Q4 2016 CBRE Research 2017 CBRE, Inc. 3
MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY METROPLEX MULTIFAMILY INVESTMENT MARKET According to Real Capital Analytics (RCA), DFW multifamily sales volume grew 25% and totaled $3.1 billion from 119 transactions in Q4 2016. Total sales volume in 2016 reached $9.31 billion, a 16% increase over 2015 as private and capital investors continue to target DFW as a safe haven for their next investment. Average infill/urban stabilized cap rates in DFW were steady across the board. Class A property cap rates remained between the ranges of 4.25% to 4.75%. Class B properties held at 5.00% to 6.00% and Class C properties stand at 6.00% to 6.50%. In suburban areas, average stabilized cap rates ranged from 4.75% to 5.25% for Class A properties. Class B properties remained at 5.50% to 6.50%, and Class C properties are now 6.25% to 6.75%. Many lenders and developers continue to favor multifamily product in DFW as historic market fundamentals persist in one of the country s most dynamic multifamily markets. The outlook for the DFW multifamily market is robust going into 2017. Fueled by a diverse local economy and incoming corporate relocations, DFW is consistently a leader for employment growth in the state of Texas, reinforcing multifamily demand. Furthermore, the constricted single-family housing market should continue to push multifamily demand forward, keeping net absorption above new supply levels for the foreseeable future. Figure 7: Q4 2016 Major Transactions Property Address City Post Addison Circle 1,334 5009 Addison Cir Addison Ilume Apartments 632 4123 Cedar Springs Rd Dallas Gardens at Vail 580 17811 Vail St Irving The Oaks of Valley Ranch 530 9519 Valley Ranch Pkwy E Irving Providence in the Park 524 1601 W Arbrook Arlington Post Uptown Village I/II 496 2121 Routh St Dallas The Phoenix 449 555 E Mockingbird Ln Dallas Post Eastside 435 1801 N Greenville Ave Richardson Franciscan Of Arlington 418 3006 Franciscan Dr Arlington Standard at CityLine Phase 1 403 1125 E Renner Rd Richardson Park Central V & VI 387 7800 Banner Dr Dallas Post Legacy 384 5741 Martin Rd Plano Overlook at Bear Creek 350 800 E Ash Ln Euless Waterford Court 196 14700 Marsh Ln Addison Loft + Row 180 2110 N Peak St Dallas Source: CBRE Research, Real Capital Analytics, Q4 2016. Q4 2016 CBRE Research 2017 CBRE, Inc. 4
MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY CONTACTS CBRE OFFICES Robert C. Kramp Director, Research & Analysis robert.kramp@cbre.com CBRE Dallas 2100 McKinney Ave., Suite 700 Dallas, TX 75201 E. Michelle Miller Research Operations Manager michelle.miller@cbre.com Robert Siddall Research Coordinator +1 214 979 6589 robert.siddall@cbre.com To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/research-and-reports. Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
MARKETVIEW Dallas/Fort Worth Multifamily, Q3 2016 DFW relocations and employment growth help mitigate oversupply Vacancy Rate 4.4% Under Construction 7,020 Net Absorption 4,077 Completions 5,299 Figure 1: DFW Multifamily Market *Arrows indicate change from previous quarter. (000s) Occupancy Rate 8 96.0% 7 95.5% 6 95.0% 5 4 94.5% 3 94.0% 2 93.5% 1 0 93.0% Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Under Construction Absorption Delivered Construction Occupancy Source: Axiometrics, CBRE Research, Q3 2016. Under construction hit a record high with 7,020 units in Q3 2016. Year-to-date absorption totaled 10,466 units in DFW with the Oaklawn submarket leading the way with1,806 units absorbed. For the first time, delivered units exceeded the 5,000-unit threshold in Q3 2016, with the majority of new product coming from the Denton, Oaklawn, and Plano submarkets. The effective rent in Fort Worth grew 1.8% quarterover-quarter while Dallas increased at a modest 1.3% over that same time, marking three consecutive quarters of positive rent growth. The total occupancy rate for the Metroplex fell slightly to 95.6%, showing a decline of 17 bps from Q2 2016. POPULATION GAINS DRIVE DEMAND THROUGH 2016 Pull factors ranging from a prime U.S. central location to world-class cultural amenities have all contributed to making the DFW Metroplex a standout destination for corporate relocations. The population in DFW is estimated to have grown by 9.9% since 2010 and is expected to reach 7.7 million people, or another 9.0%, by 2021. The three key market indicators; occupancy, absorption, and under construction have remained strong and are expected to hold steady throughout the rest of the year. Population growth and the limited amount of affordable single family homes are expected to maintain a stable pool of renters in DFW. Q3 2016 CBRE Research 2017 CBRE, Inc. 1
MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY Figure 2: Deliveries (000s) 10 8 6 4 2 0 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 2018 Deliveries Projected Deliveries Source: Axiometrics, CBRE Research, Q3 2016. Figure 3: Avg. Effective Rent $ per sq. ft. 1.75 1.50 1.25 1.00 0.75 Class A Class B Class C Class A Class B Class C Dallas Fort Worth Source: Axiometrics, CBRE Research, Q3 2016. Figure 4: Occupancy Rate % Occupied 96.0 95.5 95.0 94.5 94.0 93.5 93.0 92.5 92.0 2011 2012 2013 2014 2015 Dallas Fort Worth Q3 2016 RECORD SETTING SUPPLY According to Axiometrics, 12,141 apartment units have been delivered year-to-date. In Q3 2016, 5,299 units were delivered marking the largest delivered units in the last three years. Of the delivered units in DFW, 19% were located in the Oaklawn submarket, bringing the submarket total to 1,967 units delivered year-to-date. Moreover, 65% of this Oaklawn construction pipeline consists of highrise or high-rise conversion projects. Dallas will see the largest volume of new apartments of any metro with 24,258 units planning to deliver in 2017. Despite this record, the pipeline is expected to slow near the end of 2017 as the urban skyline begins to take a different shape. It remains to be seen what developers will do in response to high construction costs and tightening financing requirements looking forward. DEMAND KEEPS PACE Demand for rental units remained robust as 4,077 units were absorbed in Q3 2016, compared to 3,677 units in Q2 2016, according to Axiometrics. The U.S. Census Bureau reports that 14,551 multifamily housing permits were issued in DFW year-to-date, which is on pace with last year s count. In Dallas, effective rent increased 1.3% from $1.26 to $1.28 per sq. ft. Class A rents rose further to $1.61 per sq. ft., a 2.8% increase over last quarter and 12.7% higher than Class A rents in Fort Worth. OCCUPANCY STILL HIGH DESPITE DROP Occupancy in Dallas decreased 17 basis points (bps) to 95.6% in Q3 2016, which is down 10 bps from a year ago. Class B occupancy in Dallas remained the highest at 94.5%, 150 bps higher then Class A, and 16 bps higher than Class C. In Fort Worth the market's occupancy rate remained flat at 95.7% between quarters, which is above the national average of 95.1%, but down 10 bps from Q3 2015. Class B properties in Fort Worth have the best occupancy in DFW at 95.2%, a full 66 bps above Class B units in Dallas. Source: Axiometrics, CBRE Research, Q3 2016. Q3 2016 CBRE Research 2017 CBRE, Inc. 2
MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY Figure 5: Absorption and Job Growth (000s) 16 14 12 10 8 6 4 2 0 2010 2011 2012 2013 2014 2015 2016 YTD Absorption Y-o-Y Job Growth Source: Texas Workforce Commission, CBRE Research, Q3 2016. % Job Growth 5 4 3 2 1 0 DFW: TEXAS HUB FOR JOB CREATION As a result of DFW s economic diversity, the metro area continued to experience a high demand for apartment space as new units continue to be absorbed. Newly constructed properties in lease-up are offering concessions of one month s rent free upfront on average. By offering concessions, properties in particularly active submarkets such as Oaklawn, Plano, Lewisville, and Denton can attract and retain tenants in hopes of reaching stabilization sooner. The number of units in the pipeline continues to grow as 54% more units are under construction now compared to this time last year. The robust pipeline is likely in response to single-family market conditions where months inventory has compressed to record lows, while average sale prices climb to over $285,000, according to the Texas A&M Real Estate Center. Many lenders and developers continue to favor multifamily product in DFW as strong economic fundamentals persist in DFW. According to the U.S. Bureau of Labor Statistics, nonfarm payrolls in DFW increased 3.2% yearover-year, coming in at 3,511,500 total jobs at the end of Q3 2016. DFW residents are a strong consumer force with a median household income estimated at $61,800 annually. According to Moody s Analytics, personal income growth is expected to rise to 3.6% in 2016, bolstered by favorable migration trends and close proximity to several major corporate headquarters. Figure 6: Unemployment and Jobs Unemployment Rate (%) 10 9 8 7 6 5 4 3 2 1 0 Source: Moody s Analytics, CBRE Research, Q3 2016. Job Count (M) 4 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Total DFW Jobs U.S. Texas DFW Q3 2016 CBRE Research 2017 CBRE, Inc. 3 3 2
MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY DFW INVESTMENT MARKET REMAINS STRONG AS CAP RATES REMAIN STABLE According to Real Capital Analytics (RCA), DFW sales volume grew 7.0% and totaled $8.3 billion in transactions year-to-date. In Q3 2016, there were $2.3 billion in transactions, or an average of $132,728 per unit, a 51% increase from Q2 2016. Average infill/urban stabilized cap rates in DFW were steady across the board. Class A property cap rates remained in the ranges of 4.25% to 4.75%. Class B properties held at 5.00% to 6.00% and Class C properties stood at 6.00% to 6.50%. In suburban areas, average stabilized cap rates ranged from 4.75% to 5.25% for Class A properties. Unchanged from last quarter, Class B properties remained at 5.50% to 6.50%, and Class C properties compressed 25 bps to a range of 6.25% to 6.75%. The outlook for the DFW multifamily market is robust going into 2017. Fueled by a diverse local economy and incoming corporate relocations, DFW is consistently a leader for employment growth in the nation and the state, which should continue to bolster multifamily demand. Furthermore, the constricted single family housing market should continue to push multifamily demand forward, keeping net absorption above new supply levels over time. Figure 7: Q3 2016 Major Transactions Property Address City Chapel Hill 1,183 300 E Round Grove Rd Lewisville Cirque 252 2500 N Houston St Dallas Fountain Pointe Las Colinas 386 5225 Las Colinas Blvd Irving Gallery at Turtle Creek 352 3427 Cedar Springs Rd Dallas Lakewood Flats 435 7425 La Vista Dr Dallas Marabella at Las Colinas 416 4701-4805 N O Connor Rd Irving Orion Lake Ray Hubbard 334 1650 S John King Blvd Rockwall Pavilions at Pebble View & Vantage Point 636 9001 Markville Rd Dallas Residences at the Collection 312 4025 Huffines Blvd Carrollton Santa Rosa at Las Colinas 476 2900 W Royal Ln Irving Sixteen50 at Lake Ray Hubbard 334 1650 S John King Blvd Rockwall The Avenue on Fairmount 368 4210 Fairmount St Dallas The Grand Estates of McKinney 453 2580 Collin McKinney Pkwy McKinney The Mansions by the Lake 416 2050 FM 423 Little Elm Verandas at Cityview 314 7301 Oakmont Blvd Fort Worth Source: Real Capital Analytics, CBRE Research, Q3 2016. Q3 2016 CBRE Research 2017 CBRE, Inc. 4
MARKETVIEW DALLAS/FORT WORTH INDUSTRIAL CONTACTS CBRE OFFICES Robert C. Kramp Director, Research & Analysis robert.kramp@cbre.com CBRE Dallas 2100 McKinney Ave., Suite 700 Dallas, TX 75201 E. Michelle Miller Research Operations Manager michelle.miller@cbre.com Robert Siddall Research Coordinator +1 214 979 6589 robert.siddall@cbre.com To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/research-and-reports. Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
MARKETVIEW Dallas / Fort Worth Multifamily, Q2 2016 Urban markets grabbing headlines; suburban markets gaining renters Vacancy Rate 6.7% Under Construction 27,689 Completions 4,659 Net Absorption 5,112 A lot of reporting has been seen on DFW s urban multifamily renaissance over the past few months and it s understandable: more than 6,022 multifamily units are under construction in Dallas s Uptown/Downtown area, 21.7% of all apartment construction in the metro. Moreover, 65% of the Uptown/Downtown construction pipeline consists of high-rise or high-rise conversion projects. Dallas has yet to become a high-rise market, but by 2019, Big D will boast a much different skyline. Still, looking at the renter demand, North Dallas, Central Dallas and North Dallas saw more than 5,191 new move-ins (about 29 per day) during the first half of the year which means there is hefty Metroplex renter demand for multiple types of multifamily product. The multifamily construction pipeline swelled to a new record in the second quarter 2016 to over 27,689 units, the highest level recorded by CBRE s tracking of the Metroplex market, as it remains a compelling one for multifamily developers. The current inventory cycle indicates that despite such a robust pipeline, the sheer inertia of the metro s new jobs rate, where employers added 129,100 payrolls in the second quarter alone, still leans towards brisk lease-up schedules for leasing agents as these units deliver. *Arrows indicate change from previous quarter. Figure 1: Net Absorption Dallas 2,850 2,350 1,850 1,350 850 350 (150) Central Dallas North Dallas Northwest Dallas Southwest Dallas South Dallas Southeast Dallas Northeast Dallas East Dallas Source: CBRE Research, Q2 2016. Figure 2: Net Absorption Fort Worth 1,000 800 600 400 Q1 Q2 Class A occupancy increased for the first time in over two quarters even though new product was delivered and entered the lease up stage but at 89% occupied, is only 110 bps off from this period last year. On the other hand, the newer more expensive product is pushing up the group average where DFW s Class A rents increased $0.03 per sq. ft. to $1.51 per sq. ft. which is 21.9% higher than Class B and 36% higher than Class C. 200 0 (200) Northeast Ft. Worth East Ft. Worth Central Ft. Worth Source: CBRE Research, Q2 2016. Q1 Northwest Ft. Worth Q2 West Ft. Worth South Ft. Worth Southwest Ft. Worth Q2 2016 CBRE Research 2016 CBRE, Inc. 1
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY Figure 3: Market Overview Source: Apartment Data Service, Q2 2016. CBRE Research, Q2 2016. Property Count Unit Count Mthly Rent ($/SF) Occupancy (%) Net Absorption Under Construction New Construction Delivered Submarket DALLAS MARKETS CENTRAL Downtown Dallas/ West End/ Deep Ellum 49 10,336 1.53 84.8 387 1,446 590 Uptown/ Oaklawn/ Highland Park 140 29,999 1.75 88.1 881 4,576 369 East Central Dallas/ Lower Greenville Ave 49 5,508 1.44 94.9 103 974 - White Rock Lake/ Tenison Park 69 15,131 0.99 94.9 175 - - North Central Dallas/ Upper Greenville Ave 99 26,702 1.33 89.8 98 2,435 - Skillman St/ I-635 94 25,819 1.02 93.3 86 540 - Central Total 500 113,495 1.35 90.6 1,730 9,971 959 EAST Far East Dallas 19 3,280 1.08 96.8 2 - - East Total 19 3,280 1.08 96.8 2 - - NORTHEAST Garland 94 15,672 1.03 95.4 (136) - - Northeast Total 94 15,672 1.03 95.4 (136) - - NORTH North Dallas/ Addison 111 30,426 1.23 95.2 311 1,282 - Far North Dallas/ Collin County 78 24,522 1.24 95.4 (182) - - East Plano/ Richardson 84 22,742 1.26 90.9 422 1,957 299 West Plano/ Frisco 153 48,198 1.32 91.1 604 5,016 1,655 Allen/ McKinney 66 16,826 1.22 91.4 314 1.207 - North Total 492 142,714 1.26 92.7 1,469 8,136 1,954 NORTHWEST East Irving 57 7,538 0.95 96.3 (15) - - West Irving 81 18,299 1.09 95.1 (82) - - Las Colinas/ Valley Ranch/ Coppell 76 27,512 1.33 92.9 149 1,557 - Northwest Dallas/ Bachman Lake 61 11,451 1.00 96.2 37 575 - Carrollton/ Farmers Branch 114 27,724 1.21 93.0 192-731 Lewisville 71 20,983 1.21 94.4 281 242 358 Denton 62 12,274 1.12 94.9 (59) - - Northwest Total 522 125,781 1.17 94.2 503 2,374 1,089 SOUTHEAST Southeast Dallas/ Mesquite 101 21,783 0.94 94.5 (76) 419 - Southeast Total 101 21,783 0.94 94.5 (76) 419 - SOUTH South Oak Cliff 63 13,081 0.83 91.8 (40) - - Duncanville/ DeSoto/ Cedar Hill/ Lancaster 90 19,870 0.96 94.7 141 - - Far South Dallas/ Waxahachie 24 3,007 1.02 96.9 (17) - - South Total 177 35,958 0.92 93.8 84 - - Trinity Groves/ Oak Cliff North 37 6,132 1.17 94.0 122 1,001 - SOUTHWEST Grand Prairie 51 11,516 1.06 94.4 111 551 249 Southwest Total 88 17,648 2.24 94.3 233 1,552 249 FORT WORTH MARKETS CENTRAL Downtown Ft Worth/ TCU 55 9,954 1.43 91.3 306 2,104 - Central Total 55 9,954 1.43 91.3 306 2,104 - EAST East Ft Worth/ Woodhaven/ I-30E 68 12,536 0.86 90.3 46 - - North Arlington 95 21,278 1.07 94.8 163 353 - South Arlington 137 27,802 1.01 94.3 138 789 408 East Total 300 61,616 1.00 93.7 347 1,142 408 NORTHEAST Haltom City/ Richland Hills/ Fossil Creek 70 16,959 1.05 95.6 (18) - - Hurst/ Euless/ Bedford 129 29,956 1.10 95.9 300 - - Grapevine/ Roanoke/ Keller 62 15,879 1.27 95.7 109 390 - Northeast Total 261 62,794 1.13 95.8 391 390 - NORTHWEST Northwest Ft Worth/ Saginaw/ Eagle Mtn 28 4,728 0.88 93.7 146 194 - Northwest Total 28 4,728 0.88 93.7 146 194 - SOUTH South Ft Worth 61 10,872 0.88 93.5 62 - - South Total 61 10,872 0.88 93.5 62 - - SOUTHWEST Southwest Ft Worth/ Benbrook 44 12,290 1.08 95.1 74 385 - Far Southwest Ft Worth 23 2,764 0.94 91.7 (141) - - Southwest Total 67 15,054 1.05 94.5 (67) 385 - WEST Western Hills/ Ridgmar/ Ridglea 76 13,054 0.88 92.9 118 - West Total 76 13,054 0.88 92.9 118 - - DALLAS TOTAL 1,993 476,331 1.25 92.9 3,809 23,474 4,251 FORT WORTH TOTAL 848 178,072 1.05 94.3 1,303 4,215 408 DALLAS/FORT WORTH TOTAL 2,841 654,403 1.15 93.3 5,112 27,689 4,659 Q2 2016 CBRE Research 2016 CBRE, Inc. 2
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY RENTS BREAK RECORDS (AGAIN); NEW SUPPLY FORECAST TO DING NEAR-TERM GAINS Average market rents continue to increase as DFW adds population and payrolls at one of the fastest rates in the U.S. At the end of the second quarter 2016, nearly 40% of DFW s multifamily submarkets reported abovemarket rental averages (higher than $1.15 per sq. ft., a new market high). Both Class A and Class B properties saw average monthly rents increase by $0.03 in the second quarter 2016. Rents in Class A apartments, built in 2010 or after, are trending even higher despite softer overall occupancies. Class A properties are offering incentives to entice new residents where about one-infour are offering some type of rental concession or discount compared to only one in five for the broader DFW multifamily market. Figure 4: Avg. Rent, Monthly by Class $/SF 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80 0.70 0.60 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Class A Class B Class C Source: Apartment Data Service, Q2 2016. CBRE Research, Q2 2016. COMPONENTS FOR HISTORIC OCCUPANCY: ESCALATING HOME PRICES+POPULATION GROWTH Demand for apartments has increased over the past four years as factors such as strong employment and population growth contributed to this historic performance. As mentioned, with the dearth of affordable single-family homes, we are seeing wouldbe buyers being kept within the Metroplex multifamily rental market. To supplement this reasoning, based on data from NTREIS MLS (North Texas Real Estate Information Systems) North Texas saw that median single-family home prices continued to leap in the month of May, by 9.1% on a trailing 12-month total, explaining why multifamily occupancy remains over the 90% threshold. Moreover, according to Nielsen, the DFW metro area population is forecasted to grow 7.7% by 2021 as compared to 10.9% in the most recent five years, another factor pointing to a growing reservoir of new, potential renters. Figure 5: Occupancy by Class Occupancy (%) 96 95 94 93 92 91 90 89 88 87 86 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Class A Class B Class C Source: Apartment Data Service, Q2 2016. CBRE Research, Q2 2016. Looking at the numbers, overall occupancy compressed slightly to 93.3% in the second quarter of 2016. Class A occupancy rebounded as new product which has been in the lease-up stage saw an influx of renters in the active leasing season. We can expect to see Class A occupancy to fluctuate as many new communities are expected to deliver over the next 18 months. Class B occupancy increased 20 bps from 95.5% to 95.7%, the highest occupancy of all assets. Q2 2016 CBRE Research 2016 CBRE, Inc. 3
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY CONSTRUCTION PERMITS REBOUNDS AT THE AT THE MID POINT OF 2016 As a result of the economic diversity in DFW s multifamily market, DFW continued to experience a high demand for apartment space, as new units continue to be absorbed steadily. The U.S. Census Bureau reports that 7,397 multifamily housing permits were issued in DFW thus far in 2016, a slight increase of 561 permits from the same time period last year. Breaking two straight quarters of compression the number of proposed units in the pipeline increased, potentially in response to the single family market conditions at this time in 2016. However, many lenders and developers continue to favor multifamily product in DFW as historic market fundamentals persist. Additionally, there were 7,512 new unit starts the second quarter 2016, adjusting the total number of units under construction to 27,689 units. Figure 6: Construction Activity and Net Absorption Unit Count (K) Under Construction Delivered Net Absorption 26 24 22 20 18 16 14 12 10 8 6 4 2 0 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Source: Apartment Data Service, Q2 2016. CBRE Research, Q2 2016. A ROOM OF ONE S OWN: POPULATION AND PAYROLLS MAKING ONE A BIT HARDER TO FIND In the second quarter 2016, DFW created 129,100 jobs year-over-year, translating to a 3.7% annual growth rate, a robust number by any measure. Unemployment fell from 3.9% in the first quarter to the current level of 3.5% this quarter, making for a tight labor market. Consider this: DFW s unemployment is now 90 bps lower than the state average and a full 1.2% tighter than the U.S. overall. With a current estimated population of 7.1 million, the Metroplex s population has grown by 8.2% since 2010, and what s more, an additional growth of 7.7% is projected for 2016 to 2021, according to Nielsen. Figure 7: Total Employment Growth Unemployment Rate % 10 9 8 7 6 5 4 3 2008 2009 2010 2011 2012 2013 2014 2015 U.S. Texas Dallas/Fort Worth MSA Source: Bureau of Labor Statistics, June 2016. Q2 2016 Q2 2016 CBRE Research 2016 CBRE, Inc. 4
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY CAPITAL MARKETS OFFER NO NEW NEWS WITH STABLE CAP RATES AND ACTIVITY MIRRORS U.S. On the national stage, the multifamily market is still performing as forecasted. As of June 2016, U.S. occupancy closed out at 95.2%, in the second quarter. The second quarter 2016 rent growth was 2.3%, and overall the year-over-year rate was under 4.0%, the first time since 2014, as reported by Axiometrics. According to Real Capital Analytics (RCA), national sales volume decreased 33% quarter-to-quarter and totaled $26.3 billion in transactions in the second quarter 2016; year-to-date, $151.8 billion has traded over the past 12 months, a 15% increase. RCA reported sales DFW volume totaled $916.7 million in the second quarter 2016, and the average price per unit, $82,313, a 6.5% increase from the first quarter 2016. Most sales continue to occur in the suburbs while urban areas such as Downtown Dallas/West End/Deep Ellum/Uptown and Downtown Ft. Worth/TCU continue to experience extensive construction activity. Moreover, the skyline is changing in Dallas s Uptown/Downtown area as 65% of the Uptown/Downtown construction pipeline consists of high-rise or high-rise conversion projects and many are expected to deliver in 2017. At the half way mark of 2016, average infill/urban stabilized cap rates in DFW remained steady across the board. Class A property cap rates remained between the ranges of 4.25% to 4.75%. Class B properties remained at 5.00% to 6.00% and Class C properties stand at 6.00% to 6.50%. In suburban areas, average stabilized cap rates ranged from 4.75% to 5.25% for Class A properties; a compression of 25 bps from last quarter. Unchanged from last quarter, Class B properties remained at 5.50% to 6.50%, and Class C properties compressed 25 bps to a range of 6.25% to 6.75%. Figure 8: Q2 2016 Major Recent Transactions Property Address City 1,183 Chapel Hill 300 E Round Grove Rd Lewisville 494 Chatham Court and Reflections 7825 McCallum Dallas 480 Harbors and Plumtree Apartments 7676 S Westmoreland Rd Dallas 476 Santa Rosa at Las Colinas 2900 W Royal Ln Irving 453 Estates at McKinney 2580 Collin McKinney Pkwy McKinney 416 The Mansions by the Lake 2050 FM 426 Little Elm 356 Legends on Lake Highlands 11201 E Lake Highlands Dr Dallas 324 Provenza at Windhaven 4900 Windhaven Pkwy The Colony 317 Sedona Ridge 11100 Walnut Hill Dallas 316 Aura Castle Hills 5500 S State Hwy 121 The Colony 312 Estates of Prosper 980 S Coit Rd Prosper 308 Mansions at Prosper 880 S Coit Rd Prosper 299 View at Kessler 2511 Wedgela Dr Dallas 295 Advenir at Mission Ranch 901 Hwy 80 E Mesquite 290 Holly Ridge 2504 Ivy Brook Ct Arlington Source: Real Capital Analytics, Q2 2016. CBRE Research, Q2 2016. Q2 2016 CBRE Research 2016 CBRE, Inc. 5
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY FORT WORTH MARKETS CENTRAL FW1 Downtown Ft Worth/ TCU EAST FW2 East Ft Worth/ Woodhaven/ I-30E FW3 North Arlington FW4 South Arlington NORTHEAST FW5 Haltom City/ Richland Hills/ Fossil Creek FW6 Hurst/ Euless/ Bedford FW7 Grapevine/ Roanoke/ Keller NORTHWEST FW8 Northwest Ft Worth/ Saginaw/ Eagle Mtn SOUTH FW9 South Ft Worth SOUTHWEST FW10 Southwest Ft Worth/ Benbrook FW11 Far Southwest Ft Worth WEST FW12 Western Hills/ Ridgmar/ Ridglea DALLAS MARKETS CENTRAL D1 Downtown Dallas/ West End/ Deep Ellum D2 Uptown/ Oaklawn/ Highland Park D3 East Central Dallas/ Lower Greenville Ave D4 White Rock Lake/ Tenison Park D5 North Central Dallas/ Upper Greenville Ave D6 Skillman St/ I-635 EAST D6 Far East Dallas NORTHEAST D7 Garland NORTH D8 North Dallas/ Addison D9 Far North Dallas/ Collin County D10 East Plano/ Richardson D11 West Plano/ Frisco D12 Allen/ McKinney NORTHWEST D13 East Irving D14 West Irving D15 Las Colinas/ Valley Ranch/ Coppell D16 Northwest Dallas/ Bachman Lake D17 Carrollton/ Farmers Branch D18 Lewisville/Flower Mound D19 Denton SOUTHEAST D20 Southeast Dallas/ Mesquite SOUTH D21 Oak Cliff South D22 Duncanville/ DeSoto/ Cedar Hill/ Lancaster D23 Far South Dallas/ Waxahachie SOUTHWEST D24 Trinity Groves/ Oak Cliff North D25 Grand Prairie
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY CONTACTS Robert C. Kramp Director, Research & Analysis Texas-Oklahoma Division robert.kramp@cbre.com E. Michelle Miller Research Operations Manager michelle.miller@cbre.com Robert Basiliere Senior Research Analyst +1 214 252 1033 robert.basiliere@cbre.com Brian Ashton Research Coordinator +1 214 979 6589 brian.ashton@cbre.com CBRE OFFICES CBRE Dallas 2100 McKinney Ave, Suite 700 Dallas, TX 75201 To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway. Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
MARKETVIEW Dallas / Fort Worth Multifamily, Q1 2016 Urban markets grabbing headlines; suburban markets gaining renters Vacancy Rate 6.6% Under Construction 24,836 Completions 3,037 Net Absorption 3,780 A lot of reporting has been seen on DFW s urban multifamily renaissance over the past few months and its understandable: more than 5,600 multifamily units are under construction in Dallas s Uptown/Downtown area, 23% of all apartment construction in the metro. Moreover, 65% of the Uptown/Downtown construction pipeline consists of high-rise or high-rise conversion projects. Dallas has yet to be a high-rise market, but by 2019, Big D will boast a much different skyline. Still, looking at the renter demand, North Dallas, Central Dallas and Northwest Dallas saw more than 2,600 new move-ins (about 30 per day) during the winter months of the first quarter which means there is hefty Metroplex renter demand for multiple types of multifamily product. Pun on the word multi intended. The multifamily construction pipeline swelled in Q1 2016 to over 24,800 units, the highest level recorded by CBRE s tracking of the Metroplex market as it remains a compelling one for multifamily developers. The current inventory cycle indicates that despite such a robust pipeline, the sheer inertia of the metro s new jobs rate, where employers added 44,000 payrolls in the first quarter alone, still leans towards brisk lease-up schedules for leasing agents as these units deliver. *Arrows indicate change from previous quarter. Figure 1: Net Absorption Dallas 1,200 1,000 800 600 400 200 0 North Dallas Central Dallas Northwest Dallas Northeast Dallas Southeast Dallas Source: CBRE Research, Q1 2016. Figure 2: Net Absorption Fort Worth 480 380 280 180 Q1 Southwest Dallas South Dallas East Dallas Nevertheless, for the second consecutive quarter Class A occupancy compressed as new product was delivered and entered the lease up stage but at 88.5% occupied, is only 10 bps off from this period last year. On the other hand, the newer more expensive product is pushing up the group average where DFW s Class A rents increased $0.03 per sq. ft. to $1.49 per sq. ft. which is 23% higher than Class B and 36% higher than Class C. 80 (20) (120) Northeast Ft. Worth West Ft. Worth Northwest Ft. Worth Source: CBRE Research, Q1 2016. East Ft. Worth Q1 South Ft. Worth Central Ft. Worth Southwest Ft. Worth Q1 2016 CBRE Research 2016 CBRE, Inc. 1
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY Figure 3: Market Overview Property Count Unit Count Mthly Rent ($/SF) Occupancy (%) Net Absorption Under Construction New Construction Delivered Submarket DALLAS MARKETS CENTRAL Downtown Dallas/ West End/ Deep Ellum 48 10,102 1.49 88.9 195 1,744 290 Uptown/ Oaklawn/ Highland Park 137 29,245 1.74 86.3 360 3,924 951 East Central Dallas/ Lower Greenville Ave 49 5,508 1.44 93.2 (19) 574 - White Rock Lake/ Tenison Park 69 15,131 0.96 93.1 64 - - North Central Dallas/ Upper Greenville Ave 99 26,697 1.14 90.0 (43) 1,213 395 Skillman St/ I-635 94 25,819 0.99 93.1 11 540 - Central Total 496 112,502 1.31 90.2 876 8,092 1,636 EAST Far East Dallas 19 3,280 1.06 96.7 3 - - East Total 19 3.280 1.06 96.7 3 - - NORTHEAST Garland 94 15,672 1.01 96.7 3 - - Northeast Total 94 15.672 1.01 96.7 3 - - NORTH North Dallas/ Addison 111 30,426 1.12 93.1 295 1,282 - Far North Dallas/ Collin County 78 24,522 1.12 95.8 75 - - East Plano/ Richardson 82 22,123 1.23 90.2 224 1,957 386 West Plano/ Frisco 149 46,683 1.28 93.1 364 5,016 275 Allen/ McKinney 66 16,717 1.12 94.3 158 1.207 267 North Total 486 140,471 1.19 93.3 1,116 9,462 928 NORTHWEST East Irving 57 7,538 0.93 95.8 65 - - West Irving 81 18,299 1.06 95.0 88 - - Las Colinas/ Valley Ranch/ Coppell 76 27,512 1.31 93.4 61 1,557 374 Northwest Dallas/ Bachman Lake 61 11,451 0.98 95.1 62 - - Carrollton/ Farmers Branch 113 27,112 1.16 95.5 257 210 - Lewisville 70 20,445 1.15 94.3 76 599 - Denton 62 12,274 1.15 95.1 19 - - Northwest Total 520 124,631 1.15 94.7 628 2,366 374 SOUTHEAST Southeast Dallas/ Mesquite 101 21,783 0.92 94.4 114 - - Southeast Total 101 21,783 0.92 94.4 114 - - SOUTH South Oak Cliff 63 13,081 0.80 91.4 (61) - - Duncanville/ DeSoto/ Cedar Hill/ Lancaster 89 19,794 0.91 93.5 60 - - Far South Dallas/ Waxahachie 24 3,007 0.95 97.2 8 - - South Total 176 35,882 0.90 93.0 (47) - - Trinity Groves/ Oak Cliff North 37 6.123 1.14 90.9 61 693 SOUTHWEST Grand Prairie 49 11,119 1.03 96.3 52 551 - Southwest Total 86 17,251 2.17 94.4 113 1,244 - FORT WORTH MARKETS CENTRAL Downtown Ft Worth/ TCU 54 9,931 1.40 91.5 42 436 - Central Total 54 9,931 1.40 91.5 42 436 - EAST East Ft Worth/ Woodhaven/ I-30E 68 12,536 0.85 89.5 53 - - North Arlington 97 21,534 1.02 94.5 (170) - - South Arlington 137 27,802 0.99 94.4 204 747 99 East Total 302 61,872 0.97 93.4 87 747 99 NORTHEAST Haltom City/ Richland Hills/ Fossil Creek 70 16,959 1.02 95.3 53 - - Hurst/ Euless/ Bedford 129 29,956 1.07 93.7 278 - - Grapevine/ Roanoke/ Keller 62 15,882 1.23 95.1 121 300 - Northeast Total 261 62,797 1.09 94.5 452 300 - NORTHWEST Northwest Ft Worth/ Saginaw/ Eagle Mtn 28 4,728 0.87 95.2 105 194 - Northwest Total 28 4,728 0.87 95.2 105 194 - SOUTH South Ft Worth 60 10,692 0.88 93.2 61 180 - South Total 60 10,692 0.88 93.2 61 180 - SOUTHWEST Southwest Ft Worth/ Benbrook 44 12,920 1.04 95.4 (93) 374 - Far Southwest Ft Worth 23 2,764 0.92 95.6 (10) - - Southwest Total 67 15,054 1.00 95.4 (103) 374 - WEST Western Hills/ Ridgmar/ Ridglea 76 13,054 0.86 90.8 132 - - West Total 76 13,054 0.86 90.8 132 - - DALLAS TOTAL 1,979 471,548 1.20 93.1 3,004 22,605 2,938 FORT WORTH TOTAL 848 178,128 1.03 93.7 776 2,231 99 DALLAS/FORT WORTH TOTAL 2,827 649,676 1.14 93.4 3,780 24,836 3,037 Source: Apartment Data Service, Q1 2016. CBRE Research, Q1 2016. Q1 2016 CBRE Research 2016 CBRE, Inc. 2
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY RENTS BREAK RECORDS (AGAIN); NEW SUPPLY FORECAST TO DING NEAR-TERM GAINS (THOUGH) Average market rents continue to increase as DFW adds population and payrolls at one of the fastest rates in the U.S. At the end of Q1 2016, nearly 40% of DFW s multifamily submarkets reported above-market rental averages (higher than $1.14 per sq. ft., a new market high). Both Class A and Class B properties saw average monthly rents increase by $0.03 and $0.02 per sq. ft., respectfully, in Q1 2016. Rents in Class A apartments, built in 2010 or after, are trending even higher despite softer overall occupancies. Class A properties are offering concessions to entice new residents where about one-in-four are offering some type of rental concession or discount compared to only one in five for the broader DFW multifamily market. Figure 4: Avg. Rent, Monthly by Class $/SF 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80 0.70 0.60 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Class A Class B Class C Source: Apartment Data Service, Q1 2016. CBRE Research, Q1 2016. COMPONENTS FOR HISTORIC OCCUPANCY: ESCALATING HOME PRICES+POPULATION GROWTH Demand for apartments has increased over the past four years as factors such as strong employment and population growth contributed to the historic performance. As mentioned, with the dearth of affordable single-family homes, we are seeing wouldbe buyers being kept within the Metroplex multifamily rental market. To supplement this reasoning, North Texas Real Estate Information Systems (NTREIS) reports that North Texas saw the median single-family home prices continued to leap at the start of 2016 by 9.6% on a trailing 12-month total, explaining why multifamily occupancy remains over the 90% threshold. Moreover, according to Nielsen, the DFW metro area population is forecasted to grow 7.7% by 2021 as compared to 10.9% in the most recent 5 years, another factor pointing to a growing reservoir of new, potential renters. Looking at the numbers, overall, occupancy remained flat at 93.4% in Q1 2016. Class A occupancy continued to compress as new product delivered and entered the lease-up stage in the production cycle. We can expect to see Class A occupancy to fluctuate as many new communities are expected to deliver over the next 18 months. Class B occupancy increased 20 bps from 95.3% to 95.5%; the highest occupancy of all assets. Figure 5: Occupancy by Class Occupancy (%) 96 95 94 93 92 91 90 89 88 87 86 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Class A Class B Class C Source: Apartment Data Service, Q1 2016. CBRE Research, Q1 2016. Q1 2016 CBRE Research 2016 CBRE, Inc. 3
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY CONSTRUCTION PERMITS COMPRESS AT THE START OF 2016 As a result of the Economic diversity in DFW s multifamily market, DFW continued to experience a high demand for apartment space, as new units continue to be absorbed steadily. The U.S. Census Bureau reports that 2,913 multifamily housing permits were issued in DFW thus far in 2016, a slight compression of 575 permits from the same time period last year. For the second quarter in a row the number of proposed units in the pipeline compressed, potentially in response to market volatility at the end of 2015 and beginning of 2016. However, many lenders and developers continue to favor multifamily product in DFW as historic market fundamentals persist. Additionally, there were 8,624 new unit starts in Q1 2016, adjusting the total number of units under construction to 24,854 units. Figure 6: Construction Activity and Net Absorption Unit Count (K) Under Construction Delivered Net Absorption 26 24 22 20 18 16 14 12 10 8 6 4 2 0 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Source: Apartment Data Service, Q1 2016. CBRE Research, Q1 2016. A ROOM OF ONE S OWN: POPULATION AND PAYROLLS MAKING ONE A BIT HARDER TO FIND In Q1 2016, DFW created 112,000 jobs year-overyear, translating to a 3.3% annual growth rate, a robust number by any measure. Unemployment fell from 4.1% at the end of 2015 to the current level of 3.9% this quarter, making for a tight labor market. Consider this: DFW s unemployment is now 60 bps lower than the state average and a full 1% tighter than the U.S. overall. With a current estimated population of 7.1 million, The Metroplex s population has grown by 8.2% since 2010, and what s more, an additional growth of 7.7% is projected for 2016 to 2021, according to Nielsen. Figure 7: Total Employment Growth Unemployment Rate % 10 9 8 7 6 5 4 3 2008 2009 2010 2011 2012 2013 2014 2015 U.S. Texas Dallas/Fort Worth MSA Source: Bureau of Labor Statistics, February 2016. Q1 2016 Q1 2016 CBRE Research 2016 CBRE, Inc. 4
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY CAPITAL MARKETS OFFER NO NEW NEWS WITH STABLE CAP RATES AND ACTIVITY MIRRORS U.S. On the national stage, the multifamily market is off to a modest start. As of March 2016, U.S. occupancy closed out at 95%, the second consecutive monthly increase. Annual rent growth was 0.5%, and overall has been 4.0% or greater for 20 continuous months, as reported by Axiometrics s latest report. According to Real Capital Analytics (RCA), national sales volume decreased 28% quarter-to-quarter and totaled $36.8 billion in transactions in Q1 2016; year-to-date, $152.7 billion has traded over the past 12 months, a 20% increase. RCA reported sales DFW volume totaled $1.8 billion in Q1 2016, and the average price per unit, $101,905, a 22% decrease from Q4 2015. Most sales continue to occur in the suburbs while urban areas such as Downtown Dallas/West End/ Deep Ellum/Uptown and Downtown Ft. Worth/ TCU continue to experience extensive construction activity. Moreover, the skyline is changing in Dallas s Uptown/Downtown area as 65% of the Uptown/Downtown construction pipeline consists of high-rise or high-rise conversion projects. At the start of 2016, average infill/urban stabilized cap rates in DFW remained steady across the board. Class A property cap rates remained between the ranges of 4.25% to 4.75%. Class B properties remained at 5.00% to 6.00% and Class C properties stand at 6.00% to 7.00%. In suburban areas, average stabilized cap rates ranged from 4.50% to 5.50% for Class A properties; a compression of 25 bps from Q4 2015. Unchanged from last quarter, Class B properties remained at 5.50% to 6.50%, and 7.00% to 7.80% for Class C properties. Figure 8: Q1 2016 Major Recent Transactions Property Address City 586 Parks at Treepoint 6601 Treepoint Dr Arlington 472 Churchill Estates 8501 Lullwater Dr Dallas 435 Lakewood Flats 7425 La Vista Dr Dallas 360 Estates of Richardson 955 W President George Bush Hwy Richardson 354 Post Oak Place 13950 Trinity Blvd Euless 344 Heights of Cityview 5270 Bryant Irving Rd Fort Worth 334 Gateway Cedars 1100 N Gateway Blvd Forney 318 El Sol Del Lago 3102 Oradell Lane Dallas 312 Mill Valley 9001 Randol Mill Fort Worth 297 Terraces on the Parkway 1109 N Carrier Pkwy Grand Prairie 268 4689 Mustang Pkwy 4689 Mustang Pkwy Carrollton 264 Woodlands of Arlington 2800 Lynnwood Dr Arlington 250 Colorado Court 1939 Colorado Court Denton 248 Riverstone 3450 River Park Dr Fort Worth 241 Courtyards on Glenview 4401 Glennview Ct North Richland Hills Source: Real Capital Analytics, Q1 2016. CBRE Research, Q1 2016. Q1 2016 CBRE Research 2016 CBRE, Inc. 5
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY FORT WORTH MARKETS CENTRAL FW1 Downtown Ft Worth/ TCU EAST FW2 East Ft Worth/ Woodhaven/ I-30E FW3 North Arlington FW4 South Arlington NORTHEAST FW5 Haltom City/ Richland Hills/ Fossil Creek FW6 FW7 Hurst/ Euless/ Bedford Grapevine/ Roanoke/ Keller NORTHWEST FW8 Northwest Ft Worth/ Saginaw/ Eagle Mtn SOUTH FW9 South Ft Worth SOUTHWEST FW10 Southwest Ft Worth/ Benbrook FW11 Far Southwest Ft Worth WEST FW12 Western Hills/ Ridgmar/ Ridglea DALLAS MARKETS CENTRAL D1 Downtown Dallas/ West End/ Deep Ellum D2 D3 D4 D5 Uptown/ Oaklawn/ Highland Park East Central Dallas/ Lower Greenville Ave White Rock Lake/ Tenison Park North Central Dallas/ Upper Greenville Ave D6 Skillman St/ I-635 EAST D6 Far East Dallas NORTHEAST D7 Garland NORTH D8 North Dallas/ Addison D9 Far North Dallas/ Collin County D10 East Plano/ Richardson D11 West Plano/ Frisco D12 Allen/ McKinney NORTHWEST D13 East Irving D14 West Irving D15 Las Colinas/ Valley Ranch/ Coppell D16 Northwest Dallas/ Bachman Lake D17 Carrollton/ Farmers Branch D18 Lewisville/Flower Mound D19 Denton SOUTHEAST D20 Southeast Dallas/ Mesquite SOUTH D21 Oak Cliff South D22 Duncanville/ DeSoto/ Cedar Hill/ Lancaster D23 Far South Dallas/ Waxahachie SOUTHWEST D24 Trinity Groves/ Oak Cliff North D25 Grand Prairie
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY CONTACTS Robert C. Kramp Director, Research & Analysis Texas-Oklahoma Division robert.kramp@cbre.com E. Michelle Miller Research Operations Manager michelle.miller@cbre.com Lauren Paris Senior Research Analyst +1 214 979 6587 lauren.paris@cbre.com Brian Ashton Research Coordinator +1 214 979 6589 brian.ashton@cbre.com CBRE OFFICES CBRE Dallas 2100 McKinney Ave, Suite 700 Dallas, TX 75201 To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway. Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
MARKETVIEW Dallas / Fort Worth Multifamily, Q4 2015 Fundamentals make for strong 2015; deliveries in 2016 merit watching jobs/population gains Vacancy Rate 6.6% Under Construction 18,159 Completions 1,090 Net Absorption 1,261 Dallas/Fort Worth s expanding economy added to the fundamentals of the multifamily market last year which trended positively across all classes and this pattern is expected to continue into 2016. *Arrows indicate change from previous quarter. Figure 1: Net Absorption Dallas 4,950 3,950 The dip in the final quarter s absorption was due to more to a seasonal pattern that left the overall performance of the market unaffected for the year. In fact, unit demand ended 2015 where expected, with just under 19,000 new units occupied by the close of the year, the majority stemming from newly delivered Class A product. One favoring tailwind to DFW is that area home prices are up and putting pressure on the affordable housing sector while another tailwind for demand and rents is coming from the sheer heft seen with the one-two of rising corporate relocations and sustained in-migration to the DFW area. Still, with nearly 19,000 units in the Metroplex construction pipeline, approximately 80% of them located in Dallas, CBRE Research is keeping an eye on the lease up of the deliveries in addition to population gains and new jobs growth, mainly in industries which create the payrolls needed to qualify for these high-end lux rental agreements. Conversely, Class B and Class C properties persistently gain renters and can be classified as completely full at 95.3% and 95%, respectively. We expect this to continue in the year ahead as DFW s affordable housing dearth becomes more than just a topic of conversation. 2,950 1,950 950 (50) Central Dallas North Dallas Northwest Dallas South Dallas Northeast Dallas Southeast Dallas Southwest Dallas Source: CBRE Research, Q4 2015. Figure 2: Net Absorption Fort Worth 1,570 1,370 1,170 970 770 570 370 170 (30) Q1 Q2 Q3 Q4 Northeast Ft. Worth East Ft. Worth Central Ft. Worth West Ft. Worth Source: CBRE Research, Q4 2015. Southwest Ft. Worth Q1 Q2 Q3 Q4 South Ft. Worth East Dallas Northwest Ft. Worth Q4 2015 CBRE Research 2016 CBRE, Inc. 1
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY Figure 3: Market Overview Property Count Unit Count Mthly Rent ($/SF) Occupancy (%) Net Absorption Under Construction New Construction Delivered Submarket DALLAS MARKETS CENTRAL Downtown Dallas/ West End/ Deep Ellum 46 9,472 1.47 86.3 138 1,904 499 Uptown/ Oaklawn/ Highland Park 137 29,115 1.66 86.3 219 2,702 - East Central Dallas/ Lower Greenville Ave 49 5,508 1.46 93.2 80 321 180 White Rock Lake/ Tenison Park 70 15,163 0.95 93.1 18 - - North Central Dallas/ Upper Greenville Ave 100 26,588 1.14 90.0 (43) 1,213 - Skillman St/ I-635 94 25,819 0.96 93.1 (74) - - Central Total 496 111,665 1.28 90.0 338 6.140 679 EAST Far East Dallas 19 3,280 1.00 96.7 (6) - - East Total 19 3.280 1.00 96.7 (6) - - NORTHEAST Garland 94 15,672 0.99 95.5 16 326 - Northeast Total 94 15.672 0.99 95.5 16 326 - NORTH North Dallas/ Addison 111 30,432 1.15 93.1 8 1,004 - Far North Dallas/ Collin County 78 24,522 1.17 95.8 (37) - - East Plano/ Richardson 82 22,123 1.21 90.2 220 1,258 - West Plano/ Frisco 147 46,051 1.24 93.1 254 2,543 - Allen/ McKinney 63 15.747 1.18 94.3 63 998 - North Total 481 138,875 1.20 93.3 508 5,803 - NORTHWEST East Irving 57 7,538 0.91 95.8 52 - - West Irving 81 18,288 1.02 95.0 (10) - - Las Colinas/ Valley Ranch/ Coppell 75 27,138 1.27 93.4 89 1,504 - Northwest Dallas/ Bachman Lake 61 11,419 0.94 95.1 26 - - Carrollton/ Farmers Branch 110 24,212 1.13 95.5 24 210 - Lewisville 70 20,445 1.15 95.1 27 899 - Denton 62 12,274 1.14 95.1 (12) - - Northwest Total 516 123,314 1.12 94.7 196 2,313 - SOUTHEAST Southeast Dallas/ Mesquite 101 21,783 0.89 94.4 71 - - Southeast Total 101 21,783 0.89 94.4 71 - - SOUTH South Oak Cliff 63 18,288 0.88 91.4 42 - - Duncanville/ DeSoto/ Cedar Hill/ Lancaster 89 19,794 0.91 93.5 (97) - - Far South Dallas/ Waxahachie 24 3,007 0.95 97.2 8 - - South Total 176 35,882 0.90 93.0 (47) - - Trinity Groves/ Oak Cliff North 37 6.123 0.91 90.9 693 SOUTHWEST Grand Prairie 48 10,920 0.99 95.9 13 614 - Southwest Total 42 17,052 1.90 95.9 13 1,307 - FORT WORTH MARKETS CENTRAL Downtown Ft Worth/ TCU 53 9,541 1.39 91.5 231 828 - Central Total 53 9,541 1.39 91.5 231 828 - EAST East Ft Worth/ Woodhaven/ I-30E 68 12,536 0.82 89.5 (10) - - North Arlington 97 21,534 1.01 94.5 186 - - South Arlington 135 27,394 0.97 94.4 135 526 - East Total 300 61,464 0.95 93.4 311 526 - NORTHEAST Haltom City/ Richland Hills/ Fossil Creek 70 16,959 1.01 95.3 (89) - - Hurst/ Euless/ Bedford 129 29,956 1.04 93.7 42 - - Grapevine/ Roanoke/ Keller 61 15,580 1.19 95.1 312 - - Northeast Total 260 62,495 1.07 94.5 265 - - NORTHWEST Northwest Ft Worth/ Saginaw/ Eagle Mtn 26 4,187 0.85 95.2 33 542 - Northwest Total 26 4,187 0.85 95.2 33 542 - SOUTH South Ft Worth 60 10,692 0.87 93.2 (45) - - South Total 60 10,692 0.87 93.2 (45) - - SOUTHWEST Southwest Ft Worth/ Benbrook 44 12,920 1.02 95.4 (19) 374 - Far Southwest Ft Worth 24 2,810 0.91 95.6 40 - - Southwest Total 68 15,100 1.00 95.4 21 374 - WEST Western Hills/ Ridgmar/ Ridglea 76 13,054 0.85 90.8 (24) - - West Total 76 13,054 0.85 90.8 (24) - - DALLAS TOTAL 1,968 467,523 1.18 93.0 3,988 15,889 1,090 FORT WORTH TOTAL 843 176,533 1.01 93.7 792 2,270 - DALLAS/FORT WORTH TOTAL 2,811 644,056 1.12 93.4 4,780 18,159 1,090 Source: Apartment Data Service, Q4 2015. CBRE Research, Q4 2015. Q4 2015 CBRE Research 2016 CBRE, Inc. 2
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY RENTAL GAINS SEE SLOWER MOMENTUM IN Q4 BUT CHALKED SOLID GAINS FOR THE YEAR DFW s average monthly rents have eclipsed the $1.00 per sq. ft. threshold now for nearly two full years and 2015 saw them surge ahead by 7.7% year-over-year. At the end of Q4 2015, 14 of the 38 submarkets reported above-market rental averages (higher than $1.12 per sq. ft.). Both Class A and Class B properties saw average rents increase by $0.01 per sq. ft. from Q3 2015 to Q4 2015. Class A apartments, built in 2010 or after, have their asking rents trending higher despite lower overall occupancies which helps to explain why we see concessions on the rise in that class category. One in four now are offering some type of rental concession compared to nearly only one-in-five for the overall category offering some type of rental discount. Figure 4: Rent, Avg. Monthly by Class $/SF 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80 0.70 0.60 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Class A Class B Class C Source: Apartment Data Service, Q4 2015. CBRE Research, Q4 2015. HISTORIC HIGH OCCUPANCIES, JOB GAINS AND NEW POPULATION GROWTH FUEL DEVELOPMENT Figure 5: Occupancy Rate by Class DFW s demand curve over the past four years coming out of the recession have triggered developers to rush new supply additions in order to keep pace with the rental demand. As mentioned, with the dearth of affordable single family homes, we are seeing would-be buyers being kept within the Metroplex multifamily rental market. To supplement this reasoning, DFW saw single-family home prices leap during 2016 by 6% year-over-year to an home price of $264,804, explaining why multifamily occupancy remained over the 90% threshold in Occupancy (%) 96 95 94 93 92 91 90 89 88 87 86 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 2015. Moreover, according to Moody s Analytics, the DFW metro area population is forecast to reach Class A Class B Class C 7.8 million by 2020, another factor pointing to a vast reservoir of new, future renters. Looking at the numbers, overall, occupancy Source: Apartment Data Service, Q4 2015. CBRE Research, Q4 2015. decreased by 40 bps from 93.8% to 93.4% at the end of 2015. Class A occupancy broke a three year high as new product delivered, however there was still a year-over-year increase of 20 bps up from 89.3% to 89.5% as 2015 came to a close. Class B occupancy slipped 50 bps from 95.8% to 95.3%, but has remained above 95.0% for the past full year. Source: CBRE Research, Q4 2015. Q4 2015 CBRE Research 2016 CBRE, Inc. 3
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY CONSTRUCTION PERMITS UP DURING 2015 As forecasted at the end of 2014, DFW s multifamily market experienced a high demand for apartment space as new units were absorbed steadily. The U.S. Census Bureau reports that 23,612 multifamily housing permits were issued in DFW from January through December 2015, an increase of 5,924 permits from the same time period last year. The number of proposed units in the pipeline compressed slightly over last quarter. There was a decrease of 1,146 units in Q4 2015, yielding a total proposed count of 21,115 units. In addition, there were 395 new unit starts in Q4 2015, adjusting the total number of units under construction to 18,154 units. About 66% of DFW s under construction activity is concentrated within the North Dallas and Central Dallas submarket clusters, with 11,943 units currently under construction. Many of those units, about 44%, are concentrated in West Plano/Frisco and Uptown/Oaklawn/Highland Park submarkets., the most active areas in the Metroplex. Figure 6: Construction Activity and Net Absorption Unit Count (K) Under Construction Delivered Net Absorption 22 20 18 16 14 12 10 8 6 4 2 0 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Source: Apartment Data Service, Q4 2015. CBRE Research, Q4 2015. PAYROLLS ADVANCED, RESIDENTIAL GROWTH RATES MAKE FOR TIGHT MARKET AT YEAR-END In Q4 2015, DFW created 101,000 jobs year-overyear, translating to a 3.0% annual growth rate, robust number by any measure. Unemployment fell from 3.9% at the end of Q3 2015 to the current level of 3.8% this quarter, making for a tight labor market. Consider this: DFW s unemployment is now l80 bps lower than the state s and a full 1.3% tighter than the nation s. With a current estimated population of 6.9 million, the area s population has grown by 8.2% since 2010, and what s more, an additional growth of 7.1% is projected for 2015 to 2020, according to Nielsen. Figure 7: Total Employment Growth Unemployment Rate % 10 9 8 7 6 5 4 3 2008 2009 2010 2011 2012 2013 2014 U.S. Texas Dallas/Fort Worth MSA Source: Bureau of Labor Statistics, September 2015. 2015 Q4 2015 CBRE Research 2016 CBRE, Inc. 4
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY CAPITAL MARKETS ACTIVITY SEE A YEAR OF METROPLEX INVESTOR INTEREST On the national stage, the multifamily market finished out strong in 2015. In Q4 2015, U.S. occupancy closed out at 95%, a 15 year high. Annual rent growth was 4.7%, and overall, rent growth is the highest year-end figure since 2005, when effective rent growth was 5.8%, as reported by Axiometrics. According to Real Capital Analytics, national sales volume increased 47% quarter-toquarter and totaled $49.6 billion in transactions in Q4 2015; year-to-date, $148.0 billion has traded over the past 12 months, a 32% increase from 2014. Sales volume in DFW totaled $2.3 billion in Q4 2015, and reported average price per unit was $103,732, a 13% increase from Q3 2015. Most sales continue to occur in the suburbs while urban areas such as Downtown Dallas/West End/ Deep Ellum/Uptown and Downtown Ft. Worth/ TCU continue to experience extensive construction activity. At the end of 2015, average infill/urban stabilized cap rates in DFW remained stable between the ranges of 4.25% to 4.75% for Class A properties. Class B properties remained stable at 5.00% to 6.00% while Class C properties also stayed flat between 6.00% to 7.00%. In suburban areas, average stabilized cap rates ranged from 4.75% to 5.75% for Class A properties, 5.50% to 6.50% for Class B properties, and 7.00% to 7.80% for Class C properties; unchanged from last quarter. Figure 8: Q4 2015 Major Recent Transactions Property Address City 586 Parks at Treepoint 6601 Treepoint Dr Arlington 430 Sonsrena 9425 Rolater Rd Frisco 380 Creekside Homes in Legacy 6300 Windcrest Dr Plano 372 St Laurent 2825 N State Hwy 360 Grand Prairie 360 Edentree 1721 E Frankford Rd Carrollton 302 Lakeshore at Preston 3700 Preston Rd Plano 269 Ventana 5555 Spring Valley Rd Dallas 264 Windsong 177717 Vail Dr Dallas 160 Gardens on Walnut 4301 W Walnut St Garland 160 La Lolla on Meadowbrook 8901 Meadowbrook Blvd Garland 160 Landmark at Lake Village East 4358 Point Blvd Fort Worth 100 5850 Highland Hills Dr 5850 Highland Hills Dr Dallas 90 Sunset Heights 4701 Wellesley Ave Fort Worth 60 Sycamore Trace Apartment Homes 2920 Sycamore School Rd Fort Worth 56 University House TCU 3201 S University Dr Fort Worth Source: Real Capital Analytics, Q4 2015. CBRE Research, Q4 2015. Q4 2015 CBRE Research 2016 CBRE, Inc. 5
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY FORT WORTH MARKETS CENTRAL FW1 Downtown Ft Worth/ TCU EAST FW2 East Ft Worth/ Woodhaven/ I-30E FW3 North Arlington FW4 South Arlington NORTHEAST FW5 Haltom City/ Richland Hills/ Fossil Creek FW6 FW7 Hurst/ Euless/ Bedford Grapevine/ Roanoke/ Keller NORTHWEST FW8 Northwest Ft Worth/ Saginaw/ Eagle Mtn SOUTH FW9 South Ft Worth SOUTHWEST FW10 Southwest Ft Worth/ Benbrook FW11 Far Southwest Ft Worth WEST FW12 Western Hills/ Ridgmar/ Ridglea DALLAS MARKETS CENTRAL D1 Downtown Dallas/ West End/ Deep Ellum D2 D3 D4 D5 Uptown/ Oaklawn/ Highland Park East Central Dallas/ Lower Greenville Ave White Rock Lake/ Tenison Park North Central Dallas/ Upper Greenville Ave D6 Skillman St/ I-635 EAST D6 Far East Dallas NORTHEAST D7 Garland NORTH D8 North Dallas/ Addison D9 Far North Dallas/ Collin County D10 East Plano/ Richardson D11 West Plano/ Frisco D12 Allen/ McKinney NORTHWEST D13 East Irving D14 West Irving D15 Las Colinas/ Valley Ranch/ Coppell D16 Northwest Dallas/ Bachman Lake D17 Carrollton/ Farmers Branch D18 Lewisville/Flower Mound D19 Denton SOUTHEAST D20 Southeast Dallas/ Mesquite SOUTH D21 Oak Cliff South D22 Duncanville/ DeSoto/ Cedar Hill/ Lancaster D23 Far South Dallas/ Waxahachie SOUTHWEST D24 Trinity Groves/ Oak Cliff North D25 Grand Prairie
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY CONTACTS Robert C. Kramp Director, Research & Analysis robert.kramp@cbre.com E. Michelle Miller Research Operations Manager michelle.miller@cbre.com Lauren Paris Senior Research Analyst +1 214 979 6587 lauren.paris@cbre.com Brian Ashton Research Coordinator +1 214 979 6589 brian.ashton@cbre.com CBRE OFFICES CBRE Dallas 2100 McKinney Ave, Suite 700 Dallas, TX 75201 To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway. Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
MARKETVIEW Dallas / Fort Worth Multifamily, Q3 2015 Neck and neck: disciplined deliveries and new demand spike DFW occupancy Vacancy Rate 6.2% Under Construction 18,854 Completions 989 Net Absorption 4,780 *Arrows indicate change from previous quarter. DELIVERY NUMBERS BOOST OCCUPANCY In Q3 2015, there was a large drop in the delivery of new units. This directly influenced the occupancy rate as it increased 160 basis points (bps) to the highest level in the last five years. The robust increase in occupancy is attributed to steady employment growth, in-migration and the competitive single family market. NEW UNITS GOING UP: METROPLEX APARTMENT CONSTRUCTION SWELLS Over 4,700 more units were added to the under construction pipeline this quarter, up from the last quarter s two year low and four straight quarters of contraction. Figure 1: Net Absorption 4,950 4,450 3,950 3,450 2,950 2,450 1,950 1,450 950 Q3 Q2 Q1 2015 YTD Total Absorbed COMPETITIVE SINGLE FAMILY CONTRIBUTES TO HIGH APARTMENT OCCUPANCY With the dearth of affordable single family homes due to strong employment growth and in-migration, would-be buyers are pushed into the rental market as they wait for the right house in the right area. STABLE ECONOMY SUSTAINS MULTIFAMILY MARKET POSITION The overall market for multifamily real estate in Dallas/Fort Worth remained strong in Q3 2015. Market fundamentals once again are trending positively across all classes and are expected to continue for the foreseeable future. 450 (50) Central Dallas East Dallas Northeast Dallas North Dallas Northwest Dallas Southeast Dallas South Dallas Southwest Dallas Central Ft. Worth East Ft. Worth Source: CBRE Research, Q3 2015. Northeast Ft. Worth Northwest Ft. Worth South Ft. Worth Southwest Ft. Worth West Ft. Worth Additionally, employment grew by 3.2% over the last 12 months in DFW compared to a growth rate of 2.1% nationally; it is forecast that DFW will remain one of the best markets for job growth in 2015. Furthermore, DFW s population exceeds 6.9 million people and is considered young, with an average age of 35, and affluent, with most of the population (51%) in their prime earning years of 20-54. Q3 2015 CBRE Research 2015 CBRE, Inc. 1
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY Figure 2: Market Overview Source: Apartment Data Service, Q3 2015. CBRE Research, Q3 2015. Property Count Unit Count Mthly Rent ($/SF) Occupancy (%) Net Absorption Under Construction New Construction Delivered Submarket DALLAS MARKETS CENTRAL Downtown Dallas/ West End/ Deep Ellum 46 9,289 1.10 87.0 376 1,615 499 Uptown/ Oaklawn/ Highland Park 128 26,788 1.66 91.2 630 3,912 - East Central Dallas/ Lower Greenville Ave 57 7,134 1.46 92.4 85 180 180 White Rock Lake/ Tenison Park 58 11,920 0.93 92.8 76 - - North Central Dallas/ Upper Greenville Ave 95 25,820 1.12 90.6 144 685 - Skillman St/ I-635 94 25,820 0.95 93.8 105 - - Central Total 478 106,432 1.25 91.5 1,282 6,392 679 EAST Far East Dallas 19 2,380 1.00 96.9 15 - - East Total 19 2,380 1.00 96.9 15 - - NORTHEAST Garland 107 19,074 0.98 96.9 28 326 - Northeast Total 107 19.074 0.98 96.9 28 326 - NORTH North Dallas/ Addison 107 29,459 1.13 94.5 231 683 - Far North Dallas/ Collin County 81 25,314 1.17 96.0 - - - East Plano/ Richardson 77 20,532 1.21 92.3 566 1,549 - West Plano/ Frisco 135 42,380 1.24 91.9 676 1,654 - Allen/ McKinney 63 16.011 1.15 92.1 232 109 - North Total 466 134,860 1.20 93.9 1,862 5,578 - NORTHWEST East Irving 57 8,020 0.91 95.3 19 - - West Irving 81 18,288 1.02 95.2 (64) - - Las Colinas/ Valley Ranch/ Coppell 76 26,838 1.27 94.1 225 1,497 - Northwest Dallas/ Bachman Lake 61 11,419 0.94 94.9 16 - - Carrollton/ Farmers Branch 105 24,728 1.13 95.4 182 215 - Lewisville 82 23,783 1.15 94.1 96 1,022 - Denton 56 11,042 1.14 96.3 96 300 - Northwest Total 518 124,118 1.12 94.9 608 3,034 - SOUTHEAST Southeast Dallas/ Mesquite 101 21,785 0.89 94.1 (6) - - Southeast Total 101 21,785 0.89 94.1 (6) - - SOUTH South Dallas/ Oak Cliff 98 18,735 0.88 92.3 224 566 - Duncanville/ DeSoto/ Cedar Hill/ Lancaster 89 19,794 0.91 94.0 (64) - - Far South Dallas/ Waxahachie 24 3,007 0.95 96.9 26 - - South Total 211 41,536 0.90 93.4 186 - - SOUTHWEST Grand Prairie 42 9,079 0.99 95.9 13 310 - Southwest Total 42 9,079 0.99 95.9 13 310 - FORT WORTH MARKETS CENTRAL Downtown Ft Worth/ TCU 53 9,541 1.39 90. 231 227 310 Central Total 53 9,541 1.39 90.5 231 227 310 EAST East Ft Worth/ Woodhaven/ I-30E 68 12,536 0.81 89.2 (10) 272 - North Arlington 97 21,534 0.99 94.1 186 - - South Arlington 140 29,133 0.91 95.0 135 657 - East Total 305 63,206 0.92 93.5 311 929 - NORTHEAST Haltom City/ Richland Hills/ Fossil Creek 75 18,885 1.02 95.5 (89) - - Hurst/ Euless/ Bedford 129 29,720 1.04 94.4 42 300 - Grapevine/ Roanoke/ Keller 54 13,231 1.22 95.3 312 - - Northeast Total 258 61,806 1.07 94.9 265 300 - NORTHWEST Northwest Ft Worth/ Saginaw/ Eagle Mtn 26 4,187 0.85 95.9 33 302 - Northwest Total 26 4,187 0.85 95.9 33 302 - SOUTH South Ft Worth 60 10,692 0.85 93.1 (45) 124 - South Total 60 10,692 0.85 93.1 (45) 124 - SOUTHWEST Southwest Ft Worth/ Benbrook 44 12,920 1.02 95.7 (19) 766 - Far Southwest Ft Worth 24 2,810 0.92 94.8 40 - - Southwest Total 68 15,100 1.00 95.5 21 - - WEST Western Hills/ Ridgmar/ Ridglea 76 13,054 0.85 90.7 (24) - - West Total 76 13,054 0.85 90.7 (24) - - DALLAS TOTAL 1,942 460,164 1.13 93.7 3,988 16,206 679 FORT WORTH TOTAL 846 177,586 0.99 92.9 792 2,648 310 DALLAS/FORT WORTH TOTAL 2,788 637,750 1.11 93.8 4,780 18,854 989 Q3 2015 CBRE Research 2015 CBRE, Inc. 2
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY MULTIFAMILY RENTS For the sixth consecutive quarter, average monthly rents remained over $1.00 per sq. ft. for DFW overall. Year-over-year average rent increased by $0.08 per sq. ft. or a 7.3% annual increase. The highest retail rents were quoted in Uptown/Oaklawn/Highland Park at $1.66 per sq. ft., while the lowest rents were reported in East Fort Worth/Woodhaven/I-35E at $0.81 per sq. ft. At the end of Q3 2015, 17 of the 37 submarkets reported above-market rental averages (higher than $1.11 per sq. ft.). Both Class A and Class B properties saw average rental rates increase by $0.02 per sq. ft. from Q2 2015 to Q3 2015. Additionally, Class C and D properties also saw an increase of $0.02 per sq. ft. over the same time period. Figure 3: Rent, Avg. Monthly by Class $/SF 1.70 1.50 1.30 1.10 0.90 0.70 0.50 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Class A Class B Class C Class D Overall Source: Apartment Data Service, Q3 2015. CBRE Research, Q3 2015. MULTIFAMILY OCCUPANCY Figure 4: Occupancy Rate by Class Overall, occupancy increased by 120 bps to 93.8% at the end of Q3 2015. Class A occupancy reached a 12-quarter high across DFW (93.7%), a yearover-year increase of 470 bps and a quarter-overquarter increase of 360 bps. For Class B, occupancy increased by 20 bps from 95.6% to 95.8%. Class C properties remained flat and Class D occupancy increased 30 bps. The highest occupancy rates in the market were reported in the Far South Dallas/Waxahachie submarket, Far East Dallas, and Duncanville/Desoto/Cedar Hill/ Lancaster at 96.9%. Occupancy (%) 97 95 93 91 89 87 85 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Class A Class B Class C Class D Overall Source: Apartment Data Service, Q3 2015. CBRE Research, Q3 2015. Source: CBRE Research, Q3 2015. Q3 2015 CBRE Research 2015 CBRE, Inc. 3
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY MULTIFAMILY CONSTRUCTION Demand for space in the multifamily market continues to remain strong as vacancy decreased 160 bps over the quarter. New units have and will continue to be absorbed steadily in 2015. Year-to-date as of Q3 2015, the U.S. Census Bureau reports that 16,712 multifamily housing permits have been issued in DFW from January through September 2015, an increase of approximately 2,000 permits from the same time period last year. The number of proposed units in the pipeline compressed slightly over last quarter. There was a decrease of 1,732 units in Q3 2015, yielding a total proposed count of 22,261units. In addition, there were 5,775 new unit starts in Q3 2015, adjusting the total number of units under construction to 18,854 units. More than 1/5 th of DFW s under construction activity is concentrated within the Uptown/Oaklawn/Highland Park submarket with 3,912 units currently under construction, however, no units delivered in Q3 2015. Downtown Dallas/West End/Deep Ellum had the highest amount of deliveries, at 499 units, leaving 1,615 units currently under construction. The Far Southwest Fort Worth submarket has the most units under construction of the Fort Worth markets with 766 units, yet no units delivered over the quarter. Figure 5: Construction Activity and Net Absorption Unit Count (K) 22 20 18 16 14 12 10 8 6 4 2 0 Under Construction Delivered Net Absorption Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Source: Apartment Data Service, Q3 2015. CBRE Research, Q3 2015. EMPLOYMENT AND DEMOGRAPHICS In Q3 2015, DFW created 104,100 jobs year-overyear, translating to a 3.2% annual growth rate. The unemployment rate fell from 4.0% at the end of Q2 2015 to the current level of 3.9% this quarter. Dallas/Fort Worth s unemployment rate for Q3 2015 was 50 bps lower than Texas (4.4%) and130 bps lower than the U.S. (5.2%). An ample supply of well-educated workers and strong population growth contribute to the area's healthy economy. With a current estimated population of 6.9 million, the DFW metropolitan area is the fourth-largest MSA in the United States. The area s population has grown by 8.2% since 2010, and additional growth of 7.1% is projected for 2015 to 2020, according to Nielsen. Figure 6: Unemployment Rate Unemployment Rate % 10 9 8 7 6 5 4 3 2 1 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q3 2015 U.S. Texas Dallas/Fort Worth MSA Source: Bureau of Labor Statistics, September 2015. Q3 2015 CBRE Research 2015 CBRE, Inc. 4
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY CAPITAL MARKETS Market conditions at the national level remain strong. In Q3 2015, national multifamily occupancy has increased 18 bps to 95.1%, and annual rent growth was 5.2%, an increase of 10 bps quarter-over-quarter and a 109 bps year-overyear. Overall, rent growth reached a nine-year high, as reported by Axiometrics. According to Real Capital Analytics, national sales volume decreased 4% and totaled $29.6 billion in transactions this quarter and $128.5 billion over the past 12 months, an 18% increase. Multifamily sales volume in DFW totaled $1.8 billion in Q3 2015, per Real Capital Analytics. DFW's reported average price per unit in Q3 2015 was $83,574 a 4% increase from Q2 2015. Most sales continue to occur in the suburbs while urban areas such as Downtown Dallas/West End/ Deep Ellum/Uptown and Downtown Ft. Worth/ TCU continue to experience extensive construction activity. At the three quarter mark of 2015, average infill/urban stabilized cap rates in DFW remained stable between the ranges of 4.25% to 4.75% for Class A properties. Class B properties remained stable at 5.00% to 6.00% while Class C properties also stayed flat between 6.00% to 7.00%. In suburban areas, average stabilized cap rates ranged from 4.75% to 5.25% for Class A properties, 5.50% to 6.00% for Class B properties, and 6.75% to 7.50% for Class C properties; unchanged from last quarter. Figure 7: Q3 2015 Major Transactions Property Address City 524 Broadstone Valley Ranch 10201 N Macarthur Blvd Irving 396 Handover Cityplace Dallas 4030 N Central Expy Dallas 376 Thornbury at Chase Oaks 7101 Chase Oaks Plano 372 Villlas of Vista 351 State Highway 121 Lewisville 372 Broadstone Vista Ridge 160 E Vista Ridge Coppell 364 The Madision 12800 Jupiter Rd Dallas 354 Monticello by the Vineyard 2500 State Highway 121 Euless 340 Sontera Palms 9505 Royal Ln Dallas 334 The Avenues at Craig Ranch 8700 Stacy Rd Dallas 360 Century Legacy Village 606 W Gran 336 Landmark on Lovers Urban Apartment Homes 5201 Amesbury Dr Dallas 324 Meadows at Ferguson 11760 Ferguson Dallas 320 Meadow Wood 1826 Esters Rd Irving 310 Venue at Greenville 5769 Pineland Dr Dallas 300 Resort at Central Park 2300 Central Park Bedford Source: Real Capital Analytics, Q3 2015. CBRE Research, Q3 2015. Q3 2015 CBRE Research 2015 CBRE, Inc. 5
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY CONTACTS CBRE OFFICES E. Michelle Miller Research Operations Manager michelle.miller@cbre.com CBRE Dallas 2100 McKinney Ave, Suite 700 Dallas, TX 75201 Lauren Paris Senior Research Analyst +1 214 979 6587 lauren.paris@cbre.com To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway. Brian Ashton Research Coordinator +1 214 979 6589 brian.ashton@cbre.com Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
MARKETVIEW Dallas / Fort Worth Multifamily, Q2 2015 Demand lives up to seasonally strong expectations Vacancy Rate 7.4% Under Construction 14,068 Completions 2,784 Net Absorption 6,383 HIGHEST QUARTER NET ABSORPTION IN THE LAST FIVE YEARS In Q2 2015, over 6,700 units were absorbed, an increase of almost 1,000 units from Q1 2015. This robust absorption is and continues to be supported by strong employment growth and development activity in Dallas/Fort Worth. The Uptown/Oaklawn/Highland Park submarket continued to outpace all other submarkets by absorbing over 1,400 units year-to-date, over 380 more units than the next highest-performing submarket, West Plano/Frisco. Figure 1: Net Absorption 3,450 2,950 2,450 1,950 1,450 *Arrows indicate change from previous quarter. Q2 Q1 2015 YTD Total Absorbed CONTINUED INFLUX OF NEW UNITS The first half of 2015 recorded over 5,200 new unit completions, an increase of approximately 21% or 915 more new units compared to the first half of 2014. Par for the course, new units continue to be absorbed as they are delivered. MULTIFAMILY LANDSCAPE CHANGING IN THE URBAN CORE OF DALLAS. Almost all of the planned developments in the Greater Downtown area, which includes Uptown, are high-rises. Currently, Uptown has a relatively limited set of existing high-rise space, and the landscape is going to completely change. There are over 5,000 units under construction in the urban core submarkets. Notably, The Jordan Uptown, a high-rise community located near McKinney Ave at the Maple/Routh Connection, recently topped off this quarter at 23 stories. ECONOMY SUSTAINS MARKET CONDITIONS The overall market for multifamily real estate in Dallas/Fort Worth once again fired on all cylinders 950 450 (50) Central Dallas East Dallas Northeast Dallas North Dallas Northwest Dallas Southeast Dallas South Dallas Southwest Dallas Central Ft. Worth East Ft. Worth Source: CBRE Research, Q2 2015. Northeast Ft. Worth Northwest Ft. Worth South Ft. Worth Southwest Ft. Worth West Ft. Worth in Q2 2015. Overall market fundamentals are trending positively across all multifamily classes and sustained demand indicates continued growth for the remainder of 2015. Additionally, employment grew by 3.4% over the last 12 months in DFW compared to a growth rate of 2.3% nationally; it is forecasted DFW will remain one of the best markets for job growth in 2015. Furthermore, DFW s population exceeds 6.9 million people and is considered young, with an average age of 35, and affluent, with most of the population (51%) in their prime earning years of 20-54. Q2 2015 CBRE Research 2015 CBRE, Inc. 1
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY Figure 2: Market Overview Source: Apartment Data Service, Q2 2015. CBRE Research, Q2 2015. Property Count Unit Count Mthly Rent ($/SF) Occupanc y (%) Net Absorption Under Constructi on New Construction Delivered Submarket DALLAS MARKETS CENTRAL Downtown Dallas/ West End/ Deep Ellum 43 8,436 1.42 90.3 131 1,944 Uptown/ Oaklawn/ Highland Park 127 26,609 1.67 88.9 747 3,104 710 East Central Dallas/ Lower Greenville Ave 56 6,954 1.47 93.5 329 360 - White Rock Lake/ Tenison Park 58 11,920 0.93 92.8 76 - - North Central Dallas/ Upper Greenville Ave 95 25,820 1.12 90.6 144 685 - Skillman St/ I-635 94 25,820 0.95 92.8 165 - - Central Total 473 105,220 1.26 91.1 1,592 6,093 710 EAST Far East Dallas 19 2,380 1.00 94.4 24 - - East Total 19 2,380 1.00 94.4 24 - - NORTHEAST Garland 107 19,074 0.95 94.6 164-148 Northeast Total 107 19.074 0.95 94.6 164-148 NORTH North Dallas/ Addison 107 29,459 1.13 94.4 207 400 - Far North Dallas/ Collin County 81 25,314 1.29 96.0 126 - - East Plano/ Richardson 78 21,005 1.16 89.5 347 532 660 West Plano/ Frisco 135 42,380 1.24 91.9 676 1,654 318 Allen/ McKinney 63 16.011 1.15 92.1 232 109 164 North Total 464 134,169 1.20 92.9 1,588 2,695 1,142 NORTHWEST East Irving 57 8,020 0.89 95.3 53 - - West Irving 81 18,288 1.00 95.6 51 - - Las Colinas/ Valley Ranch/ Coppell 75 26,452 1.26 94.2 240 1,394 - Northwest Dallas/ Bachman Lake 62 11,510 0.93 94.8 135 - - Carrollton/ Farmers Branch 105 24,728 1.10 94.7 172-256 Lewisville 82 23,783 1.13 93.4 295 780 - Denton 56 10,958 1.12 95.8 40 384 - Northwest Total 518 123,739 1.07 94.6 986 2,558 256 SOUTHEAST Southeast Dallas/ Mesquite 101 21,785 0.88 94.1 56 - - Southeast Total 101 21,785 0.88 94.1 56 - - SOUTH South Dallas/ Oak Cliff 99 18,990 0.89 90.3 141 - - Duncanville/ DeSoto/ Cedar Hill/ Lancaster 89 19,794 0.90 94.0 149 - - Far South Dallas/ Waxahachie 24 3,007 0.95 96.1 10 - - South Total 212 41,791 0.90 92.5 300 - - SOUTHWEST Grand Prairie 41 8,949 0.96 95.9 79 - - Southwest Total 41 8,949 0.96 95.9 79 - - FORT WORTH MARKETS CENTRAL Downtown Ft Worth/ TCU 52 9,231 1.39 90.8 219 929 374 Central Total 52 9,230 1.39 90.8 219 929 374 EAST East Ft Worth/ Woodhaven/ I-30E 68 12,536 0.79 89.3 194 - - North Arlington 97 21,534 0.97 93.3 100 - - South Arlington 140 29,133 0.96 84.5 99 353 154 East Total 305 63,203 0.93 88.5 393 353 154 NORTHEAST Haltom City/ Richland Hills/ Fossil Creek 75 18,885 1.01 96.0 340 - - Hurst/ Euless/ Bedford 130 29,720 1.01 95.0 56 300 - Grapevine/ Roanoke/ Keller 54 13,231 1.19 92.9 458 322 - Northeast Total 259 61,806 1.05 94.9 754 622 - NORTHWEST Northwest Ft Worth/ Saginaw/ Eagle Mtn 27 4,323 0.84 95.3 3 302 - Northwest Total 27 4,323 0.84 95.3 3 302 - SOUTH South Ft Worth 60 10,692 0.84 93.5 28 124 - South Total 60 10,692 0.84 93.5 28 124 - SOUTHWEST Southwest Ft Worth/ Benbrook 44 12,920 1.01 95.9 105 392 - Far Southwest Ft Worth 24 2,810 0.91 94.0 (28) - - Southwest Total 68 15,100 0.99 95.5 77 392 - WEST Western Hills/ Ridgmar/ Ridglea 76 13,054 0.84 81.1 120 - - West Total 76 13,054 0.84 81.1 120 - - DALLAS TOTAL 1,935 458,007 1.13 93.1 4,789 11,346 2,256 FORT WORTH TOTAL 847 177,409 0.98 92.1 1,594 2,722 528 DALLAS/FORT WORTH TOTAL 2,782 635,416 1.09 92.6 6,383 14,068 2,784 Q2 2015 CBRE Research 2015 CBRE, Inc. 2
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY MULTIFAMILY RENTS For the fifth consecutive quarter, average monthly rents remained over $1.00 per sq. ft. for DFW overall. Year-over-year average rent increased by $0.08 per sq. ft. or a 7.4% annual increase. The highest retail rents were quoted in Uptown/Oaklawn/Highland Park at $1.67 per sq. ft., while the lowest rents were reported in East Fort Worth/Woodhaven/I-35E at $0.79 per sq. ft. At the end of Q2 2015, 13 of the 37 submarkets reported above-market rental averages (higher than $1.09 per sq. ft.). Both Class A and Class B properties saw average rental rates increase by $0.03 per sq. ft. from Q1 2015 to Q2 2015. Additionally, Class C and D properties saw an increase of $0.03 per sq. ft. and $0.02 per sq. ft. over the same time period, respectively. MULTIFAMILY OCCUPANCY Figure 3: Rent, Avg. Monthly by Class $/SF 1.70 1.50 1.30 1.10 0.90 0.70 0.50 Source: Apartment Data Service, Q2 2015. CBRE Research, Q2 2015. Figure 4: Occupancy Rate by Class Occupancy (%) Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Class A Class B Class C Class D Overall Overall, occupancy compressed slightly by 10 bps 97 to 92.6% at the end of Q2 2015. Class A occupancy 95 reached an 11 quarter high across DFW (90.1%), a year-over-year increase of 280 bps and a quarterover-quarter increase of 150 bps. For Class B, occupancy increased by 30 bps from 95.3% to 93 91 89 95.6%. Occupancy for Class C properties increased 87 by 60 bps while Class D occupancy increased by 10 bps. The highest occupancy rate in DFW, for a second consecutive quarter, was reported in the Far South Dallas/Waxahachie submarket at 96.1%, a quarter-over-quarter increase of 40 bps. 85 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Class A Class B Class C Class D Overall Source: Apartment Data Service, Q2 2015. CBRE Research, Q2 2015. Source: CBRE Research, Q2 2015. Q2 2015 CBRE Research 2015 CBRE, Inc. 3
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY MULTIFAMILY CONSTRUCTION Demand for space in the multifamily market continues to remain strained despite a vacancy increase of 10 bps over the quarter. New units have and will continue to be absorbed steadily in 2015. Year-to-date as of May 2015, the U.S. Census Bureau reports that 7,136 multifamily housing permits have been issued in DFW from January through May 2015, a decrease of approximately 2,000 permits from the same time period last year. The number of proposed units in the pipeline rebounded slightly over last quarter. There was an increase of 540 units in Q2 2015, yielding a total proposed count of 23,933 units. In addition, there were 223 new unit starts in Q2 2015, adjusting the total number of units under construction to 14,068 units. More than 1/5 th of DFW s under construction activity is concentrated within the Uptown/Oaklawn/Highland Park submarket with 3,104 units currently under construction and 710 units delivered for the quarter. East Plano/Richardson also had a notable amount of deliveries, at 660 units, leaving 532 units currently under construction. The Downtown Fort Worth/TCU submarket has the most units under construction of the Fort Worth markets with 929 units, and 374 units delivered this quarter. Figure 5: Construction Activity and Net Absorption Unit Count (K) 22 20 18 16 14 12 10 8 6 4 2 0 Under Construction Delivered Net Absorption Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Source: Apartment Data Service, Q2 2015. CBRE Research, Q2 2015. EMPLOYMENT AND DEMOGRAPHICS In Q2 2015, DFW created 121,600 jobs year-overyear, translating to a 3.7% annual growth rate. The unemployment rate fell from 4.6% at the end of Q1 2015 to the current level of 4.0% this quarter. Dallas/Fort Worth s unemployment rate for Q2 2015 was 30 bps lower than Texas (4.3%) and100 bps lower than the U.S. (5.5%). An ample supply of well-educated workers and strong population growth contribute to the area's healthy economy. With a current estimated population of 6.9 million, the DFW metropolitan area is the fourth-largest MSA in the United States. The area s population has grown by 8.2% since 2010, and additional growth of 7.1% is projected for 2015 to 2020, according to Nielsen. Figure 6: Unemployment Rate Unemployment Rate % 10 9 8 7 6 5 4 3 2 1 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 U.S. Texas Dallas/Fort Worth MSA Source: Bureau of Labor Statistics, December 2014. Q2 2015 Q2 2015 CBRE Research 2015 CBRE, Inc. 4
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY CAPITAL MARKETS Market conditions at the national level remain strong. In Q2 2015, national multifamily occupancy increased 30 bps to 95.2%, with annual rent growth at 5.0%, an increase of 4 bps quarterover-quarter and 142 bps year-over- year. Overall, rent growth reached a four year high, as reported by Axiometrics. According to Real Capital Analytics, national sales volume decreased 15% and totaled $28.23 billion in transactions this quarter, a 30% increase from $128.03 billion over the past 12 months. Multifamily sales volume in DFW totaled $1.04 billion in Q2 2015, per Real Capital Analytics. DFW's reported average price per unit in Q2 2015 was $92,381 a 19% increase from Q1 2015. Most sales continue to occur in the suburbs while the more urban submarkets of Downtown Dallas/West End/Deep Ellum, Uptown/Oaklawn/Highland Park and Downtown Ft. Worth/TCU continue to experience extensive construction activity. At the midpoint of 2015, the average infill/urban stabilized cap rates increased 25 bps to a new range of 4.25% to 4.75% for Class A properties. Class B properties remained stable at 5.00% to 6.00% while class C properties decreased 50 bps to 6.00% to 7.00%. In suburban areas, average stabilized cap rates ranged from4.75% to 5.25% for Class A properties, 5.50% to 6.00% for Class B properties, and 6.75% to 7.50% for Class C properties. Figure 7: Q2 2015 Major Transactions Property Address City 656 Sierra Park 11611 Ferguson Rd Dallas 512 Camelot Village 4200 US Hwy 80 E Mesquite 444 Jefferson Creekside 1300 N Custer Rd Allen 404 Madison at Round Grove 201 E Round Grove Rd Lewisville 400 Sheffield Square 2770 Bardin Rd Grand Prairie 395 Amalfi Stonebriar 5275 Town And Country Blvd Frisco 384 Palo Alto 3808 Post Oak Blvd Euless 376 Madison on the Parkway 19002 Dallas Pkwy Dallas 372 Wimberly Apartment Homes 4141 Horizon North Pkwy Dallas 360 Derby Park 606 W Palace Pky Grand Prairie 336 Landmark on Lovers Urban Apartment Homes 5201 Amesbury Dr Dallas 324 Meadows at Ferguson 11760 Ferguson Dallas 320 Meadow Wood 1826 Esters Rd Irving 310 Venue at Greenville 5769 Pineland Dr Dallas 300 Resort at Central Park 2300 Central Park Bedford Source: Real Capital Analytics, Q2 2015. CBRE Research, Q2 2015. Q2 2015 CBRE Research 2015 CBRE, Inc. 5
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY CONTACTS CBRE OFFICES E. Michelle Miller Research Operations Manager michelle.miller@cbre.com CBRE Dallas 2100 McKinney Ave, Suite 700 Dallas, TX 75201 Lauren Paris Senior Research Analyst +1 214 979 6587 lauren.paris@cbre.com To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway. Brian Ashton Research Coordinator +1 214 979 6589 brian.ashton@cbre.com Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
MARKETVIEW Dallas / Fort Worth Multifamily, Q1 2015 2014 s strong momentum continues into 2015 for DFW s multifamily market Vacancy Rate 7.3% Under Construction Completions Net Absorption 2,479 16,581 5,765 *Arrows indicate change from previous quarter. Quarter over quarter, the number of new units in Q1 2015 decreased by 1,058 units from Q4 2014. In Dallas, the Uptown/Oaklawn/Highland Park submarket had the highest number of units under construction, with 3,446 units, while the Downtown Ft Worth/ TCU submarket has 929 units under construction for the Fort Worth side of the Metroplex. WINTER WEATHER DID NOT COOL DOWN EXCELLENT MARKET CONDITIONS The overall market for multifamily real estate in Dallas/ Fort Worth continued to fire on all cylinders in Q1 2015. Market fundamentals trended positively Q1 2015 CBRE Research 2015 YTD Total Absorbed 1,150 950 750 550 350 150 West Ft. Worth South Ft. Worth Southwest Ft. Worth Northwest Ft. Worth East Ft. Worth Northeast Ft. Worth Central Ft. Worth South Dallas Southwest Dallas (50) Southeast Dallas DECLINED IN Q1 2015 1,350 North Dallas NUMBER OF UNITS UNDER CONSTRUCTION Q1 Northwest Dallas The last time the overall occupancy was under 90% was in Q1 2010 (89.3%) since then occupancy has remained in the low 90% range. Par for the course, new units continue to be absorbed as they are delivered. 1,550 East Dallas DFW OCCUPANCY HAS BEEN OVER 90% FOR THE PAST FIVE YEARS 1,750 Northeast Dallas In Q1 2015 over 5,700 units were absorbed, an increase of over 5,000 units from Q4 2014. This healthy absorption activity is and continues to be supported by strong employment growth and development activity in Dallas/Fort Worth. The Uptown/Oaklawn/Highland Park submarket continued to outpace all other submarkets by absorbing 716 units in Q1 2015, over 200 more units than the next highest preforming submarket, Skillman St/ I-635. Figure 1: Net Absorption Central Dallas HIGHEST Q1 NET ABSORPTION IN THE LAST FIVE YEARS Source: CBRE Research, Q1 2015. across all classes of multifamily properties and sustained demand indicates continued growth for the remainder of 2015. Additionally, DFW s central location, friendly business environment, and strong employment growth (fueled by corporate relocations and general inmigration) should help elevate apartment demand. In addition, DFW s population is over 6.9 million people and is considered young, with an average age of 35, and affluent, with most of the population (51%) in their prime earning years of 20-54. 2015 CBRE, Inc. 1
M A R K E T V I E W DALLAS / FORT WORTH MULTIFAMILY Figure 2: Market Overview DALLAS MARKETS CENTRAL EAST NORTHEAST NORTH NORTHWEST SOUTHEAST SOUTH SOUTHWEST Property Count Unit Count Downtown Dallas/ West End/ Deep Ellum Uptown/ Oaklawn/ Highland Park East Central Dallas/ Lower Greenville Ave White Rock Lake/ Tenison Park North Central Dallas/ Upper Greenville Ave Skillman St/ I-635 Central Total Far East Dallas East Total Garland Northeast Total North Dallas/ Addison Far North Dallas/ Collin County East Plano/ Richardson West Plano/ Frisco Allen/ McKinney North Total East Irving West Irving Las Colinas/ Valley Ranch/ Coppell Northwest Dallas/ Bachman Lake Carrollton/ Farmers Branch Lewisville Denton Northwest Total Southeast Dallas/ Mesquite Southeast Total South Dallas/ Oak Cliff Duncanville/ DeSoto/ Cedar Hill/ Lancaster Far South Dallas/ Waxahachie South Total Grand Prairie Southwest Total 42 125 56 58 95 94 470 19 19 106 106 106 80 76 133 61 456 57 81 75 62 105 82 56 518 100 100 99 89 84 272 41 41 8,123 26,200 6,954 11,920 25,820 25,820 104,498 2,380 2,380 18,926 18,926 29,136 29,312 20,525 41,762 15,499 132,234 8,020 18,288 26,449 11,514 24,728 23,787 10,958 123,684 21,745 21,745 18,990 19,794 8,949 41,791 8,949 8,949 1.38 1.63 1.41 0.92 1.12 0.91 1.21 1.00 1.00 0.92 0.92 1.09 1.10 1.15 1.20 1.11 1.14 0.86 0.97 1.23 0.91 1.23 1.10 1.10 1.07 0.85 0.85 0.87 0.88 0.93 0.88 0.94 0.94 91.9 87.7 88.8 92.1 90.5 92.1 90.4 95.7 96.7 94.6 94.6 94.9 95.5 88.3 91.6 93.6 92.8 94.9 95.4 93.3 93.6 93.9 92.9 95.3 94.0 94.1 94.1 89.5 93.3 95.7 91.7 94.9 94.9 59 716 43 239 102 497 1,656 (10) (10) 240 240 174 (22) 161 411 107 831 56 8 103 47 35 393 61 128 128 128 402 333 (28) 707 92 92 2,257 3,446 360 496 6,559 148 148 722 892 2,272 620 4,506 1,394 780 384 2,558-684 684 403 790 1,193 482 482 - Downtown Ft Worth/ TCU 52 52 68 99 139 306 75 131 52 258 27 27 60 60 44 24 68 75 75 9,230 9,230 12,659 21,534 28,884 63,077 18,885 29,720 12,876 61,481 4,323 4,323 10,692 10,692 12,920 2,810 15,100 12,961 12,961 1.35 1.35 0.77 0.95 0.93 0.90 0.98 0.98 1.15 1.02 0.82 0.82 0.84 0.84 0.98 0.90 0.90 0.81.81 88.4 88.4 87.4 93.1 92.5 91.7 94.8 94.9 91.5 94.2 95.0 95.6 93.3 93.3 95.0 94.9 94.9 89.9 89.9 89 89 118 151 255 524 345 77 57 479 (25) (25) 71 71 151 (3) 148 132 132 929 929 254 254 300 509 809 302 302 124 124 392 392-120 120-1,982 455,107 1.08 92.7 4,347 13,771 2,359 846 176,864 0.96 92.7 1,418 2,810 120 2,828 631,971 1.06 92.7 5,765 16,581 2,479 Submarket Mthly Rent ($/SF) Occupancy (%) New Construction Net Under Absorption Construction Delivered FORT WORTH MARKETS CENTRAL Central Total EAST NORTHEAST NORTHWEST SOUTH SOUTHWEST WEST East Ft Worth/ Woodhaven/ I-30E North Arlington South Arlington East Total Haltom City/ Richland Hills/ Fossil Creek Hurst/ Euless/ Bedford Grapevine/ Roanoke/ Keller Northeast Total Northwest Ft Worth/ Saginaw/ Eagle Mtn Northwest Total South Ft Worth South Total Southwest Ft Worth/ Benbrook Far Southwest Ft Worth Southwest Total Western Hills/ Ridgmar/ Ridglea West Total DALLAS TOTAL FORT WORTH TOTAL DALLAS/FORT WORTH TOTAL Source: Apartment Data Service, Q1 2015. CBRE Research, Q1 2015. Q1 2015 CBRE Research 2015 CBRE, Inc. 2
M A R K E T V I E W DALLAS / FORT WORTH MULTIFAMILY M U LT I FA M I LY R E N T S Figure 3: Rent, Avg. Monthly by Class $/SF 0.70 0.50 Class A Class B Class D Overall Class C Source: Apartment Data Service, Q1 2015. CBRE Research, Q1 2015. Figure 4: Occupancy Rate by Class Occupany (%) 95 93 91 89 87 Class A Class B Class D Overall Q1 2015 Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Q1 2013 85 Q4 2012 Across the Dallas/ Fort Worth Market, occupancy increased by 20 basis points (bps) to 92.7% at the end of Q1 2015, bouncing back from seasonal decline in leasing activity during the fourth quarter. Although winter weather caused a decline in new unit deliveries in Q1 2015, it is forecasted that demand will remain strong as supply struggles to keep up. Class C and D properties experienced the largest increase in occupancy quarter-overquarter, at 90 bps, to now sit at 94.2% and 90.7%, respectively. There was an increase of 40 bps in Class B properties from 94.9.% to 95.3%. Class A occupancy decreased by 70 basis points to 88.6%. The Far South Dallas / Waxahachie and Far East submarkets reported the highest occupancies in DFW at 95.7%. 0.90 Q3 2012 M U LT I FA M I LY O C C U PA N C Y 1.10 Q2 2012 Both Class A and Class B properties saw average rental rates increase in Q1 2015, by $0.03 per sq. ft. and $0.02 per sq. ft., respectively. Additionally, Class C and D properties saw the same increase of $0.02 per sq. ft. over the same time period. 1.30 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 $0.02 per sq. ft., a 1.7% increase. The highest rental rate average was quoted in the submarket of Uptown/Oaklawn/Highland Park ($1.63 per sq. ft.) while the lowest rent average was reported in East Fort Worth/Woodhaven/I-35E ($0.77 per sq. ft.). At the end of Q1 2015, 14 of the 23 submarkets reported above-market rental averages (higher than $1.06 per sq. ft.). 1.50 Q1 2012 For the fourth consecutive quarter, average monthly rents remained over $1.00 per. sq. ft. for DFW. The quarter-over-quarter average rent rose by Class C Source: Apartment Data Service, Q1 2015. CBRE Research, Q1 2015. Source: CBRE Research, Q1 2015. Q1 2015 CBRE Research 2015 CBRE, Inc. 3
M A R K E T V I E W DALLAS / FORT WORTH MULTIFAMILY MULTIFAMILY CONSTRUCTION Demand for space in the multifamily market continues to remain strong as vacancy decreased 20 bps over the quarter. New units have and will continue to be absorbed rapidly in 2015. Year-to-date as of February 2015, the U.S. Census Bureau reports that 3,488 multifamily housing permits have been issued in DFW from January to February 2015, an increase of over 100 more permits than the same time period last year. The number of proposed units in DFW saw its first decrease in over four quarters. There was a contraction of 410 units, equating to 23,393 proposed units in Q1 2015. In addition, there was a decrease of 1,058 new unit starts in Q1 2015, adjusting the total number of units under construction to 16,581 units. The most activity remained in the Uptown/Oaklawn/Highland Park submarket with 3,446 units currently under construction and 684 units delivered for the quarter. The most deliveries occurred in West Plano with 790 units, leaving 2,272 units currently under construction. The Downtown Fort Worth/TCU submarket has the most units under construction on the Fort Worth side with 929 units. Figure 5: Construction Activity and Net Absorption Q1 2015 Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013 Q3 2013 Q2 2013 Net Absorption Q1 2013 Q4 2012 Q3 2012 Delivered Q2 2012 Q1 2012 Q4 2011 Q3 2011 Q2 2011 Q1 2011 Q4 2010 Under Construction Q3 2010 Q2 2010 Q1 2010 Unit Count (000 s) 22 20 18 16 14 12 10 8 6 4 2 0 Source: Apartment Data Service, Q1 2015. CBRE Research, Q1 2015. Q1 2015 CBRE Research 10 9 8 7 6 5 4 3 2 U.S. Texas Q1 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 1 2002 2014 to the current level of 4.6% as of March 2015. Dallas/Fort Worth s unemployment rate posted an identical unemployment rate for the quarter as Texas (4.6%) but 100 bps lower than the U.S. (5.6%) in Q1 2015. An ample supply of well-educated workers and strong population growth contribute to the area's healthy economy. With a current estimated population of 6.9 million, the DFW metropolitan area is the fourth-largest MSA in the United States. The area s population has grown by 8.2% since 2010, and growth of 7.1% is projected for 2015 to 2020, according to Claritas. Unemployment Rate % 2001 In Q1 2015, DFW created 49,699 jobs year-overyear, translating to a 3.7% annual growth rate. The unemployment rate fell from 4.8% at the end of Figure 6: Unemployment Rate 2000 E M P LOY M E N T A N D D E M O G R A P H I C S Dallas/Fort Worth MSA Source: Bureau of Labor Statistics, December 2014. 2015 CBRE, Inc. 4
M A R K E T V I E W DALLAS / FORT WORTH MULTIFAMILY C A P I TA L M A R K E T S Downtown Ft. Worth/TCU continue to experience extensive construction activity. Multifamily continues to perform well at a national level. In March, national multifamily occupancy had increased 21 bps to 94.9% with annual rent growth of 5.0%; this is first time rent growth had been at or over 5.0% for two consecutive months since June/July 2011, as reported by Axiometrics. According to Real Capital Analytics, national sales volume decreased by 12%, totaling $30.2 billion in transactions in Q1 2015 and $122.16 billion over the past 12 months, a 35% increase. Multifamily sales volume in DFW totaled $1.5 billion in Q1 2015, based on data from Real Capital Analytics. DFW's reported average price per unit in Q1 2015 was $84,747 a 20% decrease from Q4 2014. Most sales continue to occur in the suburban markets while urban areas such as Downtown At the start of 2015 in the Dallas/Fort Worth region, the average infill/urban stabilized cap rates compressed 25 bps at the 4.0% to 4.5% range for Class A properties. The Class B range remained stable at 5.0% to 5.5% in addition to a stable Class C range of 6.5% to 7.0%. In suburban areas, average stabilized cap rates decreased 25 bps to 4.7% to 5.2% for Class A properties, while Class B and C properties remained stable at 5.2% to 5.7%, and 6.7% to 7.5%, respectively. Dallas/West End/Deep Ellum/Uptown and Figure 7: Q1 2015 Major Transactions Property Address City 712 Emory & Ashmore at Horizon North 4300 N Horizon Pkwy Dallas 616 Sutter Creek 2216 Plum Ln Arlington 464 Retreat at Stonebridge Ranch 1920 Grassmere Ln McKinney 436 Surrey Row 7272 Marvin D Love Dallas 400 Copper Crossing 4644 Riverwalk Dr Fort Worth 388 Versailles 4900 Pear Ridge Dr Dallas 362 Hidden Creek 1200 College Pkwy Lewisville 362 Advenir at Frankford 3702 Frankford Rd Dallas 304 Pecan Way 5821 Bonnie View Dallas 304 Mandalay Palms 7550 Cliff Creek Dallas 303 Broadstone Waterbridge 600 Woodbridge Pkwy Wylie 301 Stonebridge Ranch 2305 S Custer Rd McKinney 300 Camino Del Sol 1030 Dallas Dr Denton 296 Mandalay Palms 7501 Chesterfield Dr Dallas 288 Arioso 3030 Claremont Dr Dallas Source: Real Capital Analytics, Q1 2015. CBRE Research, Q1 2015. Q1 2015 CBRE Research 2015 CBRE, Inc. 5
M A R K E T V I E W DALLAS / FORT WORTH MULTIFAMILY C O N TAC T S CBRE OFFICES Lynn Cirillo Research Operations Manager lynn.cirillo@cbre.com CBRE Dallas 2100 McKinney Ave, Suite 700 Dallas, TX 75201 Lauren Paris Senior Research Analyst +1 214 979 6587 lauren.paris@cbre.com To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway. Brian Ashton Research Coordinator +1 214 979 6589 brian.ashton@cbre.com Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
MARKETVIEW Dallas / Fort Worth Multifamily, Q4 2014 The slow leasing season did not affect the performance of DFW s multifamily market Vacancy Rate 7.6% Under Construction 20,118 SF Completions 2,892 Net Absorption 754 *Arrows indicate change from previous quarter. TOTAL ANNUAL ABSORPTION REACHES TWO YEAR HIGH Absorption in 2014 exceeded 13,800 units, an increase of over 830 units from 2013 and 1,640 units from 2012. This healthy absorption activity is supported by strong employment growth and development activity in DFW. The Uptown/Oaklawn/Highland Park submarket outpaced all other submarkets by absorbing 1,974 units in 2014. DFW S OCCUPANCY RATE REMAINS ABOVE 92.0% FOR THE SEVENTH CONSECUTIVE QUARTER The overall occupancy rate decreased slightly in the fourth quarter, but remains higher than it was in 2013. The seasonal softness in net absorption caused a drop of 20 basis points (bps) from 92.7% in the third quarter to 92.5% at the end of the year. Class A & B properties performed best, posting occupancy increases of 30 and 80 bps, respectfully. 2013 AND 2014 HAVE DELIVERED THE MOST COMPLETIONS SINCE 2009 In the previous two years (2013-14) total new units delivered reached 24,277 units, a difference of 8,655 more units than then the three years (2010-12)prior, which totaled of 15,572 units. The overall demand for new units remained strong in 2014 and is forecasted to continue the trend into 2015. DEMAND IS EXPECTED TO CONTINUE EXCEED SUPPLY IN 2015 DFW single family homes for sale are at their lowest level in a decade as reported by the Real Estate Center Figure 1: Net Absorption 4,000 Q1 3,500 Q2 3,000 Q3 2,500 Q4 2014 Total Absorbed 2,000 1,500 1,000 500 0 (500) Central Dallas East Dallas Northeast Dallas North Dallas Northwest Dallas Southeast Dallas South Dallas Southwest Dallas Central Ft. Worth East Ft. Worth Northeast Ft. Worth Northwest Ft. Worth South Ft. Worth Southwest Ft. Worth West Ft. Worth Source: CBRE Research, Q4 2014. at Texas A&M University and the North Texas Real Estate Information System. With the low supply, single family home prices have increased at a pace more than double the national average in DFW. In turn, this makes it less affordable to become a homeowner. Additionally, strong employment growth in DFW fueled by corporate relocations and net in-migration has and will continue to keep demand high for apartments. Employment grew by 3.7% over the last 12 months in DFW, compared to a growth rate of 2.0% nationally and it is forecasted DFW will remain one of the best markets for job growth in 2015. Q4 2014 CBRE Research 2015 CBRE, Inc. 1
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY Figure 2: Market Overview Property Count Unit Count Mthly Rent ($/SF) Occupancy (%) Net Absorption Under Construction New Construction Delivered Submarket DALLAS MARKETS CENTRAL Downtown Dallas/ West End/ Deep Ellum 42 8,123 1.37 91.0 42 2,257 - Uptown/ Oaklawn/ Highland Park 122 25,235 1.63 87.4 392 4,397 408 East Central Dallas/ Lower Greenville Ave 56 6,954 1.41 87.7 (34) 360 368 White Rock Lake/ Tenison Park 58 11,920 0.89 90.1 (94) - - North Central Dallas/ Upper Greenville Ave 94 25,285 1.12 90.6 (44) 894 - Skillman St/ I-635 94 25,820 0.89 90.2 210 - - Central Total 466 103,337 1.20 89.5 472 7,908 776 EAST Far East Dallas 19 2,380 1.01 96.0 9 - - East Total 19 2,380 1.01 96.0 9 - - NORTHEAST Garland 106 18,926 0.91 93.3 32 158 147 Northeast Total 106 18,926 0.91 93.3 32 158 147 NORTH North Dallas/ Addison 106 29,136 1.08 94.1 74 722 - Far North Dallas/ Collin County 80 25,312 1.09 95.6 (92 - - East Plano/ Richardson 73 19,462 1.12 92.1 (140) 1,955 278 West Plano/ Frisco 130 40,620 1.17 92.9 (144) 3,096 384 Allen/ McKinney 61 15,499 1.08 93.0 133 620 211 North Total 450 130,029 1.12 93.6 (169) 6,393 873 NORTHWEST East Irving 57 8,020 0.84 94.5 (44) - - West Irving 81 18,288 0.94 93.7 39 - - Las Colinas/ Valley Ranch/ Coppell 75 26,449 1.20 92.9 61 1,394 - Northwest Dallas/ Bachman Lake 62 11,514 0.90 93.2 (134) - - Carrollton/ Farmers Branch 105 24,728 1.07 93.7 23 - - Lewisville 81 23,463 1.08 92.3 384 681 425 Denton 55 10,837 1.08 95.3 (8) 505 - Northwest Total 516 123,299 1.05 93.4 321 2,580 425 SOUTHEAST Southeast Dallas/ Mesquite 100 21,745 0.83 93.5 204 209 - Southeast Total 100 21,745 0.83 93.5 204 209 - SOUTH South Dallas/ Oak Cliff 98 18,738 0.84 88.2 11 252 - Duncanville/ DeSoto/ Cedar Hill/ Lancaster 89 19,794 0.87 91.6 111 - - Far South Dallas/ Waxahachie 24 3,007 0.91 96.7 22 - - South Total 211 41,539 0.86 90.4 144 252 - SOUTHWEST Grand Prairie 41 8,949 0.92 93.8 (78) - 72 Southwest Total 41 8,949 0.92 93.8 (78) - 72 FORT WORTH MARKETS CENTRAL Downtown Ft Worth/ TCU 50 8,616 1.29 93.3 20 1,316 - Central Total 50 8,616 1.29 93.3 20 1,316 - EAST East Ft Worth/ Woodhaven/ I-30E 68 12,659 0.76 87.4 (73) - - North Arlington 99 21,534 0.93 92.4 (193) - - South Arlington 139 28,884 0.91 93.9 (126) 254 - East Total 306 63,077 0.89 92.1 (392) 254 - NORTHEAST Haltom City/ Richland Hills/ Fossil Creek 74 18,704 0.97 93.0 56-281 Hurst/ Euless/ Bedford 131 29,720 0.97 94.7 (58) 300 - Grapevine/ Roanoke/ Keller 52 12,876 1.15 91.1 18 322 318 Northeast Total 257 61,300 1.01 93.4 16 622 599 NORTHWEST Northwest Ft Worth/ Saginaw/ Eagle Mtn 27 4,323 0.82 95.6 27 302 - Northwest Total 27 4,323 0.82 95.6 27 302 - SOUTH South Ft Worth 60 10,692 0.82 92.7 66 124 - South Total 60 10,692 0.82 92.7 66 124 - SOUTHWEST Southwest Ft Worth/ Benbrook 44 12,920 0.96 93.8 13 - - Far Southwest Ft Worth 24 2,810 0.90 95.1 12 - - Southwest Total 68 15,730 0.95 94.0 25 - - WEST Western Hills/ Ridgmar/ Ridglea 74 12,965 0.79 88.8 57 - - West Total 74 12,965 0.79 88.8 57 - - DALLAS TOTAL 1,909 450,204 1.07 92.3 935 17,500 2,293 FORT WORTH TOTAL 842 176,703 0.94 92.6 (181) 2,618 599 DALLAS/FORT WORTH TOTAL 2,751 626,907 1.04 92.5 754 20,118 2,892 Source: Apartment Data Service, Q4 2014. CBRE Research, Q4 2014. Q4 2014 CBRE Research 2015 CBRE, Inc. 2
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY MULTIFAMILY RENTS As 2014 concludes, average monthly rents remained above the dollar per sq. ft. mark for the third quarter in a row. Quarter-over- quarter average rent increased $ 0.01 per sq. ft., or 0.9%. The highest retail rents were quoted in the submarket of Uptown/Oaklawn/ Highland Park ($1.63 per sq. ft) and the lowest rents were reported in East Fort Worth/Woodhaven/ I-35E ($0.76 per sq. ft). There are 15 submarkets above the market average of $1.03 and 22 submarket below market average. Class A and B properties saw the same quarterover-quarter decrease of $0.06 in the average rent per sq. ft. in Q4 2014. Additionally, Class C properties decreased $0.03 per Sq. Ft. to $0.85 per sq. ft. and C properties rents held at $0.70 per sq. ft. over the same time period. MULTIFAMILY OCCUPANCY Across the Dallas/Ft. Worth market, occupancy decreased 20 bps to 92.5%. Occupancy seasonally decreased as leasing activity slowed over the quarter. Although, as more new units continue to deliver, demand remains strong. Class B properties experienced the largest increase in occupancy overover-quarter, a 80 bps increase, to 94.9%. There was an increase of 30 bps in Class A properties from 89.0% to 89.3%. Class C properties decreased 50 bps to 93.3% and Class D occupancy decreased 20 bps to 89.8%. The Far South Dallas/Waxahachie submarket reported the highest occupancy in DFW at 96.7%. Figure 3: Rent, Avg. Monthly by Class $/SF 1.50 1.30 1.10 0.90 0.70 0.50 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Figure 4: Occupancy Rate by Class Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Class A Class B Class C Class D Overall Source: Apartment Data Service, Q4 2014. CBRE Research, Q4 2014. Occupancy (%) 95 93 91 89 87 85 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Class A Class B Class C Class D Overall Source: Apartment Data Service, Q4 2014. CBRE Research, Q4 2014. Q4 2014 Q4 2014 Source: CBRE Research, Q4 2014. Q4 2014 CBRE Research 2015 CBRE, Inc. 3
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY MULTIFAMILY CONSTRUCTION Forecasts are suggesting multifamily market conditions will remain tight, as new units will continue to be absorbed rapidly in 2015, along with the expectation for job growth and net in-migration to DFW. Yearto-date through November 2014, the U.S. Census Bureau reports that 15,183 multi-family housing permits were issued in DFW. Thus, development activity will likely keep its momentum into 2015. The number of units proposed saw an increase for a third quarter in a row in DFW. There was an addition of 57 units in Q4 2014, for a total of 23,803 proposed units, indicating that market fundamentals continue to remain strong. In addition, there were a total of 1,608 new units started in Q4 2014, bringing the total number of units under construction to 20,118 units. The most activity remains to be in the Uptown/Oaklawn/Highland Park submarket with 4,397 units currently under construction and 408 units delivered for the quarter. The most deliveries occurred in Lewisville with 425 leaving 681 units currently under construction. Overall, this is the second quarter in a row that the total number of units under construction is over the 20,000 unit level; Q3 2014 reported the most units under construction in CBRE s recorded history. Figure 5: Construction Activity and Net Absorption Unit Count (000's) Under Construction Delivered Net Absorption 22 20 18 16 14 12 10 8 6 4 2 0 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Source: Apartment Data Service, Q4 2014. CBRE Research, Q4 2014. Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 EMPLOYMENT AND DEMOGRAPHICS In October 2014, DFW created 115,800 jobs yearover-year, translating to a 3.7% annual growth rate. The unemployment rate fell from 5.8% in the first quarter 2014 to the current level of 4.8% this quarter. Dallas/Ft. Worth s unemployment rate posted 30 bps lower than Texas (5.1%) and over 100 bps lower than United States (5.8%) in Q4 2014. An ample supply of well-educated workers and strong population growth contribute to the area's healthy economy. With a current estimated population of 6.8 million, the DFW metropolitan area is the fourth-largest MSA in the United States. The area s population has grown 30% since 2000, and growth of 8.6% is projected for 2015 to 2019, according to Claritas. Figure 6: Unemployment Rate Unemployment Rate % 10 9 8 7 6 5 4 3 2 1 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 US Texas Dallas/Fort Worth MSA Source: Bureau of Labor Statistics, December 2014. Q4 2014 CBRE Research 2015 CBRE, Inc. 4
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY CAPITAL MARKETS Nationally, the multifamily market outperformed forecasts in 2014. National multifamily occupancy has decreased 28 bps to 94.8%, and rent growth was 4.5%, the first time rent growth has been over 4.0% since May 2012, as reported by Axiometrics. According Real Capital Analytics, national sales volume increased 1% or approximately $31.0 billion over last quarter and $107.1 billion over the past 12 months. Multifamily sales volume in DFW totaled $1.5 billion in Q4 2014, per Real Capital Analytics. DFW's reported average price per unit in Q4 2014 was $108,346, a 40% increase from Q3 2014. Most 2014 sales occurred in the suburbs while urban areas such as Downtown Dallas/ West End/ Deep Ellum/Uptown and Downtown Ft. Worth/ TCU continue to experience extensive construction activity. At the close of 2014 in the Dallas/Ft. Worth region, the average infill/urban stabilized cap rates decreased 50 bps between the ranges of 4.25%-to- 4.75% for Class A properties. Class B properties remained stable at 5.0%-to-5.5%, while class C properties increased 25 bps to 6.5%-to-7.0%. In suburban areas, average stabilized cap rates ranged from 5.0%-to-5.5% for Class A properties, 5.25%-to-5.75% for Class B properties, and 6.75%- to-7.50% for Class C properties. The multifamily market experienced one of the best growth years in past decade as sales volume totaled over $263.2 million in DFW. Figure 7: Q4 2014 Major Transactions Property Address City 576 Fairways at Wilson Creek 3191 Medical Center Drive McKinney 535 Gramercy On The Park 4755 Gramercy Oaks Drive Dallas 520 Parkside at Legacy Phase III and IV 5765 Bozeman Drive Plano 492 Northside At Legacy Phase II 5725-5781 Hathaway Pkwy Plano 436 Hunter s Hill 18081 Midway Rd Dallas 410 Brighton Apartments 5426 Meadowcreek Drive Dallas 404 Plaza on Harvest Hill 5535 Harvest Hill Dallas 370 Northside at Legacy Phase I 7560 Bishop Rd Plano 360 Orion At Oak Hill 2450 Oak Hill Cir Fort Worth 357 Villas at Montierra 1603-1615 John West Rd Dallas 330 Elan City Centre 13301 Galleria Pl Dallas 325 Berkshire Medical District 4725 Fairmount St Dallas 311 Union at Carrollton Square 1111 S Main St Carrollton 293 Parkside At Legacy Phase V 5765 Bozeman Drive Plano 292 View at Lake Highlands 9855 Shadow Way Dallas Source: Real Capital Analytics, Q4 2014. CBRE Research, Q4 2014. Q4 2014 CBRE Research 2015 CBRE, Inc. 5
MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY CONTACTS CBRE OFFICES Lynn Cirillo Research Operations Manager lynn.cirillo@cbre.com CBRE Dallas 2100 McKinney Ave, Suite 700 Dallas, TX 75201 Lauren Paris Senior Research Analyst +1 214 9796587 lauren.paris@cbre.com To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway. Brian Ashton Research Coordinator +1 214 9796589 brian.ashton@cbre.com Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
Dallas/Fort Worth Multifamily MarketView Q3 2014 CBRE Global Research and Consulting TOTAL OCCUPANCY 92.7% AVG RENT PER SQ. FT./MTH $1.03 NET ABSORPTION 4,201 CONSTRUCTION 21,402 DELIVERIES 4,330 PROPOSED 23,746 Directional arrows based on change from the previous quarter. Data reflects market totals. MULTIFAMILY OUTPERFORMS EXPECTATIONS AS MARKET FUNDAMENTALS CONTINUE TO STRENGTHEN. Net Absorption decreases but occupancy increases. Occupancy has increased for the third consecutive quarter in DFW, although the market saw a decrease in the number of units absorbed. Third quarter occupancy increased 20 basis points (bps) to 92.7%. Net absorption totaled 4,201 units, a 603 unit decrease from Q2 2014, and year-to-date net absorption totaled 12,868 units. Permit activity for the multifamily market exceeds 2013 totals in Q3 2014. As of July 2014, Dallas/Fort Worth single and multifamily permits totaled 21,266 and 41,165 for the year, respectfully. Multifamily permits to-date in 2014 are up 10.6% from the same period in 2013, according to the Census Bureau. Fort Worth outperforms all major Texas MSA s. According to Axiometrics, Fort Worth ranks 11th out of the 50 top markets nationally. One contibuting factor is due to the effective rent growth. Rent increased 56 basis points from July and 187 bps from August 2013. Fort Worth has surpassed Austin and Houston to the top of the charts in Texas. Figure 1: Market Net Absorption Unit Count 3,400 3,100 2,800 2,500 2,200 1,900 1,600 1,300 1,000 700 400 100 (200) Central Dallas East Dallas Northeast Dallas North Dallas Source: Apartment Data Services, Q3 2014. CBRE Research, Q3 2014. Northwest Dallas Southeast Dallas Key demographic supports multifamily demand. South Dallas The ongoing strength of the multifamily market in Dallas/Fort Worth is due to the strong demand by one key demographic group. Known as Generation Y or Millennials, who are in their 20s to early 30s, are driving the rental demand because they are delaying marriage, embracing the live, work, play lifestyle, and experiencing restrictive mortgage requirements. DFW s population is considerably young, with an average age of 39, and affluent, with most of the population (51%) in their prime earning years of 20-54. This population make up is directly effecting why the multifamily market is continuing to perform better than expected. Another contributing factor to the strength of the DFW market is residents tend to earn more than the national average, supporting an estimated median household income of $56,065 as of Q3 2014, versus $53,352 in the U.S. Southwest Dallas Central Ft. Worth East Ft. Worth Northeast Ft. Worth Northwest Ft. Worth Q1 Q2 Q3 2014 YTD Total Absorbed South Ft. Worth Southwest Ft. Worth West Ft. Worth 2014, CBRE, Inc.
MULTIFAMILY THIRD QUARTER MARKETVIEW Q3 2014 Dallas/Fort Worth Multifamily MarketView 2 Figure 2: Market Overview by Submarket Submarket Property Count Unit Count Monthly Rent $/Sq. Ft. Occupancy % Net Absorption Under Construction Delivered Construction CENTRAL Downtown Dallas/ West End/ Deep Ellum 41 7,847 1.35 92.3 66 2,533 164 Uptown/ Oaklawn/ Highland Park 120 24,827 1.62 87.3 846 4,214 630 East Central Dallas/ Lower Greenville Ave 55 6,586 1.41 93.1 116 728 White Rock Lake/ Tenison Park 58 11,920 0.88 90.6 (6) North Central Dallas/ Upper Greenville Ave 94 25,285 1.16 90.7 66 894 Skillman St/ I-635 94 25,820 0.89 89.4 215 362 Central Total 462 102,285 1.20 89.8 1,303 8,369 1,156 EAST Far East Dallas 19 3,280 1.00 95.7 (17) Far East Dallas Total 19 3,280 1.00 95.7 (17) 0 0 NORTHEAST Garland 106 18,926 0.90 93.1 (198) 158 Garland Total 106 18,926 0.90 93.1 (198) 158 0 NORTH North Dallas/ Addison 107 29,136 1.08 93.9 122 722 Far North Dallas/ Collin County 80 25,312 1.09 96.0 122 0 East Plano/ Richardson 73 19,462 1.11 92.8 261 1,955 381 West Plano/ Frisco 131 40,882 1.19 93.2 320 3,096 1,189 Allen/ McKinney 61 15,495 1.09 92.1 393 623 North Total 452 130,287 1.12 93.7 1,218 6,396 1,570 NORTHWEST East Irving 57 8,020 0.84 95.0 29 West Irving 81 18,228 0.93 95.1 35 Las Colinas/ Valley Ranch/ Coppell 74 25,967 1.19 94.4 115 1,876 Northwest Dallas/ Bachman Lake 62 11,514 0.89 94.5 (17) Carrollton/ Farmers Branch 105 24,728 1.05 93.6 189 555 Lewisville 80 23,038 1.08 92.0 369 782 Denton 54 10,794 1.09 95.0 220 548 Northwest Total 513 122,289 1.04 94.0 940 3,206 555 SOUTHEAST Southeast Dallas/ Mesquite 100 21,745 0.83 92.6 (190) 209 Southest Totals 100 21,745 0.83 92.6 (190) 209 0 SOUTH South Dallas/ Oak Cliff 98 18,738 0.83 88.2 194 252 201 Duncanville/ DeSoto/ Cedar Hill/ Lancaster 89 19,748 0.85 91.3 55 354 Far South Dallas/ Waxahachie 24 3,007 0.91 95.9 3 South Total 211 41,493 0.85 90.2 252 252 555 SOUTHWEST Grand Prairie 41 9,849 0.93 94.6 2 Southwest Totals 41 9,849 0.93 94.6 2 0 0 FORT WORTH MARKETS CENTRAL Downtown Ft Worth/ TCU 51 8,753 1.28 92.7 215 1,316 Central Total 51 8,753 1.28 92.7 215 1,316 0 EAST East Ft Worth/ Woodhaven/ I-30E 68 12,659 0.75 89.0 99 North Arlington 99 21,462 0.93 93.3 (7) South Arlington 139 28,884 0.91 94.3 128 254 East Totals 306 63,005 0.88 92.9 220 254 0 NORTHEAST Haltom City/ Richland Hills/ Fossil Creek 75 18,704 0.96 92.8 150 Hurst/ Euless/ Bedford 131 29,720 0.96 94.9 80 300 Grapevine/ Roanoke/ Keller 51 12,558 1.15 93.2 101 640 294 Northeast Totals 257 60,982 1.00 93.9 331 940 294 NORTHWEST Northwest Ft Worth/ Saginaw/ Eagle Mtn 27 4,323 0.81 95.0 (2) 302 Northwest Totals 27 4,323 0.81 95.0 (2) 302 0 SOUTH South Ft Worth 58 10,424 0.82 92.0 2 South Totals 56 10,424 0.82 92.0 2 0 0 SOUTHWEST Southwest Ft Worth/ Benbrook 44 12,290 0.95 93.7 84 Far Southwest Ft Worth 24 2,810 0.91 94.6 57 Southwest Totals 68 15,100 0.94 93.9 141 0 0 WEST Western Hills/ Ridgmar/ Ridglea 74 12,965 0.80 88.4 (16) 200 West Totals 74 12,965 0.80 88.4 (16) 0 200 DALLAS TOTAL 1,904 450,154 1.06 92.9 3,310 18,590 3,836 FORT WORTH TOTAL 841 175,552 0.94 92.8 891 2,812 494 DALLAS/FORT WORTH TOTAL 2,745 625,706 1.03 92.7 4,201 21,402 4,330 Source: Apartment Data Services, Q3 2014. CBRE Research, Q3 2014. 2014, CBRE, Inc.
MULTIFAMILY THIRD QUARTER MARKETVIEW Rents For the second quarter in a row the average monthly rents were over the dollar mark. Quarter-over- quarter the average rent increased $0.02 per sq. ft. or a 1.9% increase. The highest retail rents were reported in the submarket of Uptown/Oaklawn/ Highland Park ($1.62 per sq. ft.) and the lowest rents were reported in East Fort Worth/Woodhaven/ I-35E ($0.75 per sq. ft.). There are 15 submarkets are above the overall market average of $1.03 and 22 submarkets below market average. Class A and B properties saw the same quarter-overquarter increase of $0.02 in the average price per sq. ft. in Q3 2014. Additionally, Class B and C properties rents grew $0.01 over this period. Occupancy Across the Dallas/Fort Worth Market, occupancy increased 20 bps to 92.7%. Occupancy continues to rise despite that fact that more new units continue to deliver. Class A properties experienced the largest increase in occupancy over-over-quarter, at 170 bps, rising to 89.0%. There was a decrease of 20 bps in Class B properties from 94.3% to 94.1%. Class C properties held at 93.8% and Class D occupancy rose 10 bps to 90.0%. Construction The number of units proposed saw an increase for a second quarter in a row in DFW. There was an addition of 2,406 units equating proposed unites to 23,746 units indicating that market fundamentals have remained strong. In addition, there were a total of 5,748 new unit starts in Q3 2014, bring the total number of units under construction to 21,402 units. The most activity continues to be in the Uptown/Oaklawn/Highland Park submarket with 4,214 units currently under construction and 630 units delivered for the quarter. The most deliveries occurred in West Plano/Frisco with 1,189, leaving 3,096 units currently under construction. Downtown Fort Worth/ TCU had the most units under construction in Fort Worth with 1,316 units. Employment and Demographics Over the year-ending July 2014, DFW created 115,500 jobs, which translates to a 3.7% annual growth rate. The unemployment rate fell from 5.2% in the first quarter 2014 to the current level of 5.1% this quarter. DFW posted once again an identical unemployment rate for the quarter as Texas (5.1%), but still lower then United States (6.2%). An ample supply of well-educated workers and strong population growth contribute to the area s healthy economy. With a current estimated population of 6.7 million, the DFW metropolitan area is the fourth-largest MSA in the United States. The area s population has grown 30% since 2000, and growth of 8.6% is projected for 2013 to 2018, according to Claritas. Figure 3: Average Monthly Rent Rates per Sq. Ft. $1.50 $1.30 $1.10 $0.90 $0.70 $0.50 Source: CBRE Research, Q3 2014. Apartment Data Services, Q3 2014. Figure 4: Occupancy Rate By Class 95% 93% 91% 89% 87% 85% Q1 2012 Q2 2012 Q3 2012 Source: CBRE Research, Q3 2014. Apartment Data Services, Q3 2014. Figure 5: Construction Activity and Net Absorption Unit Count 000's 22 20 18 16 14 12 10 8 6 4 2 0 Q1 2012 Source: CBRE Research, Q3 2014. Apartment Data Services, Q3 2014. Q4 2012 Q1 2013 Figure 6: Unemployment Rate 10% 9% 8% 7% 6% 5% 4% 3% 2000 Q1 2011 Q2 2010 2001 Source: U.S. Bureau of Labor Statistics, September 2014. Q2 2013 Class A Class B Class C Class D Overall Q2 2012 Q3 2010 2002 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Class A Class B Class C Class D Overall Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Under Construction Delivered Net Absorption 2003 2004 2005 2006 2007 US Texas Dallas/Fort Worth MSA 2008 Q3 2013 Q3 2013 Q4 2012 2009 Q4 2013 Q4 2013 Q1 2013 2010 Q2 2013 Q1 2014 Q1 2014 Q3 2013 2011 Q4 2013 2012 Q2 2014 Q2 2014 Q1 2014 2013 Q3 2014 Q3 2014 Q2 2014 Q3 2014 Q3 2014 Q3 2014 Dallas/Fort Worth Multifamily MarketView 3 2014, CBRE, Inc.
MULTIFAMILY THIRD QUARTER MARKETVIEW Q3 2014 Dallas/Fort Worth Multifamily MarketView Capital Markets Nationally, the multifamily market continues to outperform expectations. National multifamily occupancy has climbed 22 bps, to 95.2%, and rent growth was 4.1%, the first time rent growth has been over 4% since May 2012, as reported by Axiometrics. According Real Capital Analytics, national sales volume decreased 9%, to $23.5 billion over the last quarter for a total of $99.3 billion over the past 12 months. Multifamily sales volume in DFW totaled $1.1 billion in Q3 2014, per Real Capital Analytics. DFW s reported average price per unit in Q3 2014 was $77,717, a 21% decrease from Q2 2014. Most sales over-thequarter occurred in the the suburbs while urban areas such as Downtown Dallas/ West End/ Deep Ellum/ Uptown and Downtown Ft. Worth/ TCU continue to experaince exrensive conscuction actvity. Though three quarters of the year in the Dallas/Fort Worth region, the average infill/urban stabilized cap rates remained stable between the ranges of 4.75%-to-5.25% for Class A properties. Both Class B and C properties decreased 50 bps to 5.00%-to-5.50%, and 6.25%-to- 6.75%, respectfully. In suburban areas, average stabilized cap rates ranged from 5.50%- to-6.00% for Class A properties, 5.50%-to-6.00% for Class B properties, and 7.00%-to-7.50% for Class C properties. NATIONAL OCCUPANCY ROSE TO 95.2% DESPITE AN INCREASE IN SUPPLY. Figure 7: Major Transactions Property Address City 836 Equestrian Pointe 8435 Thousand Oaks Drive North Richland Hills 532 Lincoln Crossing 19251 Preston Rd Dallas 524 Resort at Valley Ranch 10201 N Macarthur Blvd Irving 495 Aberdeen at Bellmar 10843 N Central Expy Dallas 420 Resort at Jefferson Park 1127 Hidden Ridge Irving 417 Suite 2801 2800 Brazos Blvd Euless 416 The Mansions by the Lake 2050 FM 423 Little Elm 410 The Resort at Jefferson Ridge 5301 N Macarthur Irving 396 Vineyards at Arlington 2007 Springcrest Drive Arlington 390 Sage Creek Ranch 3939 Rosemeade Pkwy Dallas 376 Ridge at Timberline 2400 Timberline Drive Grapevine 360 Mission at La Villita 625 E Royal Lane Irving 353 Vineyard 4299 Pleasant Run Rd Irving 352 Fairway Estates 807 The Heights Drive Fort Worth 346 Wood Hollow 3875 Post Oak Euless Source: CBRE Research, Q3 2014. Real Capital Analytics, Q3 2014. 4 2014, CBRE, Inc.
CONTACTS For more information about this Dallas/Ft Worth MarketView, please contact: TEXAS RESEARCH Lynn Cirillo Research Operations Manager CBRE Americas Research 2800 Post Oak, Suite 2300 Houston, TX 77056 lynn.cirillo@cbre.com Lauren Paris Senior Research Analyst CBRE Dallas Research 2100 McKinney Ave, Suite 700 Dallas, TX 75201 +1 214 979 6587 lauren.paris@cbre.com Brian Ashton Research Coordinator CBRE Dallas Research 2100 McKinney Ave, Suite 700 Dallas, TX 75201 +1 214 979 6589 brian.ashton@cbre.com Q3 2014 Dallas/Fort Worth Multifamily MarketView FOLLOW CBRE GLOBAL RESEARCH AND CONSULTING This report was prepared by the CBRE U.S. Research Team which forms part of CBRE Global Research and Consulting a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe. Additional U.S. research produced by Global Research and Consulting can be found at www.cbre.us/research. DISCLAIMER Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. 5 2014, CBRE, Inc.
Dallas/Fort Worth Multifamily MarketView 2Q 2014 Q2 2014 TOTAL OCCUPANCY 92.5% CBRE Global Research and Consulting AVG RENT $1.01 per Sq. Ft./Mth NET ABSOPORTION 4,571 CONSTRUCTION 19,984 DELIVERIES 2,514 PROPOSED 21,340 Directional arrows based on change from the previous quarter. Data reflects market totals. MULTIFAMILY REGISTERS ONE OF THE BEST QUARTERS IN A DECADE WITH NO INDICATION OF A SLOWDOWN ANYTIME SOON. The prosperous multifamily market is sustained by the flourishing DFW economy. The DFW metro area was ranked number one for job growth and second in number of jobs added for the quarter by the Bureau of Labor Statistics. Also, the Dallas Business Journal reported that Manpower Group ranked DFW third best for its job outlook out of all U.S. metro areas. These rankings confirm that DFW s economy is strong and healthy and explains why the multifamily housing market continues to thrive. Moody s Analytics reports that personal income among DFW residents was grew 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 Q1 Q2 West Ft. Worth Southwest Ft. Worth South Ft. Worth Northwest Ft. Worth Northeast Ft. Worth East Ft. Worth Central Ft. Worth Southwest Dallas South Dallas Southeast Dallas Northwest Dallas North Dallas 0 (200) Northeast Dallas Proposed construction increases over the quarter. Proposed construction increased to 21,340 units in Q2 2014, illustrating that development will probably not slow down in the near future. With strong demand driving continued increases in occupancy, we expect many of the proposed projects to break ground. East Dallas Average rental rates break the $1 mark. Rental rates increased $0.02 per sq. ft. in DFW, bringing the market average rate $1.01 per sq. ft. This is first time the average rental rate across all class types has broken the dollar mark. Figure 1: Market Net Absorption Central Dallas Occupancy continues to rise despite jump in deliveries. DFW saw another increase in deliveries this quarter, however, there were more new unit starts then deliveries. For the quarter, deliveries were up about 37% over the previous quarter, totaling 2,514 units. In Q2 2014, occupancy rose to 92.5%, for a 30 basis point (bps) increase, indicating that demand remains strong enough to absorb new supply. 2014 YTD Total Absorbed Source: Apartment Data Services, Q2 2014. CBRE Research, Q2 2014. an estimated 3% from the previous quarter, bringing the average median household income to more then $46,000. DFW s population is young, with an average age of 35, and affluent, with most of the population (52.1%) in their prime earning years of 1854. Of the population 25 years and over, 50% of the population has some college, an associate or bachelor s degree. The current estimated population of 6.8 million, the DFW metropolitan area is the fourth largest MSA in the United States. The area s population has grown 7.2% since 2010, and growth of 8.6% is projected for 2014 to 2019, according to Nielsen. 2014, CBRE, Inc.
MULTIFAMILY SECOND QUARTER MARKETVIEW Q2 2014 Dallas/Fort Worth Multifamily MarketView 2 Figure 2: Market Overview by Submarket Submarket Property Count Unit Count Monthly Rent Per Sq. Ft. Occupancy Net Absorption Under Construction Delivered Construction CENTRAL Downtown Dallas/ West End/ Deep Ellum 41 7,847 $1.33 91.4% 73 2,533 123 Uptown/ Oaklawn/ Highland Park 119 24,009 $1.58 86.5% 414 4,733 757 East Central Dallas/ Lower Greenville Ave 55 6,586 $1.38 91.1% 179 728 White Rock Lake/ Tenison Park 58 11,920 $0.88 90.6% 124 North Central Dallas/ Upper Greenville Ave 94 25,285 $1.15 90.5% 268 714 Skillman St/ I-635 94 25,793 $0.86 88.7% 9 200 Central Total 461 101,440 $1.18 89.2% 1,067 8,708 1,080 EAST Far East Dallas 18 3,120 $0.99 26.2% 7 Far East Dallas Total 18 3,120 $0.99 26.2% 7 0 0 NORTHEAST Garland 106 18,926 $0.89 94.2% 119 158 Garland Total 105 18,926 $0.89 94.2% 119 158 0 NORTH North Dallas/ Addison 105 28,755 $1.05 94.4% 218 1,032 Far North Dallas/ Collin County 80 25,312 $1.05 95.5% 168 East Plano/ Richardson 71 19,008 $1.10 93.3% (40) 1,423 West Plano/ Frisco 128 39,920 $1.15 94.2% 332 2,921 Allen/ McKinney 60 15,078 $1.06 91.5% 320 167 North Total 444 128,073 $1.09 94.1% 998 5,543 0 NORTHWEST East Irving 57 8,020 $0.83 94.7% 66 West Irving 81 18,284 $0.91 94.9% 74 Las Colinas/ Valley Ranch/ Coppell 74 25,967 $1.17 94.0% 388 1,843 Northwest Dallas/ Bachman Lake 61 11,451 $0.88 94.8% 124 Carrollton/ Farmers Branch 105 24,629 $1.02 94.0% 228 299 Lewisville 79 22,927 $1.06 90.4% 376 425 508 Denton 54 10,794 $1.08 92.9% (30) 740 Northwest Total 511 122,072 $1.02 93.5% 1,226 3,307 508 SOUTHEAST Southeast Dallas/ Mesquite 100 21,745 $0.82 93.3% 13 Southest Totals 100 21,745 $0.82 93.3% 13 0 0 SOUTH South Dallas/ Oak Cliff 95 18,275 $0.83 87.8% 245 252 167 Duncanville/ DeSoto/ Cedar Hill/ Lancaster 89 19,748 $0.85 91.1% (34) Far South Dallas/ Waxahachie 20 2,600 $0.90 96.0% 20 South Total 204 40,623 $0.84 89.9% 231 252 167 SOUTHWEST Grand Prairie 40 8,877 $0.92 95.4% 45 Southwest Totals 40 8,877 $0.92 95.4% 45 0 0 FORT WORTH MARKETS CENTRAL Downtown Ft Worth/ TCU 51 8,753 $1.25 89.9% 180 1,076 485 Central Total 51 8,753 $1.25 89.9% 180 1,076 485 EAST East Ft Worth/ Woodhaven/ I-30E 68 12,659 $0.74 87.5% (26) North Arlington 99 21,462 $0.91 93.4% 132 South Arlington 139 28,884 $0.89 93.9% 62 154 East Totals 306 63,005 $0.86 92.4% 168 0 154 NORTHEAST Haltom City/ Richland Hills/ Fossil Creek 74 18,584 $0.95 92.5% 216 Hurst/ Euless/ Bedford 131 29,717 $0.94 94.5% 217 300 120 Grapevine/ Roanoke/ Keller 49 12,014 $1.1 5 94.6% 149 640 Northeast Totals 254 60,315 $0.99 93.9% 582 940 120 NORTHWEST Northwest Ft Worth/ Saginaw/ Eagle Mtn 27 4,323 $0.79 95.0% (7) Northwest Totals 27 4,323 $0.79 95.0% (7) 0 0 SOUTH South Ft Worth 58 10,424 $0.81 92.0% 38 South Totals 56 10,424 $0.81 92.0% 38 0 0 SOUTHWEST Southwest Ft Worth/ Benbrook 44 12,290 $0.94 92.8% (109) Far Southwest Ft Worth 22 2,558 $0.95 92.2% 2 Southwest Totals 66 14,848 $0.95 92.7% (107) 0 0 WEST Western Hills/ Ridgmar/ Ridglea 74 12,965 $0.78 88.3% 11 West Totals 74 12,965 $0.78 88.3% 11 0 0 DALLAS TOTAL 1,884 444,876 $1.04 91.9% 3,706 17,968 1,755 FORT WORTH TOTAL 836 174,633 $0.92 92.6% 865 2,016 759 DALLAS/FORT WORTH TOTAL 2,720 619,509 $1.01 92.5% 4,571 19,984 2,514 Source: Apartment Data Services, Q2 2014. CBRE Research, Q2 2014. 2014, CBRE, Inc.
MULTIFAMILY SECOND QUARTER MARKETVIEW Multifamily Rents Across the Dallas/Fort Worth market, the average monthly rent broke the one dollar mark, at $1.01 per sq. ft. in Q2 2014, for first time in CBRE Research s recorded history. This is an increase of $0.04 per sq. ft. year-over-year or a 4.5% increase. Class A properties had the biggest rental increase of $0.03 per sq. ft. over the quarter and a $0.06 per sq. ft., or 4.04%, increase from Q2 2013. Both Class B and C grew $0.05 per sq. ft. over the past 12 months, for 5.0% and 5.6% growth, respectfully. The highest average rental rates can be found in the Uptown/Oaklawn/Highland Park submarket at $1.58 per sq. ft. Multifamily Occupancy Occupancy hits a 4 year high across the DFW market, at 92.5% or a difference of 4.9% from Q1 2010. All Classes saw an increase in occupancy for the quarter. Class B reported the highest occupancy at 94.3%, followed by Class C at 93.8%. Class A, however, had the largest quarter-over- quarter jump at 90 bps, bringing occupancy to 89.3%. Overall, Q2 2014 saw a 30 bps increase over the previous quarter from 92.2%. Multifamily Construction DFW had 4,312 new units starts for Q2 2014, bringing the total number of units under construction to 19,984 units. New unit starts accounted for 1,798 more units than the 2,514 units that delivered this quarter. Most activity is in the Uptown/Oaklawn/Highland Park submarket with 4,733 units currently under construction and 757 units delivered for the quarter. West Plano/ Frisco follows with 2,921 units currently under construction and Downtown Dallas/ West End/ Deep Ellum with 2,533 units, rounding out the top three. The submarkets of Lewisville and Downtown Fort Worth/ TCU had 508 and 485 units deliver this quarter, respectfully. Also, the number of units proposed rose to 21,340 indicating there will be no slowdown anytime soon, according to Apartment Data Services. Employment and Demographics Over the year-ending April 2014, DFW created 106,800 jobs, which translates to a 3.5% annual growth rate. The unemployment rate fell from 5.8% in the first quarter 2014 to the current level of 5.2% this quarter. DFW posted an identical unemployment rate for the quarter as Texas (5.2%), but still lower then United States (6.3%). An ample supply of well-educated workers and strong population growth contribute to the area s healthy economy. With a current estimated population of 6.8 million, 52.1% fall between the ages of 18-54 making DFW metropolitan area the fourthlargest MSA in the United States, according to Nielsen. Figure 3: Average Rates Per Sq. Ft./Mth $1.50 $1.30 $1.10 $0.90 $0.70 $0.50 Source: CBRE Research, Q2 2014. Apartment Data Services, Q2 2014. Figure 4: Occupancy Rate By Class Source: CBRE Research, Q2 2014. Apartment Data Services, Q2 2014. Figure 5: Construction Activity and Net Absorption 000's 0 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Source: CBRE Research, Q2 2014. Apartment Data Services, Q2 2014. Figure 6: Unemployment 10% 9% 8% 7% 6% 5% 4% 3% 20 18 16 14 12 10 95% 93% 91% 89% 87% 85% 8 6 4 2 Q1 2011 2000 Q1 2012 Q2 2010 2001 Source: U.S. Bureau of Labor Statistics, June 2014. Q1 2013 Class A Class B Class C Class D Overall Q3 2010 2002 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Class A Class B Class C Class D Overall Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2013 Q2 2012 Under Construction Delivered Net Absorption 2003 2004 2005 2006 2007 US Texas Dallas/Fort Worth MSA 2008 Q3 2012 Q3 2013 2009 Q3 2013 Q4 2012 Q4 2013 Q1 2013 2010 Q4 2013 Q2 2013 2011 Q1 2014 Q3 2013 2012 Q1 2014 Q4 2013 Q2 2014 2013 Q1 2014 Q2 2014 Q2 2014 Q2 2014 Q2 2014 Dallas/Fort Worth Multifamily MarketView 3 2014, CBRE, Inc.
MULTIFAMILY SECOND QUARTER MARKETVIEW Q2 2014 Dallas/Fort Worth Multifamily MarketView Capital Markets Across the nation, the multifamily market had one of best performing quarters since the turn of the millennium. National multifamily occupancy has reached 95%, and rent growth was 3.3%, as reported by AXIOMetrics. According Real Capital Analytics, national sales volume grew 22% or approximately $23.29 billion over last quarter and $94.01 billion over the past 12 months. Multifamily sales volume in DFW totaled $8.6 billion in Q2 2014, per Real Capital Analytics. DFW s reported average price per unit in Q2 2014 was $99,149 a 26% increase from Q1 2014. In the Dallas/Fort Worth region, the average infill/urban stabilized cap rates rose to the ranges of 4.75%-to-5.25% for Class A properties. Both Class B and C properties remained stable within the rages of 5.50%-to-6.00%, and 6.50%-to-7.00%, respectfully. In suburban areas, average stabilized cap rates ranged from 5.50%- to-6.00% for Class A properties, 6.00%-to-6.50% for Class B properties, and 7.25%-to-7.75% for Class C properties. NATIONAL OCCUPANCY HITS 95% ACROSS THE ENTIRE BOARD. Figure 7: Major Transactions Property Address City 656 Honey Creek 11611 Ferguson Road Dallas 612 Bella Madera 650 N Leora Lane The Colony 466 Enclave at Prestonwood 5930 Arapaho Road Dallas 454 Elan Maker Center 3825 Mapleshade Lane Plano 442 Villas of White Rock 2222 Graycliff Drive Dallas 440 Pecan Square 3350 Lombardy Lane Dallas 420 Trails at River Park 711 Trinity Circle Arlington 379 Soho Parkway 6653 McKinney Ranch Parkway McKinney 372 Icon at Ross 1707 N Hall Street Dallas 369 Lincoln Park at Trinity Bluff 520 Samules Avenue Fort Worth 360 Estates of Frisco 1801 McCord Way Frisco 323 Villas of Vista Ridge 351 State Highway 121 Bypass Lewisville 308 Bayou Bend 3339 Lombardy Lane Dallas 304 Mira Flores 9901 Burton Road Dallas 301 Avant 1955 Market Center Boulevard Dallas Source: CBRE Research, Q2 2014. Real Capital Analytics, Q2 2014. 4 2014, CBRE, Inc.
CONTACTS Q2 2014 For more information about this Dallas/Ft. Worth MarketView, please contact: TEXAS RESEARCH Lauren Paris Senior Research Analyst CBRE Dallas Research 2100 McKinney Ave, Suite 700 Dallas, TX 75201 +1 214 979 6587 lauren.paris@cbre.com Dallas/Fort Worth Multifamily MarketView Lynn Cirillo Research Operations Manager CBRE Americas Research 2800 Post Oak, Suite 2300 Houston, TX 77056 lynn.cirillo@cbre.com Brian Ashton Research Coordinator CBRE Dallas Research 2100 McKinney Ave, Suite 700 Dallas, TX 75201 +1 214 979 6589 brian.ashton@cbre.com FOLLOW CBRE GLOBAL RESEARCH AND CONSULTING This report was prepared by the CBRE U.S. Research Team which forms part of CBRE Global Research and Consulting a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe. Additional U.S. research produced by Global Research and Consulting can be found at www.cbre.us/research. DISCLAIMER Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. 2014, CBRE, Inc. 5
Dallas/Fort Worth Multi-Housing MarketView Q1 2014 CBRE Global Research and Consulting TOTAL OCCUPANCY 92.2% AVG RENT PER SQ. FT./MTH $0.99 NET ABSOPORTION 3,750 CONSTRUCTION 18,186 DELIVERIES 1,834 PROPOSED 19,684 Directional arrows based on change from the previous quarter. Data reflects market totals. OCCUPANCY AND CONSTRUCTION LEVELS ARE THE HIGHEST THEY HAVE BEEN IN DFW SINCE 2008. Construction boom has not slowed yet. While construction on 1,834 units was completed in Q1 2014 in Dallas/Fort Worth (DFW), another 3,272 units began construction during the quarter, indicating another strong year for development ahead in 2014. DFW placed third in the nation for number of multifamily building permits issued in the past 12 months. Rent growth strong despite increase in new supply. Rental rates in DFW grew across every apartment property class over the quarter, with the strongest growth occuring among Class B and C properties. The average overall rental rate increased 4.2% over the past 12 months. Occupancy has risen 30 basis points in the past 12 months. Occupancy across DFW, at 92.2%, is at its highest level since Q3 2008. DFW has the highest occupancy rate among the major Texas markets. DFW s thriving economy supports a strong multifamily housing market. An expanding local job market, ample supply of well-educated workers and strong population growth contribute to DFW s healthy economy and growing multifamily housing market. With a current estimated population of 6.8 million and labor force of 3.4 million people, the DFW metropolitan area is the fourth-largest MSA in the United States. Employment experienced an annual growth rate of 3.0% from March 2013 to March 2014 in DFW, adding 92,700 jobs to the local economy, and the unemployment rate in DFW dropped to 5.3%. Moody s predicts a net inward migration of 79,600 people to DFW for the year 2014. Figure 1: Market Net Absorption 900 800 700 600 500 400 300 200 100 0 (100) Central Dallas East Dallas Northeast Dallas North Dallas Q1 Source: Apartment Data Services, Q1 2014. CBRE Research, Q1 2014. Northwest Dallas Southeast Dallas South Dallas DFW s population is young, with an average age of 35, and affluent, with most of the population (51%) in their prime earning years of 20-54. DFW residents tend to earn more than the national average, supporting an estimated median household income of $56,065 as of Q1 2014. Southwest Dallas Central Ft. Worth East Ft. Worth Northeast Ft. Worth 2014 Total Absorbed Northwest Ft. Worth South Ft. Worth Southwest Ft. Worth West Ft. Worth 2014, CBRE, Inc.
MULTI-HOUSING FIRST QUARTER MARKETVIEW Q1 2014 Dallas/Fort Worth Multi-Housing MarketView 2 Figure 2: Market Overview by Submarket Submarket Property Count Unit Count Monthly Rent Per Sq. Ft. Occupancy Net Absorption Under Construction Delivered Construction CENTRAL Downtown Dallas/ West End/ Deep Ellum 39 7,560 $1.33 93.9% 14 1,492 Uptown/ Oaklawn/ Highland Park 120 23,987 $1.53 85.5% 435 5,199 950 East Central Dallas/ Lower Greenville Ave 55 6,586 $1.33 87.8% 89 728 White Rock Lake/ Tenison Park 58 11,920 $0.86 89.6% 105 North Central Dallas/ Upper Greenville Ave 94 25,569 $1.12 89.8% 22 202 336 Skillman St/ I-635 93 25,458 $0.85 90.0% 107 362 Central Total 459 101,080 $1.15 89.0% 772 7,983 1,286 EAST Far East Dallas 18 3,120 $0.97 95.7% (7) Far East Dallas Total 18 3,120 $0.97 95.7% (7) 0 0 NORTHEAST Garland 106 18,926 $0.87 93.6% 228 158 147 Garland Total 105 18,926 $0.87 93.6% 228 158 0 NORTH North Dallas/ Addison 105 28,755 $1.04 93.7% 195 1,032 Far North Dallas/ Collin County 80 25,312 $1.05 94.8% 53 East Plano/ Richardson 70 18,730 $1.08 94.7% 115 1,441 West Plano/ Frisco 128 39,799 $1.13 94.2% 454 2,136 Allen/ McKinney 59 14,871 $1.04 90.5% 136 220 North Total 442 127,467 $1.08 93.8% 953 4,829 0 NORTHWEST East Irving 57 8,020 $0.81 93.5% 20 West Irving 81 18,284 $0.89 94.6% 13 Las Colinas/ Valley Ranch/ Coppell 74 25,967 $1.16 92.6% 289 1,158 Northwest Dallas/ Bachman Lake 60 11,408 $0.86 93.9% (52) Carrollton/ Farmers Branch 104 24,340 $1.00 92.8% 61 299 281 Lewisville 76 21,963 $1.03 91.9% 13 1,232 Denton 54 10,794 $1.07 93.2% (35) 548 Northwest Total 506 120,776 $1.00 93.1% 309 3,237 281 SOUTHEAST Southeast Dallas/ Mesquite 100 21,745 $0.82 93.4% 362 Southest Totals 100 21,745 $0.82 93.4% 362 0 0 SOUTH South Dallas/ Oak Cliff 94 18,074 $0.81 87.0% 153 452 Duncanville/ DeSoto/ Cedar Hill/ Lancaster 88 19,394 $0.84 92.9% 115 354 Far South Dallas/ Waxahachie 20 2,600 $0.89 95.7% 41 South Total 202 40,068 $0.83 90.4% 309 806 0 SOUTHWEST Grand Prairie 42 9,126 $0.87 93.5% 80 Southwest Totals 42 9,126 $0.87 93.5% 80 0 0 FORT WORTH MARKETS CENTRAL Downtown Ft Worth/ TCU 50 8,639 $1.23 87.4% 92 374 Central Total 46 8,639 $1.23 87.4% 92 374 0 EAST East Ft Worth/ Woodhaven/ I-30E 68 12,659 $0.72 87.7% 98 North Arlington 101 21,722 $0.88 92.1% (22) South Arlington 139 28,884 $0.87 93.7% 129 East Totals 308 63,265 $0.84 92.0% 205 0 0 NORTHEAST Haltom City/ Richland Hills/ Fossil Creek 73 18,423 $0.93 91.9% 83 159 Hurst/ Euless/ Bedford 131 29,717 $0.93 93.6% 63 120 Grapevine/ Roanoke/ Keller 48 11,918 $1.14 93.4% 100 640 Northeast Totals 252 60,058 $0.97 93.0% 246 799 120 NORTHWEST Northwest Ft Worth/ Saginaw/ Eagle Mtn 27 4,323 $0.78 95.2% 35 Northwest Totals 27 4,323 $0.78 95.2% 35 0 0 SOUTH South Ft Worth 56 10,106 $0.79 91.7% 90 South Totals 56 10,106 $0.79 91.7% 90 0 0 SOUTHWEST Southwest Ft Worth/ Benbrook 45 12,364 $0.93 93.7% 11 Far Southwest Ft Worth 22 2,558 $0.82 92.5% 28 Southwest Totals 67 14,922 $0.91 93.5% 39 0 0 WEST Western Hills/ Ridgmar/ Ridglea 73 12,765 $0.77 89.9% 37 West Totals 72 12,765 $0.77 89.9% 37 0 0 DALLAS TOTAL 1,875 442,308 $1.01 92.4% 3,006 17,013 1,714 FORT WORTH TOTAL 833 174,078 $0.90 91.9% 744 1,173 120 DALLAS/FORT WORTH TOTAL 2,708 616,386 $0.99 92.2% 3,750 18,186 1,834 Source: Apartment Data Services, Q1 2014. CBRE Research, Q1 2014. 2014, CBRE, Inc.
MULTI-HOUSING FOURTH QUARTER MARKETVIEW Multi-housing Rents The average occupancy rate across DFW increased 10 basis points (bps) over the quarter to reach 92.2%. This is the highest the occupancy rate has been since Q3 2008. With a rate of 94.2%, Class B properties continue to have the highest occupancy, following historical trends in DFW. Class C properties had the greatest annual occupancy growth, with the rate increasing by 110 bps over the past 12 months to reach 93.6% in Q1 2014. Following robust development over the past year, Class A properties experienced a decrease in occupancy of 180 bps in the past 12 months, and currently average 86.4%. Multi-housing Occupancy The average occupancy rate across DFW increased 10 basis points (bps) over the quarter to reach 92.2%. This is the highest the occupancy rate has been since Q3 2008. With a rate of 94.2%, Class B properties continue to have the highest occupancy, following historical trends in DFW. Class C properties had the greatest annual occupancy growth, with the rate increasing by 110 bps over the past 12 months to reach 93.6% in Q1 2014. Following robust development over the past year, Class A properties experienced a decrease in occupancy of 180 bps in the past 12 months, and currently average 86.4%. Multi-housing Construction Following strong employment growth in DFW, multifamily housing construction has been rapidly increasing for the past three years. There are 18,186 units under construction in DFW, which is the highest level since the last construction peak in Q4 2008. DFW placed third in the nation for number of multifamily (5+ units) building permits issued over the past 12 months, after second-place Houston and top-ranked New York City, according to the U.S. Census Bureau. The highest concentration of development activity remains in the Central Dallas area, where 5,199 units are under construction in Uptown/Oak Lawn/Highland Park and another 1,492 units are underway in the Downtown Dallas/West End/Deep Ellum submarket. In the suburban market, West Plano/Frisco is experiencing the most development with 2,136 units underway. This area also has the highest concentration of single-family residential development in DFW. Employment and Demographics Annual employment growth in DFW was 3.0% from March 2013 to March 2014; a net increase of 92,700 jobs. The unemployment rate in DFW fell 70 bps over the quarter to 5.3%, a significantly lower rate than that of the U.S. (6.7%). DFW s population has grown 32% since 2000 and now stands at 6.8 million. Further growth of 8.6% is projected from 2014 to 2019, according to market research firm Nielsen. Figure 3: Average Rates Per Sq. Ft./Month Source: CBRE Research, Q1 2014. Apartment Data Services, Q1 2014. Figure 4: Occupancy Rate By Class Source: CBRE Research, Q1 2014. Apartment Data Services, Q1 2014. 000's $1.50 $1.30 $1.10 $0.90 $0.70 $0.50 95% 93% 91% 89% 87% 85% Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Class A Class B Class C Class D Overall Figure 5: Construction Activity and Net Absorption 0 Source: CBRE Research, Q1 2014. Apartment Data Services, Q1 2014. Figure 6: Unemployment 10% 9% 8% 7% 6% 5% 4% 3% 20 18 16 14 12 10 8 6 4 2 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 2000 Q1 2011 Q2 2010 2001 Q3 2010 2002 Class A Class B Class C Class D Overall Q4 2010 Q1 2011 Q2 2011 Q3 2011 Source: U.S. Bureau of Labor Statistics, March 2014. Q4 2011 Q1 2012 Under Construction Deliveries Net Absorption 2003 2004 2005 2006 2007 US Texas Dallas/Fort Worth MSA Q2 2012 2008 Q3 2012 2009 Q4 2012 2010 Q1 2013 2011 Q2 2013 2012 Q3 2013 2013 Q4 2013 Q1 2014 2014 Q1 2014 Dallas/Fort Worth Multi-Housing MarketView 3 2014, CBRE, Inc.
MULTI-HOUSING FIRST QUARTER MARKETVIEW Q1 2014 Dallas/Fort Worth Multi-Housing MarketView Capital Markets Apartment sales volume totaled $1.1 billion in DFW in Q1 2014, according to Real Capital Analytics. Sales volume over the past 12 months totaled $5.68 billion, a 35% increase over the annual total at this time last year. Real Capital Analytics reports a current average price per unit of $75,148 in DFW. National sales volume totaled $18.6 billion in Q1 2014 and $89.6 billion over the past 12 months, according to Real Capital Analytics. Average infill/urban stabilized cap rates in DFW are within the range of 4.25%-to-4.75% for Class A properties, 5.50%-to-6.00% for Class B properties, and 6.5%-to- 7.0% for Class C properties. Average suburban stabilized cap rates in DFW remain slightly higher, ranging from 5.25%-to-5.75% for Class A properties, 6.25%-to-6.75% for Class B properties, and 7.0%-to- 8.0% for Class C properties. ANNUAL SALES VOLUME INCREASED 35% YEAR- OVER-YEAR IN DALLAS/ FORT WORTH. Figure 7: Q1 2014 Major Transactions Property Address City 1,183 Chapel Hill 300 E Round Grove Road Lewisville 642 Silverbrook I&II 2934 Alouette Drive Grand Prairie 523 Parque Rio 2777 N Buckner Boulevard Dallas 510 Lincoln Las Colinas I 365 Northwest Highway Irving 495 Eagle Crest 4013 W North Gate Irving 468 Hunting Ridge 9821 Summerwood Circle Dallas 460 Lakeway Meadows 241 E Interstate 30 Garland 446 Cameron Creek 5209 Bryant Irvin Road Fort Worth 360 Pradera Apartments 851 Greenside Drive Richardson 350 Park Village 7575 S Westmoreland Road Dallas 348 The Fairways 1450 North State Highway 360 Grand Prairie 348 Mustang Ridge at Grapevine Ranch 3601 Grapevine Mills Parkway Grapevine 340 Sontera Palms 9505 Royal Lane Dallas 334 The Avenues at Craig Ranch 8700 Stacy Road McKinney 302 Mira Vista Ranch 350 Continental Drive Lewisville Source: CBRE Research, Q1 2014. 4 2014, CBRE, Inc.
CONTACTS For more information about this Dallas/Ft Worth MarketView, please contact: TEXAS RESEARCH Lynn Cirillo Research Operations Manager CBRE Americas Research 2800 Post Oak, Suite 2300 Houston, TX 77056 lynn.cirillo@cbre.com Lauren Paris Senior Research Analyst CBRE Dallas Research 2100 McKinney Ave, Suite 700 Dallas, TX 75201 +1 214 979 6587 lauren.paris@cbre.com Mallary Jolly Research Coordinator CBRE Dallas Research 2100 McKinney Ave, Suite 700 Dallas, TX 75201 +1 214 979 6589 mallary.jolly@cbre.com Q1 2014 Dallas/Fort Worth Multi-Housing MarketView FOLLOW CBRE GLOBAL RESEARCH AND CONSULTING This report was prepared by the CBRE U.S. Research Team which forms part of CBRE Global Research and Consulting a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe. Additional U.S. research produced by Global Research and Consulting can be found at www.cbre.us/research. DISCLAIMER Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of the CBRE Global Chief Economist. 5 2014, CBRE, Inc.
Dallas/Fort Worth Multi-Housing MarketView Q4 2013 TOTAL OCCUPANCY 92.1% AVG RENT PER SQ. FT. $0.98 NET ABSOPORTION 428 Directional arrows based on change from the previous quarter. Data reflects market totals. CONSTRUCTION 16,478 CBRE Global Research and Consulting DELIVERIES 2,694 PROPOSED 19,573 THE DFW MULTI-HOUSING MARKET WAS DISTINGUISHED BY STRONG EMPLOYMENT GROWTH AND BOOMING DEVELOPMENT IN 2013. Total net absorption in 2013 outperformed 2012. Quarterly total net absorption typically dives downward in the fourth quarter, and this remained true for 2013. However, at positive 428 units, Q4 2013 net absorption was significantly stronger than the Q4 2012 net total of negative 44 units. Net absorption for the year outperformed 2012 as well. Annual net absorption totaled 13,044 units in 2013, besting the 2012 total by 1,941 units. Annual net absorption was positive across every Dallas/Fort Worth (DFW) submarket in 2013. North Dallas posted the highest annual net total (3,045 units) in response to continued rapid population growth in the northern Dallas suburbs, such as Frisco, Plano, and McKinney. Nearly twice the amount of new units were completed in 2013 than in 2012. In response to economic and population growth in DFW, 2013 was a year of robust multifamily development activity. 12,657 units were completed in 2013, nearly double the amount of units constructed in 2012. Deliveries will remain strong through early 2014, as another 16,478 units are under construction, primarily concentrated in the Uptown and Oak Lawn areas of Central Dallas. Uptown/Oak Lawn/Highland Park has more development activity than any other submarket in the state. The Uptown/Oak Lawn/Highland Park submarket experienced the biggest boom in multifamily housing development in Texas this year. Following job growth in the area and a trend toward live-work-play neighborhoods, this submarket has grown to become a highly coveted area among renters. As a result, 5,416 units are under construction in the submarket, more than any other submarket in Texas. Figure 1: Market Net Absorption 3,200 2,900 2,600 2,300 2,000 1,700 1,400 1,100 800 500 200 (100) Central Dallas East Dallas Northeast Dallas North Dallas Northwest Dallas Southeast Dallas Q1 Q2 Q3 Q4 2013 Total Absorbed Source: Apartment Data Services, Q4 2013. CBRE Research, Q4 2013. South Dallas DFW employment growth continues to significantly outpace the nation. DFW s strong economy and growing multifamily housing market is fueled by the area s ample supply of well-educated workers and above-average population growth. DFW employment experienced an annual growth rate of 3.1% from October 2012 to October 2013, more than doubling the 1.7% national growth rate during that same period. In DFW, the largest industry component that contributed to this growth was the Professional & Business Services supersector, which grew by 6.4% over the same 12-month period. The average age of DFW residents is 38, three years younger than the national average. This young and affluent population supports an average household income of $76,618, 10% greater than the national average of $69,637. Southwest Dallas Central Ft. Worth East Ft. Worth Northeast Ft. Worth Northwest Ft. Worth South Ft. Worth Southwest Ft. Worth West Ft. Worth 2014, CBRE, Inc.
MULTI-HOUSING FOURTH QUARTER MARKETVIEW Q4 2013 Dallas/Fort Worth Multi-Housing MarketView 2 Figure 2: Market Overview by Submarket Submarket Property Count Unit Count Rents Per Sq. Ft./ Month Occupancy Net Absorption Under Construction Delivered Construction CENTRAL Downtown Dallas/ West End/ Deep Ellum 39 7,560 $1.31 93.7% 48 978 Uptown/ Oaklawn/ Highland Park 115 22,424 $1.52 89.0% 33 5,416 775 East Central Dallas/ Lower Greenville Ave 55 6,586 $1.32 86.3% 91 368 White Rock Lake/ Tenison Park 58 11,920 $0.85 88.9% (60) North Central Dallas/ Upper Greenville Ave 94 25,724 $1.10 89.7% (71) 202 336 Skillman St/ I-635 93 25,258 $0.81 90.1% (69) 562 Central Total 454 99,472 $1.12 89.6% (28) 7,526 1,111 EAST Far East Dallas 18 3,120 $0.97 96.0% (22) Far East Dallas Total 18 3,120 $0.97 96.0% (22) 0 0 NORTHEAST Garland 106 18,926 $0.86 92.4% (41) 158 147 Garland Total 105 18,926 $0.86 92.4% (41) 158 0 NORTH North Dallas/ Addison 105 28,755 $1.03 93.1% 145 632 Far North Dallas/ Collin County 80 25,311 $1.03 94.6% (52) East Plano/ Richardson 71 18,803 $1.06 94.2% (66) 1,042 West Plano/ Frisco 128 39,799 $1.12 93.0% 187 1,419 290 Allen/ McKinney 59 14,977 $1.03 89.3% 59 220 334 North Total 443 127,645 $1.06 93.1% 273 3,313 624 NORTHWEST East Irving 57 8,020 $0.80 93.2% 13 West Irving 82 18,335 $0.88 94.5% 98 Las Colinas/ Valley Ranch/ Coppell 74 25,969 $1.16 91.7% 66 868 Northwest Dallas/ Bachman Lake 60 11,202 $0.84 94.3% 13 Carrollton/ Farmers Branch 102 23,927 $0.99 94.0% 3 715 Lewisville 74 21,482 $1.02 92.9% 14 1,157 506 Denton 53 10,602 $1.06 95.2% (41) 492 Northwest Total 502 119,537 $0.99 93.5% 166 3,232 506 SOUTHEAST Southeast Dallas/ Mesquite 100 21,745 $0.80 91.6% 51 Southest Totals 100 21,745 $0.80 91.6% 51 0 0 SOUTH South Dallas/ Oak Cliff 93 17,907 $0.78 87.1% 41 366 Duncanville/ DeSoto/ Cedar Hill/ Lancaster 88 19,394 $0.83 92.3% (40) 354 Far South Dallas/ Waxahachie 20 2,600 $0.87 93.4% 2 South Total 201 39,901 $0.81 90.0% 3 720 0 SOUTHWEST Grand Prairie 42 9,126 $0.86 92.7% 16 Southwest Totals 42 9,126 $0.86 92.7% 16 0 0 FORT WORTH MARKETS CENTRAL Downtown Ft Worth/ TCU 48 8,154 $1.20 91.5% 46 603 Central Total 46 8,154 $1.20 91.5% 46 603 0 EAST East Ft Worth/ Woodhaven/ I-30E 68 12,659 $0.71 86.9% 91 North Arlington 102 21,980 $0.87 91.9% 4 South Arlington 138 28,730 $0.85 93.9% (101) East Totals 308 63,369 $0.83 91.8% (6) 0 0 NORTHEAST Haltom City/ Richland Hills/ Fossil Creek 71 17,857 $0.92 91.6% 55 159 306 Hurst/ Euless/ Bedford 130 29,597 $0.92 93.8% 34 121 Grapevine/ Roanoke/ Keller 48 11,918 $1.10 92.2% 17 646 Northeast Totals 249 59,372 $0.96 92.8% 106 926 306 NORTHWEST Northwest Ft Worth/ Saginaw/ Eagle Mtn 27 4,323 $0.77 94.4% (29) Northwest Totals 27 4,323 $0.77 94.4% (29) 0 0 SOUTH South Ft Worth 56 10,106 $0.78 90.9% (50) South Totals 56 10,106 $0.78 90.9% (50) 0 0 SOUTHWEST Southwest Ft Worth/ Benbrook 45 12,364 $0.90 93.6% 4 Far Southwest Ft Worth 21 2,350 $0.83 95.1% (21) Southwest Totals 66 14,714 $0.89 93.8% (17) 0 0 WEST Western Hills/ Ridgmar/ Ridglea 72 12,636 $0.76 89.6% (40) West Totals 72 12,636 $0.76 89.6% (40) 0 0 DALLAS TOTAL 1,866 439,472 $1.01 92.0% 418 14,949 2,388 FORT WORTH TOTAL 826 172,674 $0.89 92.2% 10 1,529 306 DALLAS/FORT WORTH TOTAL 2,692 612,146 $0.98 92.1% 428 16,478 2,694 Source: Apartment Data Services, Q4 2013. CBRE Research, Q4 2013. 2014, CBRE, Inc.
MULTI-HOUSING FOURTH QUARTER MARKETVIEW Multi-housing Rents Across the Dallas/Fort Worth market, average monthly rents remained unchanged in the fourth quarter, at $0.98 per sq.ft. In the past 12 months, the average rental rate has grown by 4.3%. This growth has been evident across every class of property, but Class C properties have experienced the greatest increase with an annual growth rate of 5.0%. Class A rates increased 2.9% and Class B rates increased 4.0%. The average rental rate has increased from this time last year across every DFW submarket and the highest rates are clustered in Central Dallas. Within that area, the Uptown/ Oak Lawn/Highland Park submarket topped the list at $1.52 per sq. ft. The East Central Dallas/Lower Greenville Ave submarket and Downtown Dallas/West End/Deep Ellum submarket had the next highest rates across the Metroplex, averaging $1.32 and $1.31 respectively. Multi-housing Occupancy The occupancy rate increased steadily in 2013, climbing 40 basis points (bps) over the last 12 months to reach 92.1% in Q4 2013. With a rate of 94.2%, Class B properties continue to have the highest occupancy, as has been true historically in DFW. The Class B occupancy rate remained unchanged versus one year ago. Class D properties had the most occupancy growth, with the rate increasing by 170 bps to 89.0%. Following an influx of Class A development, occupancy among that property class decreased in 2013 by 210 bps to 87.5%. Class C occupancy increased 130 bps over the last 12 months, reaching 93.2% in Q4 2013. Multi-housing Construction Employment growth and a strengthening economy fueled a large amount of development in DFW in 2013, making it the most active year for development since 2009. 12,657 units were completed in 2013, and 2,694 of those units were completed in the fourth quarter. The amount of units under construction increased each quarter in 2013 and topped out at 16,748 units in the fourth quarter. Uptown/Oak Lawn/Highland Park has held the highest representation of this development activity, with 5,416 units currently under construction in that submarket. This area has the largest concentration of multi-housing development in Texas. The U.S. Census Bureau reports that 15,125 multi-family housing permits have been issued in DFW from January through November 2013. Thus, development activity will likely keep its momentum into 2014. Employment and Demographics Seasonally adjusted employment growth in DFW was 3.2% over the last 12 months, for a net increase of 97,000 jobs. The unemployment rate in DFW dropped to 6.0% in Q4 2013, down from 6.3% last quarter. Once again, DFW posted a lower unemployment rate for the quarter than Texas (6.2%) and the United States (7.3%). An ample supply of welleducated workers and strong population growth contribute to the area s healthy economy. With a current estimated population of 6.7 million, the DFW metropolitan area is the fourth-largest MSA in the United States. The area s population has grown 30% since 2000, and growth of 8.6% is projected from 2013 to 2018, according to Claritas. Figure 3: Average Rates Per Sq. Ft./Month Source: CBRE Research, Q4 2013. Apartment Data Services, Q4 2013. Figure 4: Occupancy Rate By Class Source: CBRE Research, Q4 2013. Apartment Data Services, Q4 2013. 000's $1.50 $1.30 $1.10 $0.90 $0.70 $0.50 95% 93% 91% 89% 87% 85% 83% Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Class A Class B Class C Class D Overall Figure 5: Construction Activity and Net Absorption 18 16 14 12 10 8 6 4 2 0 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Class A Class B Class C Class D Overall Source: CBRE Research, Q4 2013. Apartment Data Services, Q4 2013. Figure 6: Unemployment 10% 9% 8% 7% 6% 5% 4% Q1 2011 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Under Construction Deliveries Net Absorption Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q4 2013 Dallas/Fort Worth Multi-Housing MarketView 3 3% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014, CBRE, Inc. Source: U.S. Bureau of Labor Statistics, December 2013. US Texas Dallas/Fort Worth MSA
MULTI-HOUSING FOURTH QUARTER MARKETVIEW Q4 2013 Capital Markets Dallas/Fort Worth Multi-Housing MarketView Apartment sales volume totaled $5.47 billion in DFW for the year 2013, according to Real Capital Analytics. Sales volume in 2013 was 56.0% higher than it was in 2012, when the annual total was $3.51 billion. Sales volume surged in Q4 2013 at $1.91 billion, representing an almost 80% increase over the Q4 2012 total of $1.07 billion. National sales volume totaled $103.46 billion in 2013, according to Real Capital Analytics. Sales volume in the United States was 17% higher in 2013 than the year before. Cap rates compressed slightly during the second half of 2013 in DFW. Average infill/urban stabilized cap rates in DFW are within the range of 4.25%-to-4.75% for Class A properties, 5.75%-to-6.25% for Class B properties, and 6.0%-to-6.5% for Class C properties. Average suburban stabilized cap rates in DFW remain slightly higher, ranging from 5.25%-to-5.75% for Class A properties, 6.0%-to-6.75% for Class B properties, and 7.0%-to- 8.0% for Class C properties. SALES VOLUME WAS 56% HIGHER IN 2013 THAN IT WAS IN 2012 IN DFW, WHILE THE UNITED STATES SAW AN INCREASE OF ONLY 17%. Figure 7: Q4 2013 Major Transactions Property Address City 240 The Encore 4700 Tribeca Lane Plano 420 910 Texas Street 910 Texas Street Dallas 242 Town Oaks 4401 Glenview Court North Richland Hills 250 Benchmark 3424 W Country Club Drive Irving 414 15777 Quorum 15777 Quorum Drive Addison 194 U Centre at Fry Street 1221 W Oak Street Denton 480 Landmark at Sutherland Park 3400 W Park Boulevard Plano 256 Landmark at Courtyard Villas 2200 N Belt Line Road N Mesquite 198 Huntington Ridge 821 S Polk Street DeSoto 580 Remington Oaks 1601 Weyland Drive North Richland Hills 270 Westmount at Vista Ridge 2241 S Business Highway 121 Lewisville 256 Advenir at Walnut Creek 3251 Matlock Road Mansfield 314 Landmark at Collin Creek 6301 Windhaven Parkway Plano 259 Vail Village Apartments 3840 Frankford Road Dallas 256 Camden Gardens 4280 Trinity Mills Road Dallas Source: CBRE Research, Q4 2013. 4 2014, CBRE, Inc.
MULTI-HOUSING FOURTH QUARTER CONTACTS MARKETVIEW Q4 2013 For more information about this Dallas/Ft Worth MarketView, please contact: TEXAS RESEARCH Lauren Paris Senior Research Analyst CBRE Dallas Research 2100 McKinney Ave, Suite 700 Dallas, TX 75201 +1 214 979 6587 lauren.paris@cbre.com Mallary Jolly Research Coordinator CBRE Dallas Research 2100 McKinney Ave, Suite 700 Dallas, TX 75201 +1 214 979 6589 mallary.jolly@cbre.com Dallas/Fort Worth Multi-Housing MarketView Lynn Cirillo Research Operations Manager, TX CBRE Americas Research 2800 Post Oak, Suite 2300 Houston, TX 77056 lynn.cirillo@cbre.com +FOLLOW US GOOGLE+ FACEBOOK TWITTER GLOBAL RESEARCH AND CONSULTING This report was prepared by the CBRE U.S. Research Team which forms part of CBRE Global Research and Consulting a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe. DISCLAIMER Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of the CBRE Global Chief Economist. 5 2014, CBRE, Inc.