Multifamily’s Three Paths
The darling of commercial real estate continues to skip along happily. Hendricks-Berkadia senior director of research David Delich highlights three multifamily trends to continue all year. (As for us, we're happy Jersey Boys is coming to the big screen this summer.)
1) Apartments everywhere
David (left center, with his research team) says developers are active in both lower- and higher-priced submarkets. In contrast, builders are opting for pricier areas in Dallas-Fort Worth; they shy away from submarkets where rents are $750/month or less. Roughly one-half of all units under construction are in the Metroplex’s 10 priciest submarkets, with sub-marketwide asking rents ranging between $1,020 and $1,680/month. Both big and small builders are active in Texas, David says, with JLB Partners, Greystar, and Trammell Crow among the most active with a combined 21 projects and 7,400 units underway in DFW, Austin, and San Antonio.
2) Building in the ‘burbs
The majority of development is in the suburbs. In the Metroplex, more than 17,250 units are in the works in the outlying areas, and another 6,600 market-rate rentals are underway in the near-in submarkets, David tells us. Despite infill development constituting 30% to 40% of all units in development, these near-in submarkets represent a fraction of the overall market area. Based on the projects under construction, apartment inventory in centrally located submarkets will expand by 6.6%, compared to a 3.5% increase in suburban apartment stock.
3) Finding the finish line
Job creation is expected to persist well into 2016, David says. In 2013, DFW payroll grew by 98,700 jobs. Over the next two years, more than 235,000 new jobs are expected. Construction output is expected to peak in 2014, he says, and deliveries will be substantial in the DFW area this year as 12,600 units come online. Nevertheless, the 114,000 new hires during that same span will be even more significant and will help tamp down vacancy. (They move in as fast as you build 'em. Careful when laying foundation, as there may already be some residents down there getting a head start.)