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C REPORT DALLAS-FORT WORTH MULTIFAMILY | Q3 2018

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Page 1: C RE PORT - Greysteel · DFort Wort Q3 218 Q3 CRE Report / 5 PIPELINE & DELIVERIES 2,800 REMAINING COUNTIES 36,800 TOTAL UNITS MARKET RATE UNITS UNDER CONSTRUCTION: 3,100 DENTON COUNTY

C REPORTDALLAS-FORT WORTH

MULTIFAMILY | Q3 2018

Page 2: C RE PORT - Greysteel · DFort Wort Q3 218 Q3 CRE Report / 5 PIPELINE & DELIVERIES 2,800 REMAINING COUNTIES 36,800 TOTAL UNITS MARKET RATE UNITS UNDER CONSTRUCTION: 3,100 DENTON COUNTY

Dallas-Fort Worth | Q3 2018

Q3 CRE Report / 2

Greysteel’s CREport focuses on any subject that potentially impacts, or relates to, the commercial real estate sector, ranging from

studies of the performance of a specific asset type or region to economic and demographic studies, and anything in-between. Readers

will benefit from our professionals’ expertise and insight into the economic and market trends that affect all sectors of commercial real

estate, as well as our expansive knowledge of local markets. For more information about the CREport, or to request information for a

specific region, please contact [email protected].

DALLAS-FORT WORTH MULTIFAMILY INVESTMENT SALES CONTACTS

DALLAS-FORT WORTH MULTIFAMILY DEBT & STRUCTURED FINANCE CONTACTS

GREYSTEEL RESEARCH & MARKETING CORPORATE LEADERSHIP

SOURCES & METHODOLOGY

DOUG BANERJEEManaging [email protected]

KEELEY BYERLead Research Analyst

DANIEL HARTNETTSr. Finance [email protected]

ARI FIROOZABADIPresident & CEO

REBECCA WILEYDirector of Marketing

ANDREW MUELLERSenior Investment [email protected]

BOYAN RADICManaging [email protected]

JASON LANCESenior Designer / Media Coordinator

MITT PATELFinance [email protected]

JACK STONEInvestment [email protected]

MOISES MALDONADOInvestment [email protected]

DUERK BREWERChief Operating Officer

YASSI FARZANEHDirector of Corporate Services

NICOLE CAPOBIANCODirector of Transaction Services

SCOTT SIMONSenior Investment [email protected]

JOHN MARSHALL DOSSSenior Investment [email protected]

ANDREW HANSONSenior Investment [email protected]

All data is obtained from sources recognized as reliable but Greysteel makes no guarantees as to the accuracy thereof.

(1) Rental & occupancy trends take into account only multifamily assets larger than 50 units, except in the case of development and transactional analysis.

(2) The Dallas-Fort Worth Metro Area, as defined by Greysteel Research, is comprised of the following counties: Collin, Dallas, Denton, Ellis, Hood, Hunt, Johnson, Kaufman,

Parker, Rockwall, Somervell, Tarrant, and Wise.

(3) Affordable properties and market-rate properties with an affordable element are not analyzed in this report; this includes, but is not limited to, LIHTC, Section 8, HCVP, senior housing, military housing, corporate housing, and student housing.

(4) Data provided courtesy of Greysteel Research, CoStar Realty Information, Inc., REIS, Bureau of Labor Statistics, Bureau of Economic Analysis, and the U.S. Census Bureau.

* For more information or to inquire about Greysteel, please contact

Ari Firoozabadi, CEO & President ([email protected] | 202.417.3873)

DALLAS-FORT WORTH

Page 3: C RE PORT - Greysteel · DFort Wort Q3 218 Q3 CRE Report / 5 PIPELINE & DELIVERIES 2,800 REMAINING COUNTIES 36,800 TOTAL UNITS MARKET RATE UNITS UNDER CONSTRUCTION: 3,100 DENTON COUNTY

Dallas-Fort Worth | Q3 2018

Q3 CRE Report / 3

Dallas-Fort Worth leads nation in population growth

The Dallas-Fort Worth metro area is the fourth most populated MSA in the U.S. and continues to be one of the fastest growing metros

in the nation. The Metroplex added more than 146,000 residents last year, the most of any metro area, while non-farm employment

increased by 3.2% over the past 12 months. Major corporate relocations and expansions across the metro have generated thousands of

new jobs, resulting in a massive influx of new residents capitalizing on those opportunities and driving the apartment market forward.

Even though Dallas-Fort Worth is leading the nation in home building, single-family houses are being built at half the rate of the previous

cycle, contributing to a tight housing market.

DFW is the top U.S. metro in deliveries and absorption

Approximately 36,800 market-rate apartments were under

construction in the Metroplex at the end of Q3 2018.

However, completion volumes are expected to decline next

year and after with a decrease in multifamily starts and

permitting. Despite near-record levels of supply, vacancies

are still below the metro’s historical average of 8.4% since

2000. Moreover, Dallas-Fort Worth led all major U.S. metros

with nearly 22,700 units delivered and more than 23,400

units absorbed over the past 12 months, ahead of New York

and Washington, D.C. With absorption outpacing deliveries,

the vacancy rate dipped to 7.2% at the end of September

and effective rents reached $1.29 PSF, a 3.2% increase from

one year ago.

Northern suburbs leading construction boom

For the past two decades, cities like Allen, Frisco, and McKinney

have experienced some of the fastest growth in the country, and

publications like Forbes continually rate these cities as some of the

best places to live in America. Strong population growth combined

with major corporate expansions and relocations by companies such

as AmerisourceBergen, Fannie Mae, FedEx, Liberty Mutual, State

Farm, and Toyota, will keep multifamily demand strong in northern

suburbs of the Metroplex. The Frisco-Prosper submarket leads

development in the metro with over 3,750 units under construction

and another 3,900 units proposed as of Q3 2018. The average

asking rent in Frisco-Prosper reached $1,364 per unit at the end of

September, an increase of 14.6% since 2015 and one of the highest

asking rents in the Metroplex.

TRENDLINES

GEO

GRA

PHIC

BRE

AK

DO

WN

DALLAS COUNTY Class A Class B Class C

Effective Rent Growth (Y-O-Y) -0.2% 2.6% 3.1%

Vacancy Rate 12.8% 6.2% 5.3%

Net Absorption (12-Month Trailing) 8,215 1,995 87

TARRANT COUNTY Class A Class B Class C

Effective Rent Growth (Y-O-Y) 2.3% 3.6% 4.0%

Vacancy Rate 10.1% 5.8% 5.0%

Net Absorption (12-Month Trailing) 3,139 1,343 162

COLLIN COUNTY Class A Class B Class C

Effective Rent Growth (Y-O-Y) 0.6% 1.4% -1.6%

Vacancy Rate 10.5% 6.2% 6.4%

Net Absorption (12-Month Trailing) 4,268 476 -80

PIPELINE VS EFFECTIVE RENTAL RATE PSF

Pipeline vs Effective Rental Rate PSF

$0.60

$0.70

$0.80

$0.90

$1.00

$1.10

$1.20

$1.30

$1.40

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD

Under Construction Delivered Effective Rent PSF

UNITS EFFECTIVE RENT PSF

NET ABSORPTION VS VACANCY

Net Absorption vs Vacancy

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

0

3,000

6,000

9,000

12,000

15,000

18,000

21,000

24,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD

Net Absorption Vacancy %

UNITS

2009 2010 2011 2012 2013 2014 2015 2016 YTD2017

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

$1.40

$1.30

$1.20

$1.10

$1.00

$0.90

$0.80

$0.70

$0.60

24,000

21,000

18,000

15,000

12,000

9,000

6,000

3,000

0

12.0%

11.0%

10.0%

9.0%

8.0%

7.0%

6.0%

5.0%

4.0%2009 2010 2011 2012 2013 2014 2015 2016 YTD2017

Page 4: C RE PORT - Greysteel · DFort Wort Q3 218 Q3 CRE Report / 5 PIPELINE & DELIVERIES 2,800 REMAINING COUNTIES 36,800 TOTAL UNITS MARKET RATE UNITS UNDER CONSTRUCTION: 3,100 DENTON COUNTY

Dallas-Fort Worth | Q3 2018

Q3 CRE Report / 4

Trade, Transp. & Utilities

Prof. & Business Services

Ed. & Health Services

Government

Leisure & Hospitality

Financial Activities

Manufacturing

Mining, Logging & Const.

Other Services

Information

KEY ECONOMIC INDICATORS

LABOR Q3 2017 Q3 2018 Change

EMPLOYMENT 3.60M 3.72M +3.2%

UNEMPLOYMENT RATE 3.8% 3.6% -0.2%

PEOPLE 2010 2018 2023 Projected

POPULATION 6.42M 7.51M 8.25M

% CHANGE — +17.0% +9.7%

HOUSEHOLDS 2.32M 2.68M 2.93M

% CHANGE — +15.5% +9.3%

HOUSING UNITS 2.53M 2.87M 3.13M

OWNER-OCCUPIED 1.43M 1.59M 1.77M

RENTER-OCCUPIED 887K 1.09M 1.16M

MEDIAN HH INCOME $56,349 $64,460 $72,373

% CHANGE — 14.4% 12.3%

38.0%

55.2%

OwnerOccupied

RenterOccupied

6.8%

Vacant

HOUSING PROFILE

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

18-24 25-34 35-44 45-54 55-64

2010 2018 2023 Projection

POPULATION COUNT BY AGE

2010 2018 2023 Projection

30.1%of Dallas-Fort Worth rental units are occupied by Millennials (aged 25-34)

52.3%of Dallas-Fort Worth rental units are occupied by renters aged 25-44

The chart above is middle‐right on page 40.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

2,800,000

2,900,000

3,000,000

3,100,000

3,200,000

3,300,000

3,400,000

3,500,000

3,600,000

3,700,000

3,800,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Employment Unemployment rate

EMPLOYMENT VS UNEMPLOYMENT RATEEMPLOYMENT SECTORS

Trade, Transp. & Utilities

Prof. & Business Services

Ed. & Health Services

Government

Leisure & Hospitality

Financial Activities

Manufacturing

Mining, Logging & Const.

Other Services

Information

21%

17%

11%

11%

12%

8%

8%

6%

2%3%

2009 2010 2011 2012 2013 2014 2015 2016 20182017

10.0%

9.0%

8.0%

7.0%

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%

3,800,000

3,700,000

3,600,000

3,500,000

3,400,000

3,300,000

3,200,000

3,100,000

3,000,000

2,900,000

2,800,000

18-24 25-34 35-44 45-54 55-64

1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

0

2008

Page 5: C RE PORT - Greysteel · DFort Wort Q3 218 Q3 CRE Report / 5 PIPELINE & DELIVERIES 2,800 REMAINING COUNTIES 36,800 TOTAL UNITS MARKET RATE UNITS UNDER CONSTRUCTION: 3,100 DENTON COUNTY

Dallas-Fort Worth | Q3 2018

Q3 CRE Report / 5

PIPELINE & DELIVERIES

2,800REMAINING COUNTIES

36,800TOTAL UNITS

MARKET RATE UNITS UNDER CONSTRUCTION:

3,100DENTON COUNTY

7,300TARRANT COUNTY

7,500COLLIN COUNTY

16,100DALLAS COUNTY

Under Construction Planned

UNITS

HOT SUBMARKETS

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Frisco-Prosper

Farmers Branch-Addison-Carrollton

Garland-Rowlett

Plano NorthwestFort Worth

East Dallas DowntownDallas

SouthwestFort Worth

Under Construction Planned

Percentage of Frisco- Prosper Inventory Under Construction

Percentage of Farmers Branch-Addison- Carrollton Inventory Under Construction

DALLASFORT WORTH

DENTON

CARROLLTON

PLANO

McKINNEY

RICHARDSONFARMERSBRANCH

FRISCO

DEVELOPMENT UNDER CONSTRUCTION. THE LARGER THE AREA OF THE CIRCLE, THE MORE UNITS UNDER CONSTRUCTION.

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

3.4%

19.2%

Page 6: C RE PORT - Greysteel · DFort Wort Q3 218 Q3 CRE Report / 5 PIPELINE & DELIVERIES 2,800 REMAINING COUNTIES 36,800 TOTAL UNITS MARKET RATE UNITS UNDER CONSTRUCTION: 3,100 DENTON COUNTY

Dallas-Fort Worth | Q3 2018

Q3 CRE Report / 6

PROPERTY CITY SALE DATE UNITS CLASS YEAR BUILT

Pine Oaks Mesquite Sep-18 240 B 1983

Retreat at Stonebridge Ranch McKinney Sep-18 464 A 2008

Canyon Grove Grand Prairie Sep-18 312 B 1983

Crossroads at Arlington Arlington Sep-18 216 C 1984

Brandon Mill Apartments Dallas Sep-18 300 C 1985

Capitol at Stonebriar Frisco Sep-18 424 A 2016

Trails at Creekside Allen Sep-18 457 B 2013

The Ranch at Ridgeview Plano Aug-18 288 B 1998

RiverVue Fort Worth Aug-18 375 A 2016

Spring Parc Dallas Aug-18 304 B 1986

Century 380 Aubrey Aug-18 416 A 2016

Villas del Estancia Irving Aug-18 206 C 1972

Vine on North Park Grapevine Jul-18 216 B 1985

Magnolia Creek Dallas Jul-18 436 C 1988

Pioneer Creek Townhomes Arlington Jul-18 213 C 1969

Cortland Waters Edge Dallas Jul-18 606 A 2016

RECENT TRANSACTIONS

TRANSACTIONAL TRENDS

Sales velocity in Dallas-Fort Worth is down slightly year-over-year, with approximately 391 assets trading compared to 435 properties

sold through the third quarter of 2017, but is on pace to reach 520 sales by the end of the year. From 2013–2017, the Metroplex

set new records for volume as investors sought more affordable opportunities away from expensive coastal metros such as Boston,

New York, and San Francisco. Investors continue to be attracted to the strong fundamentals despite loads of supply, long-term

demand drivers, and above average rent growth that Dallas-Fort Worth has to offer. This substantial investor interest has driven up

pricing, especially in the urban and premier suburban areas of the Metroplex. Even as prices increase, investment in Dallas-Fort Worth

multifamily properties remains extraordinary.

SALES VELOCITY MOST ACTIVE SUBMARKETSSales Velocity

135 18

5

203

300

418 46

6 498 55

6 580

391

0

100

200

300

400

500

600

700

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

700

600

500

400

300

200

100

0

NW DALLAS

SW FORT WORTH

ALLEN-MCKINNEY

RICHARDSON

GARLAND-ROWLETT

ARLINGTON

FB-ADD-CARROLL*

EAST DALLAS2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD

Most Active Submarkets (YTD)

0 1,000 2,000 3,000 4,000 5,000

East Dallas

FB-Add-Carr

Arlington

Garland-Rowlett

Richardson

Allen-McKinney

SW Fort Worth

NW Dallas# of units sold (YTD)

FB-Add-Carr: Farmers Branch-Addison-Carrollton submarket

0 1,000 2,000 3,000 4,000

*FB-ADD-CAROLL: Farmers Branch-Addison-Carrollton submarket

Page 7: C RE PORT - Greysteel · DFort Wort Q3 218 Q3 CRE Report / 5 PIPELINE & DELIVERIES 2,800 REMAINING COUNTIES 36,800 TOTAL UNITS MARKET RATE UNITS UNDER CONSTRUCTION: 3,100 DENTON COUNTY

Dallas-Fort Worth | Q3 2018

Q3 CRE Report / 7

Greysteel is a leading transactional commercial property advisor for private, middle-market and institutional investors. Our

platform optimizes options for our clients by providing end-to-end investment services, from sales and financing to research and

investment planning. Strategically located across the United States, Greysteel has established broad market coverage from coast

to coast.

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FW PHL

DALNY

DC

LA

PHO DEN

BALOur Offices

NEW YORKNEW YORK

FORT WORTHTEXAS

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BALTIMOREMARYLAND

LOS ANGELESCALIFORNIA

WASHINGTON,D.C.

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DENVERCOLORADO

NORFOLKVIRGINIA

NEW YORK NEW YORK300 Cadman Plaza West, 12th Floor,

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[email protected]

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FORT WORTH TEXAS500 W. 7th Street, 9th Floor,

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Page 8: C RE PORT - Greysteel · DFort Wort Q3 218 Q3 CRE Report / 5 PIPELINE & DELIVERIES 2,800 REMAINING COUNTIES 36,800 TOTAL UNITS MARKET RATE UNITS UNDER CONSTRUCTION: 3,100 DENTON COUNTY

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