Dallas High End MF Slowing down?

Question

D- Magazine with an article suggesting that the top end of the MF high end apartment market is in really bad shape from a pricing perspective.

I think this is an early sign that we are seeing the end of the boom in Dallas.  Especially in MF's

https://www.dmagazine.com/frontburner/2017/11/there-sure-are-a-lot-of-specials-on-uptowns-expensive-apartment-stock/

Paul Moore · Answer

So have any developers been building Class B MultiFamily?  Apartments that rent for a reasonable rate right out of the gate?   I wonder how those are performing... or would perform?    If these were coming out of the ground, they could compete with older Class B and be a real threat.  Thoughts?

David Thompson · Answer

@Mark Allen thanks for adding that additional perspective.  This clearly highlights risks in class A and accurately talks about pricing and salaries that need to catch up on new construction, not supply / demand for MF in general.  DFW continues to be a strong market for class B/C MF assets where rents are far more affordable for the continuing growth in population and jobs. The pricing comparison on rents for these posh units discussed in the article and B/C rents is not even in the same ballpark.

Bruce Lynn · Answer

Everyone 8 years ago gets the same data.....high growth, shortage of inventory, let's build....everyone jumps in at the same time and runs their numbers....stretches them a bit to meet cap rate goals and lender requirements and the BOOM is on.  Build Build Build....then it is like oh crap...who tied up all the cranes....where did all the bricklayers go....ut-oh....there are 30 high rises under construction....how the heck am I going to rent my $3000/month units to.   So we are back to 1 month free 2 months free....free car washes....free laundry....and we'll throw in a dog park too.

Bruce Lynn · Answer

B&B..... Boom and Bust...   better kick in some bucks for the Amazon HQ2 bribe.

Neil Aggarwal · Answer

Reality is finally dawning on people...

Account Closed · Answer

When you have the huge population increases we have in DFW it is going to be very difficult to not have some issues with keeping the supply in line with demand.

Collin County is expected to double in population from 1-1-2017 and 1-1-2030.

Since many of these projects are so large when they come online there will always be hicups.

Account Closed · Answer

I have been saying for months the construction of new units needed to slow.

I thought the population needed a little time to catch up.  It is almost impossible to absorb the volume that was being constructed.  If you do a 50 miles radius from Dallas we were probably about 100,000 new units. With more than 40,000 in the Metroplex proper.

People in other areas would be shocked if they saw our construction rates.

I know some of the small communities around here that are similar to the following...

10,000 population

200 homes being built a month.

400-1000 new apartments in development about to start construction.

While that number of apartments might be needed within the next 3 years it might take to years to absorb them.

It is the same in the high end areas.  If thousand of apartments come on line with 3 miles of each other all at the same time then it is going to be hard to maintain <4% vacancy rates.

Mike Dymski · Answer

I hear a lot of commentary about developers not building affordable B class apartments or that the costs of construction are too high to do so.  Not sure about DFW, but in my area, I see new construction in that space.  I have an OM in front of me right now with rents at $1.04 per SF.  IDK...you guys know more about this than I do.

Curt Riffel · Answer

The lenders are not lending right now for multifamily in the DFW area from what I understand and have not been for nearly a year. The excess inventory will burn off slowly and we will have 96% occupancy rates again in the near future. However the upper tier market is getting crammed down by the flood of new apartments coming online. There will likely be solid growth in the DFW MF space, and this may only be a setback for the really expensive units >$2500/mo. The price range of $1000 - $1500 should not experience any issues in a year's time and likely aren't now.

My concern is with increased rent concessions, it may be foretelling of an impending correction, slow-down, or recession.

Dallas High End MF Slowing down?

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