During the first three months of the year, renters absorbed 6,520 apartment units, the best quarterly demand performance seen since fall 2007. The number of occupied apartment climbed 9,970 units between March 2009 and March 2010.
MPF Research vice president Greg Willett attributes the improvement to the corresponding improvement in the local economy, along with a large influx of people who have moved to the Metroplex over the past several months.
"Despite the fact that Texas lost jobs last year, Dallas/Fort Worth had an in-migration of 100,000 people," Willett notes. "We continue to attract new households because the job prospects, and once we get in the upside of the cycle, the recovery will be comparatively fast. It doesn't ease the pain so far, but it does position us better moving ahead."
The apartment occupancy rate in Dallas/Fort Worth stood at 89.3 percent in March, up 0.5 points since December, but still 1.2 points below early 2009's performance. North Texas hasn't seen occupancy around the 94 percent mark, which represents a reasonably balanced market here, since the end of 2007.
Willett says apartment owners have had to make the choice between discounting rents and offering concessions to keep their properties full or suffering decreased occupancy. Effective rents slipped another 0.8 percent during 1st quarter, taking the annual drop in prices to 4.7 percent. The average monthly rent in North Texas is now $739.
Those rent change figures take into account the impact of concessions that are rampant in the market. Rent giveaways were offered for 61 percent of Dallas/Fort Worth's apartment product as of March, with the typical discount equaling five to six weeks of free rent. However, these types of concessions are commonplace during difficult economic periods, Willett tells GlobeSt. He forecasts that owners can expect rental rates to stabilize in 2011; however, meaningful rent growth is at least 18 months away.
That rental growth will be driven by decreasing vacancies and limited new supply. Interestingly, Dallas/Fort Worth is the last market to wrap up the current development cycle. Nearly 3,000 apartments came online during the first quarter, bringing the year-ending March total to 18,921 units. Total inventory reached 590,400 units.
Ongoing construction has been drawn down to 9,009 units, and about 80 percent of that future supply is scheduled to finish during the next six months. "Occupancy will tighten considerably in 2011 and 2012, but it will be at least three years until we reach the mid-90 percent range," Willett says. "That's still a ways off."
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