Are 28,000 New Apartments Too Many?
Indeed, the current number of new multifamily units under construction across the Metroplex (in the land of apartments, the futon retailer is king) may well slow lease-up when the latest batch delivers, according to the experts Thursday at Bisnow’s fifth annual DFW Multifamily Summit.
More than 400 joined us for our event held at the Intercontinental Dallas. AMLI Residential has four communities in the works across DFW and EVP Taylor Bowen says it seems like everyone plans to deliver in Q1 ’15, which means lease-up will be more of a dogfight than the last wave of deliveries in 2011. (Get that marketing team off the futon, it's time to shine.) At that time, AMLI was absorbing 40 to 50 units a month with rent increases, too. Taylor’s not as optimistic this time around. Typically, rents increase 3.5%/month, but landlords may not hit that in ‘14 and ’15, he says.
The Uptown apartment market has expanded beyond that 25- to 35-year-old demographic to older renters who have sold their homes and want to live in these apartment with more amenities, says Behringer SVP/chief investment officer for multifamily funds Bob Poynter. (It will make for much more interesting elevator conversation.) Behringer has three development deals under construction across Dallas including two with Trammell Crow Co and one in Victory Park.
IPA Texas director Drew Kile (far right, with Milestone Apartments REIT COO Steve Lamberti, Bob, Taylor, and Embrey EVP of development John Kirk) says with all the new units under development, rents are a little slow to see increases. Plus, major projects like State Farm will spur support positions in retail and restaurants. Those people aren’t going into the new apartments, they’re moving in the Class-B and C, which is driving that space.
Steve (and our thirsty panelists) says higher job growth is predicted, but while some may intuitively think salaries are going up, too, that’s not necessarily the case. The Class-B market is offering zero concessions. He’s seeing a bump of $750 to $800/month rent for Class-B apartments; for tenants that means cutting back on other purchases (think new car, evening on the town, renting a truck to move to a cheaper building) so they can pay the rent. (As long as it doesn't affect Girl Scout Cookie sales, we should be fine.)
John says construction costs and labor issues slow projects down. Developers have to pay a premium to make sure they’re working with sub-contractors that are legit. Embrey is doing a lot of “gurban” deals with surface parking, interior corridors, and elevators for the multi-level deals. It’s a nice amenity and one that attracts an older demographic, he says. Most of Embrey’s renters are all about convenience so proximity to employment and grocery stores is key. (People haven't wanted to stay this close to home since they had to ride horses everywhere.)
We snapped event sponsor Bury’s Deren Wilcox and Robert Pilgrim (bookending Walton’s Matt Robinson and Phoenix Property’s Aaron Vampran). We learned Deren just returned from a family cruise. He tells us Bury’s full spectrum of services include civil engineering, MEP engineering, structural engineering, water and wastewater engineering, transportation and traffic engineering, landscape architecture, planning, project management/construction management, cost estimating, and surveying.
Event sponsor AUI/Centerpoint’s Tony Rader, Ashley Carter, and Dustin Stiffler tells us they have four student housing projects in the works with two in Houston, one in San Antonio, and Fayetteville, Ark. That’s 2,000 beds across more than 600 units.
We found the folks from another event sponsor, KeyBank Real Estate Capital, in the midst of the crowd. Here’s Jay Small, Bryan Kesman, Katie Thompson, and John Roberts. Jay tells us KeyBank is the fourth largest commercial servicer in the US and provides lending from soup to nuts, including in the multifamily arena.
We also snapped event sponsor Henry S Miller’s Doug Prude, Missy Hodges, and Monica James showing off their Team USA spirit. HSM hosted a World Cup watching party right after the event. (Psst, can we come over Tuesday for some pizza and big screen action again as the US men’s national team takes on Belgium?) Come back tomorrow for another day of event coverage. We won't tell anyone that you're watching the USMNT game. #webelieve