Could Downtown Apartment Development Max Out?
There are 9,000 multifamily units in the pipeline in Downtown and Uptown, but skyrocketing land prices, rising construction costs and limited municipal incentives remaining could stifle future developments, says Metropolitan Capital Advisors founder Scott Lynn (second from the right, with colleagues Justin Laub, Brandon Wilhite, Todd McNeill and Sunny Sajnani last month). Scott tells us many projects underway are large, complex deals (which create barriers to entry). An example is the $170M redevelopment of 1401 Elm Street Tower in Downtown (rebranded as The Olympic). The 1960s-era 1.5M SF project received more than $50M in economic incentives from the City of Dallas for redevelopment into 500 Class-A apartments, along with commercial retail space. MCA served as the project finance advisor, and it should deliver in late 2016.
About one-third of the 27,000 new apartment deliveries across DFW are in the Uptown, Downtown and surrounding infill areas (where rents average $1,800 to $2,000/unit), Scott tells us. These new projects tend to be substantially pre-leased, often in excess of 30% with monthly absorption rates often double that of traditional suburban product. The products are being absorbed almost as quickly as they can be delivered, Scott says. There's another upside: plenty of other development opportunities in the infill submarkets such as retail, storage, medical, hospitality and service space, Scott tells us.
