Wednesday, May 20, 2015

More apartment rent increases coming in North Texas

A flood of new apartment completions this year may not bring much relief to renters.
The Dallas-Fort Worth area’s apartment rents in the first quarter were more than 5 percent higher than a year earlier — a record annual increase for North Texas.
With 20,000 apartments set to open in 2015, industry analysts were expecting a slowdown in rent growth.
But that’s not happening yet.
“As we move into the second quarter this number is going to go up and could go up meaningfully,” said Greg Willett, vice president of Carrollton apartment analyst MPF Research. “In some places across the country and in other Texas markets, there is a slowdown in rent growth.
“Not in D-FW.”
Average rents in the area are now at $927 a month, with most new units renting for $1,200 or more.
Willett, who spoke at a Tuesday morning apartment market update sponsored by Marcus & Millichap and management company Pinnacle, said current construction will increase D-FW’s apartment supply by about 5 percent.
About a third of that new construction is high-end rental units in central Dallas.
“If there is any vulnerability in this market over the next couple of years, it is probably that sector,” Willett said. “Overall occupancy is going to cool off a little bit. But it will still be essentially full.”
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Willett said D-FW apartment vacancies are now at a 14-year low at 5 percent.
He said that while the oil price plunge has slowed apartment building in Houston, that’s not so in North Texas.
“In Houston, starts are stalling out,” Willett said. “People are waiting to see what is happening to the economy there.”
Drew Kile, a director at Marcus & Millichap’s Institutional Property Advisors, said that employment gains in North Texas this year will likely drop below 100,000 jobs. Last year, the D-FW area’s employment grew by almost 140,000 positions.
“We have a job growth story in Texas, but it’s not quite keeping up with our apartment deliveries,” Kile said. “We are expecting to see a little bit of increase in vacancy, with Houston leading that charge.”
Still, with migration to the state continuing, the forecast is for the D-FW population of 20- to 34-year-olds to grow by more than 140,000 in the next five years, he said.
More than 70 percent of those new young residents will be renters, Kile said.
“A lot of people are moving to the state of Texas,” he said.
By Steve Brown/Dallas Morning News