Multi-Housing News - April 2009 - (Page 14)

Market Rent Growth 9.0% 8.0% 7.0% 6.0% Growth % US Texas D/FW Historical Vacancy 12.0% 10.0% 8.0% Vacancy % 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 6.0% 4.0% 2.0% 0.0% US Texas D/FW 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: REIS AT&T is the second largest employer in the MSA, so this will have some effect moving forward. While all industries are feeling the effects of current market conditions, Dallas/Ft. Worth’s distribution of jobs across a wide range of disciplines is favorable for the area. The positive household formation and a younger demographic combine to bode well for apartments in current and future years. According to M|PF Yieldstar, for 2008, apartment absorption finished in negative territory, with 5,580 move-outs—all in the fourth quarter—while the first three quarters were essentially flat, recording only 290 net move-ins. With this negative apartment absorption, revised job growth numbers surely will be lower than the initial estimates. Single-family building has fallen off by more than one-half from 12 months ago (driven by sales falling by more than two-thirds), but multifamily construction continues to see significant deliveries in 2009. As of March 1, 2009, more than 15,000 units were under construction in Dallas/Ft. Worth and scheduled for delivery through year-end. A drastic drop-off in starts should occur in 2010, as only 4,000 units appear to have secured construction financing. Looking ahead to 2011, the development pipeline may base at record-setting low levels not seen since the late 1980s. After these deals are delivered, though, a few years should follow with almost no new units brought to market. As developers put the brakes on pre-development, the gap in deliveries will allow current inventory to be absorbed and occupancy to tighten. This gap also will allow developers to revise plans and possibly develop new design characteristics—creating a new “A” class of product. In the late 1980s, the construction gap segregated the “A” product from the “B” product through the introduction of ninefoot ceilings. This time, either 10-foot ceilings, better soundproofing insulation, or the “green apartment” may define the new “A” product. If the job loss path continues and 2009 numbers are flat or worse, absorption of new units will be lackluster, at best. The new product coming on line will be heavily marketed and concession-driven, and rents will fall to a level that actually puts “heads on beds.” When rent growth vanished in fourth quarter 2008, falling slightly into negative territory, apartment communities offering concessions increased. This marks a change from the strong rent growth of about 4 percent annually for the previous eight quarters. Fourth quarter 2008 rent concessions increased 25 percent year-over- year, resulting in half of all properties offering concessions upon move-in. Other economic factors The North Texas region didn’t have the drastic run-up in home prices in recent years that other U.S. markets experienced, so the single-family market has held up relatively speaking, with only an 8 percent price decline. Pricing was also held in check by the drop in construction activity throughout the area. In addition, the condominium craze did not have a large market share of development. Failed condominium developments reverting to the rental pool were extremely limited, with our data showing four to five developments—fewer than 1,000 units—making the transition to rentals. For more information, visit www.multi-housingnews.com/productinfo 14 April 2009 | Multi-Housing News | Official Publication of Multi-Housing World http://mirrormatecommercial.com http://mirrormatecommercial.com http://www.multi-housingnews.com/productinfo

Table of Contents for the Digital Edition of Multi-Housing News - April 2009

Multi-Housing News - April 2009
Contents
From the Editor
Executive Insight: Sue Ansel
Finance: Fannie Mae & Freddie Mac
Quote of the Month
Market Forecast: Texas
Profile: Affordable Developers
Operations: Green Laundry Rooms
Technology: BIM
Kitchen & Bath: Tile Installation
Perspective: Doug Bibby, NMHC

Multi-Housing News - April 2009