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MULTIFAMILY MARKET REPORT

DALLAS- FORT WORTH

Fourth Quarter 2020

  • The first quarter of 2020 was an excellent flight to the year for multifamily real estate transactions. But it came to a sudden halt because of the pandemic brought about by COVID-19, worldwide.

  • Purchasers and sellers have pushed the pause button, and real estate brokers are waiting for the next plan.

  • But, mid-summer, the market is slowly getting back on track, and transactions significantly are up, and GreyStone ISG had one of its excellent times yet.

  • Real Estate Investors are going to Texas, DFW specifically because of forecasted future growth to add to the fact that capital is having complications in placing equity in retail, hotels, and office, leaving industrial and multifamily as the most effective and efficient alternatives.

  • Major firms like Charles Schwab, Facebook, CBRE, and Uber have already transferred or expanded in the DFW community.

  • DFW is presently the fourth biggest market in the United States and has been at the top all over the United States in terms of growth in 2017, 2018, and 2019.

  • Fortunately, the multifamily real estate investment industry is quick to recover and still making big numbers for both purchasers and sellers.

Dallas-Fort Worth Multifamily Occupancy Rates and Effective Rental Rates

YOC Occupancy Rate T-12 Absorption
1800-1969 90.7% 0.8% 321
1970-1979 93.0% 0.2% 229
1980-1989 93.7% 0.4% 1,643
1990-1999 94.2% -0.3% 479
2000-2019 91.8% 5.0% 14,563
2020-21** 27.7% 81.5% 5,273
All 90.3% -0.8% 23,822

YOC Effective Rental Rate T-12 YoY Change
1800-1969 $952 2.2% $21
1970-1979 $962 1.9% $18
1980-1989 $996 1.3% $12
1990-1999 $1,270 -0.9% ($12)
2000-2019 $1,378 -0.8% ($12)
2020-21** $1,539 -6.1% ($100)
All $1,182 1.0% $12[1]

2020 Amendments in the Perspective of a Broker

  • Amidst travel restrictions, information was always provided as much as possible, including virtual tours.

  • There is an increase in price in Dallas-Fort worth because of rising demand in the fourth quarter of the year, paired with lower rates of interest.

  • Increase in “new-to-market” purchasers coming from coastal markets.

  • Net migration to DFW is said to be the highest all over the United States, and it is anticipated to grow with the Biden Administration since changes in policies are also expected.

  • DFW is leading in the market for sales transactions in 2020 after finishing on the third spot in the years 2018 and 2019, next to Los Angeles and New York, respectively.

  • BFR and SFR portfolios already recovered and are in high demand because of the side effects of the pandemic brought about by COVID-19. It is beginning to create a shadow market that cannot be overlooked.

Construction of Multifamily Complexes for the last five (5) years; 2016-2020

  • Five (5) cities in North Texas constructed multifamily complexes at an amazing rate for the last five (5) years, overtaking other United States regions in construction volume, as stated by the RENTCafe.

  • During the five (5) years covered period, developers come up with a whopping 22,848 new apartments within the suburbs of DFW such as McKinney, Grand Prairie, Garland, Frisco, and Farmer’s Branch which represents around 4.5% of more than 500,000 units constructed all over the United States during the said period as per RENTCafe and Yardi.

  • Frisco is the leading in the entire nation for total apartment construction during the five years, with the suburb constructing around 8,044 units. That is about 42% of its apartment stock is now a new product.

  • The North Dallas community of McKinney placed second in RENTCafe’s analysis of apartment construction, with the city structures, 4843 units over the last five (5) years’ time, pushing its share of new units to about 1/5 of its entire multifamily product.

  • RENTCAFE also showcases the top 20 and it features Farmers Branch with a total of about 3,788 new apartments over the last five years, Grand Prairie garnering a total of 3,308 apartment builds, and Garland at 2,865 units.

  • Analysts state, despite the pandemic brought about by COIVD-19, DFW is not that suffering from oversupply and still holds the class of growing population needed to justify the inflated pace of construction it has recorded for the last five (5) years.

  • Frisco had experienced an increase in population from around 152,000 in the year 2016 to approximately 206,000 in 2020, based on Frisco information.

  • The second place, Mc Kinney, projected its estimated population increase from 155,000 in the last quarter of 2015 to 195,000 in the first quarter of 2020.

  • As the population increases and the area deals with residents moving in, multifamily real estate is in heavy demand among residents for practical places to live.

  • The DFW region is not reaching saturation or oversupply in terms of housing, according to Doug Ressler, Manager of Business Intelligence. To him, renting has emerged to be an affordable alternative because of the lack of single-family and restricted growth in income.

  • The growing population in DFW of young professionals in the 22 to 34 age bracket is another consideration in maintaining a steady trend in multifamily real estate prior, during, and after the pandemic.

  • DFW has a relatively young range in population. Generation Z and the younger millennials are in their prime period bracket where they are demanding in rental properties, according to the former chief economist for the Texas A&M Texas Real Estate Research Center, Jim Gaines.

  • The average age of the DFW-Arlington region hovers around 35 years, with about 30% of the population in the 20-39 age bracket as per the United States Census Bureau.

  • As the pandemic brought about by COVID-19 pushes young professionals toward the middle of the United States in search of practical housing and jobs, multifamily real estate specialists firmly believe DFW will still emerge to be demandable in terms of multifamily apartment rentals in the next several years.

  • These have maintained priced parameters of multifamily investment sales significantly steady during these trying times.

Dallas-Fort Worth Multifamily Properties Sold within more than twenty (20+) units in the last quarter of 2020

 

YOC

1800-1969 Q4 – 2020 YoY for Q4 – 2020
#Props 1 -90.9%
Units 133 -90.0%
Price per Unit NA $78,385
Cap Rate NA 5.4%

1970-1979 Q4 – 2020 YoY for Q4 – 2020
#Props 2 -60.0%
Units 674 -9.0%
Price per Unit NA NA
Cap Rate NA NA

1980-1989 Q4 – 2020 YoY for Q4 – 2020
#Props 7 -30.0%
Units 1664 -36.5%
Price per Unit $114,139 NA
Cap Rate NA NA

1990-1999 Q4 – 2020 YoY for Q4 – 2020
#Props 1 0.0%
Units 312 -22%
Price per Unit NA NA
Cap Rate NA NA

2000-2019 Q4 – 2020 YoY for Q4 – 2020
#Props 9 200.0%
Units 2,352 118.6%
Price per Unit $161,031 NA
Cap Rate 4.8% NA

2020 – Q4 – 2020 YoY for Q4 – 2020
#Props 1 NA
Units 371 NA
Price per Unit NA NA
Cap Rate NA NA[2]

Unemployment

  • In DFW-Arlington, the unemployment rate as of the first week of January 2021, was pegged at 7.1%.

  • There is a minor increase as compared to 6% in December of 2020.

  • The year-over-year (“YoY”) unemployment rate was pegged at 3.1%.

  • We have listed the numbers as of the first week of December 2020, for weekly unemployment claims in Texas since the first reported United States Case of Covid-19:

  1. Total Weekly Claims before adjustment = 47,521 claims
  2. The unadjusted four-week moving average is pegged as 37,528 claims.

  • Meanwhile, as of January 2, 2021, we also collected the numbers for weekly unemployment claims in Texas since the first reported United States case of COVID-19:

  1. Total Weekly Claims before adjustment = 43,583 claims
  2. The unadjusted four-week moving average = 37,164 claims.

Figures in Leasing Activities

  • An increase in North Texas apartment leasing during the last quarter of 2020 was good news for rental landlords.

  • Net apartment rentals in DFW are pegged at 4,455 units during the final quarter of 2020.

  • Leasing activity was solidly strong in the last quarter of 2020, it was pegged at about double the average volume for the last five (5) years.

  • For the entire year of 2020, net apartment leasing in the area added up to more than 20,400 units. DFW lead the United States for both completions and demand in the year 2020.

  • The demand for an apartment in DFW for the last 2020 was a bit below 25,810 units in net leasing in 2019 as per RealPage.

  • The solid last quarter of 2020 in terms of leasing activity during the pandemic could not keep up with apartment construction in the vicinity.

  • Developers finished a whopping 7,289 new rental units in the last quarter of 2020, bringing 2020’s tally to more than 26,101 apartments added to the DFW market.

  • Occupancy levels decrease to a tremendous 95% because of the oversupply of apartments.

  • Entire quoted rents were also down a bit for 2020.

  • The loss was because of restrictions in urban Dallas neighborhoods. Prices came down 5% to 7% over the last twelve (12) months in the Intown Oak Lawn, Dallas, and Medical District communities, contrasting to the plateau to a bit of an increase in rents in the majority of the parts in the metro.

  • Tenants in the past who paid a premium to live in gated apartments convenient to entertainment sites and downtown complexes before the rise of the pandemic were more enticed to practical, economical, less dense locations farther out.

  • Average apartment rental in the area of DFW was pegged at $1,183 at the end of the year. This is practically down from levels in the second and third quarters of 2020 as per RealPage.

  • These rental figures comprise basic concessions a lot of landlords now offer to tenants of new units.

Construction forecast and data in 2021

  • As per RealPage, project-by-project information in terms of ongoing development showcases a total of 583,280 market-rate units under construction all over the United States’ 150 biggest metros by the end of 2020.

  • That figure is off its present peak by close to 100,000 units, reflecting that building began slowed during 2020.

  • But, scheduled completions in 2021 have overtaken the delivery total in 2020, given that a lot of the projects now underway are close to completion.

  • Deliverables by 2021 reached 403,644 units, up to about 17% from last year’s new supply figure of 344,380 apartment complexes.

  • It is anticipated that some of these projects will miss their scheduled completion dates. But that means that the present year’s new supply is likely to surpass last year’s tally by a minimal edge.

  • If the topic is about construction, the state of Texas will always play a major role in the talks.

  • DFW is still the United States apartment delivery king over the last ten (10) years or so by a significant margin.

  • Anticipated products on the way are pegged at 36,400 units.

  • Since starts slowed a bit in the year 2020, that’s the smallest block of ongoing construction that North Texas has been in the last five (5) years, but still possessing an aggressive building pace.

  • Apartments that are set to deliver this year are pegged at 28,500 units.

[1] ALN, 20+ units, excludes Senior and Student, Counties include Collin, Cooke, Dallas, Denton, Ellis, Hunt, Johnson, Kaufman, Parker, Tarrant, Wise
** vs. 6-months end of July

[2] Sources: ALN (rent-vacation) and CoStar (sales, 20+ units), Countries Collin, Cooke, Dallas, Denton, Ellis, Hunt, Johnson, Kaufmann, Parker, Tarrant, Wise

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