The sun continues to shine on the Dallas-Fort Worth multifamily market. In fact, ULI listed Dallas as its No. 1 investment market in the United States for 2016, a jump of four places when compared to last year’s rank. While domestic investors flock to the region, more international buyers have also taken an interest in our market, with groups from China, the Middle East, Germany, and South America all signing on the dotted line for Dallas real estate.
MPF shows we have 24,000 units in the pipeline that are scheduled to deliver by the end of the third quarter of 2016, projecting a 95.5 percent occupancy. These are the highest occupancy levels in 14 years. This pattern should continue, with 105,000 new jobs expected to be added to the workforce by the end of September 2016. Correspondingly, multifamily sales activity has also been strong—our office has sold more than $500 million in properties in the last 90 days alone. Broker pipelines of deals under contract are deep, as investor interest is intense. We have seen a slowdown in the amount of product that is currently on the market, which only deepens investor passion and competition.
Buyers are clamoring to find well-located suburban deals, especially in Plano and Frisco, proximate to the major corporate relocations, although infill locations are attracting attention, too. North Texas continues to grow, with redevelopment playing a major role.
For the first time in its history, Dallas has an active new multifamily segment—the high-rise market, with between 30 and 35 towers under development or planned for the area. It will be interesting to see the evolution of this new sector and the effects on the Dallas landscape. Also, the area south of the Trinity has been exploding with new multifamily developments, transforming the sector and serving as a positive catalyst to growth for Dallas as a whole.
Value-add deals continue to be among the most sought-after product type, with significant rental increase scenarios playing out over all classes. Pricing remains very aggressive, with cap rates for this product comparable to those on core deals. Some well-located class “B” properties are trading in the $80,000- to $100,000-per-unit range, whereas some class “C” deals are trading in the $60,000- to $80,000-per-unit range. This represents a significant price appreciation within the last year alone.
Job growth predictions remain strong for North Texas, and the region’s multifamily sector continues to be a great place to invest capital.
Brian O’Boyle Sr. is vice chairman of ARA, a Newmark Company. Contact him at [email protected].
