DALLAS-While once Dallas' urban core was hot when it came to annual effective rent growth, as of August 2013, that figure dwindled to below the region's MSA average. According to statistics from locally based Axiometrics Inc., annual effective rent growth in Dallas' Oaklawn submarket was 1%, underperforming the MSA's 3.8% rate, and a definite drop from the 12.3% reported during August of 2011.
Axiometrics' researchers point out that the reason for the precipitous drop is due to a rise in construction due to the high effective rent growth from a couple of years ago. The researchers also state that occupancy has declined in the Oaklawn submarket. In August 2011, occupancy was 95.8%. In August 2013, it stood at 95.3%.
The forecast is for unit deliveries to ramp up in the MSA; though the Oaklawn submarket represents only 11% of the MSA's deliveries for 2013, the area accounts for about 29% of the 2014 scheduled deliveries.
As such, development will slow down until it's determined that the new supply can be absorbed. Other reasons for potential slowdown include increasing construction costs and interest rates. However, the Axiometrics researchers do point out that if job grown continues and developers are disciplined, new construction opportunities could open in 2015.
Dallas isn't alone when it comes to urban core effective rent growth weakening. Similar trends are being observed in Austin and Denver.
Nationally, annual effective rent growth dropped from 3.4% in July to 3.2% in August. The rate was 3.68% during August 2012.
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