Brian O’Boyle: Dallas Multifamily Continues to Impress

Brian O'Boyle
Brian O’Boyle

North Texas continues to be the No. 1 market in the United States for multifamily development. From an investment standpoint, value-add deals are still the most sought after, as buyers are finding that thoughtful upgrades can lead to long-term results in profit and demand. In some cases, value-add opportunities are selling at cap rates below core assets, with many international equity sources playing an important role. Some of the most common international groups acquiring multifamily assets in Dallas-Fort Worth are from Hong Kong, the Middle East, and Canada.

The delta between owning and renting continues to widen. Approximately 43,000 apartment units are under construction across North Texas, and overall occupancy is remaining high, at 95 percent. Although MPF reported a slowdown in apartment leasing for the first quarter of 2016, there is no cause to hit the panic button. Long-term, DFW’s occupancy rates and absorption have remained among the strongest in the country.

The impact of the decline in the oil and gas sector has caused many Houston buyers to gravitate to other markets, with Dallas being one of the biggest beneficiaries of this shift. Nationally, DFW is showing up on more radar screens as the country sees the corporate relocations, low cost of living, and exceptional quality of life that North Texas has to offer.

In the high-rise market, there has been a lot of new delivery of multifamily communities where initial lease-up attempts are being met with much success. Some well-located communities are now seeing rent at more than $3 per square foot. It will be interesting to watch what happens as significant additional supply is delivered.

In suburban locations, it is not uncommon to see a number of deals setting new high-water marks as well, and I wouldn’t be surprised to see several sales at the $200,000 per unit level this year. Multifamily communities of the late-1970s through early-1980s-vintage are even reaching the $100,000-per-unit mark. Demand is strong, and although there is a lot of new supply in the pipeline, the metro area remains a very robust market in which to invest.

Brian O’Boyle Sr. is vice chairman of ARA, a Newmark company. Contact him at [email protected]