Friday, April 12, 2013

Dallas-area apartment construction still booming as rental leasing slows in first quarter


North Texas apartment leasing cooled a bit in the first quarter of 2013. But there was no sign of a step back in construction.
The 1,574 net apartment rentals in the Dallas-Fort Worth area during the first three months of the year was an improvement from leasing in the same period last year, MPF Research said Monday.
But net leasing in the area fell from strong fourth-quarter levels of more than 1,900 apartments rented.
At the same time, developers completed 2,315 D-FW apartments in the first quarter.
North Texas leads the country in apartment building, with 22,837 units under construction — the highest local building total since the first quarter of 2009, according to MPF Research.
“There’s no sign yet of construction slowdown, but you’d think — hope — the market is close to leveling off in starts,” said MPF Research’s Jay Parsons. “Dallas-Fort Worth is one of only a handful of markets nationally where apartment development has already topped historic norms.”
But Parsons isn’t in a panic over the volume of development.
“There’s a lot of construction, yes, but that’s almost always the case here.”
The fevered pace of apartment building and an increase in the number of renters buying houses caused overall apartment occupancy levels in D-FW to drop slightly in the first quarter, to 93.6 percent. That’s still ahead of year-ago occupancy levels, but less than at the end of 2012.
Overall rents in the first quarter were only up 2.3 percent from a year earlier, to an average of $833, MPF found.
“The local apartment market is still in very healthy shape,” Parsons said. “But occupancy is inching down and rent growth levels are easing.”
Most of the building activity is in Uptown and downtown Dallas, the Oak Lawn area, Irving’s Las Colinas district and Carrollton-Farmers Branch.
As the local housing market has turned the corner, some renters are opting to buy and take advantage of near record-low home finance rates.
“The increase in buyers has softened apartment demand in some of the key suburbs, and that — along with all of the new construction — has forced apartment operators to limit rent hikes,” Parsons said.
But he said that the rate of home purchases so far isn’t enough to have a serious impact on the D-FW apartment market.
“This market is accustomed to heavy home sales and large apartment construction volumes,” Parsons said.
Developers say they’ve seen no sign of a slowdown in leasing at their new projects.
“We had the typical seasonal slowdown, but for the most part all of our properties are experiencing strong leasing activity now that spring has arrived,” said Scott Sherwood with JLB Partners, which has several new rental projects in the Dallas area.
DALLAS-FORT WORTH APARTMENT PROFILE 
First quarter 2013 
Completions: 2,315 units 
Net leasing: 1,574 units 
Average monthly rent: $833 
Average occupancy: 93.6% 
Under construction: 22,837 units