Can Multifamily's Dominance Possibly Continue?
DFW has been one of the strongest apartment markets in the US over the past five years, but will it stay that way? We're excited to hear the answer from the experts at Bisnow’s Dallas Multifamily Boom event on June 23 starting at 7:30am at the Hotel Intercontinental. We grabbed a sneak peek of the event from two of the speakers.
Event keynote speaker, Axiometrics SVP Jay Denton, tells us he believes the DFW multifamily market will remain one of the best nationally during the next five years. Jay (doing his best Buddy Holly cosplay here with co-workers on staff "decade day") says current annual rent growth is 6% and the average occupancy rate in the Metroplex is 95.6%. DFW has been an area described as a high demand/high supply market, he says. That meant it would add a lot of jobs, but supply would keep rent growth rates in check and not allow it to be a top performer.
It’s certainly a high demand market, but supply is still in catch-up mode, even though there is more construction here than most other markets, he tells us. Whether someone is looking to buy or rent, there is very little vacant housing in DFW. Because vacancy is so tight, the new supply is being absorbed with little impact to existing stock, which is resulting in stronger rent growth than in the past, Jay says. Jay will be headed off with his family on a cruise to Mexico the day after the event.
Henry S. Miller Brokerage multifamily EVP Lew Wood (far right, with colleagues Darden Orand and Andrew Doster) is starting to see some hesitation by buyers and sellers, which may slow the pace of Class-A multifamily transactions. Lew, who will be speaking at Bisnow’s Multifamily Boom, says one Class-A multifamily deal he was marketing in Richardson (Parkside Towns, a 135-unit urban townhome project built in 2014) went out to about 100 potential buyers, but it took a 1031 buyer to create the perfect fit at a 5.5% cap rate. It was difficult to get the seller and a buyer to come together, Lew says, but it's set to close later this month.
Sellers want the higher price and extremely low cap rates, which is causing that small hiccup in the market, Lew says. Rental rates are still increasing and the market is strong, but there might be a general uneasiness, especially in regard to the cap rates buyers need to get a deal done, he says. Andrew says the more Class-A suburban properties will be in the 6 range with cap rates around 5 ¾% to 6 ¼%. Buyers (especially those from out of town) are accustomed to seeing sellers want sub-6s and 5s on those, especially on the two coasts, and these buyers will continue to acquire. Lew says new developments may have a harder time getting financing as banks and lenders already have so much money tied up in multifamily assets that they have to start diversifying their equity and debt investments. If Lew looks relaxed, he can attribute it to his recent jaunt to Telluride, where he took is wife, Sunny, (here with former President George H.W. Bush and Lew) to celebrate their 40th anniversary. Join us for the Dallas Multifamily Boom event on June 23 starting at 7:30am at the Hotel Intercontinental. Sign up here.
