Eastwood tells GlobeSt.com that many people who purchased houses during the low interest rate will be unable to hold onto their homes and will be forced back into apartments. That dynamic, coupled with 1.8% forecasted job growth, leads him to believe that occupancy will tick up two to three points and concessions will start to clear out in most submarkets.
However, Eastwood doesn't believe that the recovery will be so strong that concessions will disappear completely. "Concessions are just really deep, and I can't see any reason the market will recover with enough vigor within one year to wipe them out," he notes. Apartment owners are now typically offering one month to three months free rent.
The Metroplex's vacancy rate remained relatively flat this year, according to Marcus & Millichap's most recent Apartment Market Report. During the first half of 2004, the vacancy rate increased half a percent, but will end the year at the 11.6%--the same level at year-end 2003.
In particular, Eastwood expects that the hard-hit Tech Corridor that encompasses Richardson/Plano submarkets will show the most improvement in 2005. The submarket will end this year at 9.8% vacant, down from 10.5% in 2003, according to Marcus & Millichap.
Despite the increasing occupancy and decreasing concessions, Eastwood doesn't expect rental rates to change at all in 2005. At $730 per month, the current average asking rent is flat compared to 2003. And, although Eastwood does not see new construction as an "imminent threat," more than 9,200 units were delivered this year, up from 6,700 units in 2003, according to Marcus & Millichap. During the first six months of 2005, developers are expected to complete 3,100 units, with about 30% of the units in Downtown, and Las Colinas will likely receive 1,000 more units by the second quarter of next year. Developers are planning to build another 1,800 units in the next few years.
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