ALN Apartment Monthly News January 2012 Volume 21, Issue 1 Page 1 >> > ALN Apartment Data 2611 Westgrove Carrollton, Texas 75006 Phone: 1.800.643.6416 Fax: 1.800.649.6251 Email: sales@alndata.com DFW State of the Industry Recap by Wayne Williams President, ALN Apartment Data Printable PDF Version Empowering Multifamily Professionals with the Best Data in the Industry Follow us on Twitter. On January 24 I was fortunate enough to be invited as a guest speaker at the State of the Industry Luncheon hosted by the Apartment Associations of Greater and Tarrant County. The other speakers included Dr. Bernard Weinstein, an economist affiliated with the SMU Cox School of Business, and Steve Brown, the Real Estate Editor for the Morning News. Dr. Weinstein spoke first and gave a very informative and entertaining presentation on Going from the Great Recession to the Great Stagnation. Among the items he pointed out were that the construction industry is at a historic low. Building permits for Single and Multifamily housing were at record low minimums. Also, for the last ten year real income is down for each quintile of American households, not just the middle class. I then gave my presentation. You can download the powerpoint slides from the market news links off our web site at http://alndata.com. I started off by pointing out that in 2010 the DFW area had a remarkably good year for occupancy gains. Over 23,000 Units were absorbed in 2010, yet owners had failed to capitalize on the opportunity to raise rents. Rents in 2010 only rose 2.1% I had predicted that in 2011 rents would rise even as occupancy couldn t match the gains of 2010. Sure net new units came online in 2011, another very low number. I had forecast in the beginning of 2011 that it would be a repositioning year for economic mix. By that I meant that during the downturn we had a lot of new supply going vacant. These were typically Class A properties. Those owners and managers at the time had to buy occupancy and discount heavily and take whatever they could get to keep up their occupancy numbers. Therefore residents who would not normally qualify for Class A units now could. Residents who would not normally qualify for Class B properties could qualify for those and so on. During 2011 I forecasted the cycle would go the other way. As occupancy levels leveled off toward maximum occupancy, higher tier properties would raise rents, forcing less qualified residents to choose lower tier properties and so on. Sure enough in 2011 Class A properties reached almost 95% occupancy at the end of the 3rdquarter before dipping down to 93%. Effective rents in Class A properties rose throughout the year to end up at $1253 per unit. Class B properties also had occupancy gain, even finishing the year with higher occupancy than the Class A properties. By 2012 Class B properties were at 93.9% occupancy with Effective rents averaging $840 per unit. (Continued on page 3) enough in 2011, the DFW market absorbed 15,600 units w h ic h b r o u g h t o ve ra ll occupancy up to 91.6%. Effective rents however rose 5.8% to an average of $782 per units. On the side Effective Rents were up over 6% averaging $814 per unit while on the Fort Worth side Effective rents were up 4.6% to $701 per unit. In January 2011 there were 29 properties with 7400 units still in Lease-up, mostly from the deals developed prior to the downturn. By January 2012 there were only 19 properties in Lease-up with 4300 units, a very low number. Only 5,100
< << Page 2 >> > On a monthly basis, ALN surveys all apartment communities in each of the 23 markets that we cover and an average of 92% of these surveys are successfully completed. The above statistics reflect only Conventional, Midrise, and High-Rise apartment communities. In addition, unless otherwise noted, these statistics do not included Income Restricted, Student Housing, or Senior Independent Housing. In-depth, property level research and data is available for all property types (including Senior and Income Restricted) through ALN OnLine, which includes Market and Effective Rents, Occupancy, Floor Plan & Unit Mix information, Market & Submarket statistics, Market Surveys, Historical Trends & Customizable Reports. By using ALN OnLine, you are able to see monthly fluctuations in any submarket you need which will greatly enhance your ability to respond to changes quickly and efficiently. Why Does ALN Update Monthly? Most data providers update their data quarterly. For some, that is often enough. However, this industry moves way too quickly and many opportunities are missed when waiting on slow reacting data providers to catch up with your market. Only ALN can provide you with monthly updated data on 23 markets throughout the southern U.S.
1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 ALN Apartment Monthly News < << Page 3 >> > DFW Recap (from P.1) While the occupancy gains in Class A and B properties slowed in 2011 compared to 2010, in class C properties occupancy rose in 2011 at a faster pace than 2010. Rental gains were not as strong in 2011 suggesting that the class C properties are about a year behind the Class A and B properties in raising rents during this recovery. Class C properties now average about $625 per unit and the Class C properties are averaging 90.8% occupancy. Class D properties still have a way to go to see any benefit from this recovery. It s going to take full employment to get the bottom tier properties showing any large signs of occupancy or rental growth. Currently Class D properties are at 84.6% Occupancy and $539 per unit. Less than half of what the class A s get! As for submarkets, all of the submarkets performed better than the year before with the exception of Mesquite/Balch Springs. Both Rents and Occupancy were flat in the Mesquite Balch Springs submarket. The well performing submarkets were in the Far North Area and the Oak Lawn/ Downtown area of. The Preston/Frankford submarket saw rents rise by over 10% for the year and Carrollton and Plano were not far behind with 9.1% and 8.0% Effective Rent growth, respectively. I also noted that we are coming up on the 30th anniversary of the big 80 s housing boom in DFW. From 1982 to 1986 almost 200,000 units were added to the market. Those properties account for almost a third of our market! That is a lot of aging property. Some of those properties have not aged well. In the near future we are going to have to think about how this aged product will reflect on our market. If those properties deteriorate to the point where they are considered Class D properties that is going to drag down our market. Almost as if we planned it, Steve Brown gave a presentation on the type of product that we are seeing these days, a far cry from the product that was being constructed 30 years ago. The finish outs on the new products are outstanding. It seems that at least in the urban centers, renters are willing to give up space for more luxurious common areas and quality finish-outs. Residents are no longer choosing renting over buying as a last resort, but rather as a lifestyle preference. He quoted an industry member that calculated the average renter in their properties made $65,000 per year. He also pointed out that the new products are commanding serious money. A new Class A property now charges rent that is $300 more per month than the average home mortgage payment. Right now people are choosing renting over buying but the pendulum could swing back again if rental prices go up too much. The worry that the glut of foreclosed homes and condos, the so-called shadow market, would affect rents and occupancy has passed, at least in the DFW area, but could become a factor if rental prices expand too quickly. With only 8900 units currently in some phase of construction we will see another year of very small inventory added to the market. Consequently 2012 looks to be another solid year for rental gains. I would like to thank the organizers from the Greater and Tarrant County Apartment Associations for letting me speak and I encourage you to attend any functions like this in your own area. I found it entertaining and insightful to hear from industry professionals on the multifamily economic picture and hopefully they did the same! 70000 Fort Worth New Units 1965-2011 60000 50000 40000 30000 New Units 20000 10000 0
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