What exactly is our state of the industry? Well, as of January 9, 2018, we have a insight of what to expect for the coming year as all those who attended our annual AAGD-AATC SOI Luncheon. If you want some insight into what to expect, then keep reading!
AAGD-AATC State of the Industry (SOI) economic forecast panelists Jay Denton, Senior Vice President with Axiomatics; Jeff Price, Managing Director with JLL Capital; and Brian O’Boyle, Vice Chairman of ARA foresee a strong 2018 for the DFW multifamily industry.
Jay, Jeff, & Brian point out the multifamily industry contributes $25 billion to the Metroplex economy and supports more than 240,000 jobs throughout the region. Although there are numerous unknown factors, they anticipate DFW job creation to remain strong with a slight deceleration in job-growth rate.
The panelists predict decelerating occupancy in the 94% range, but occupancy depends on job and wage growth. Rent increases will continue with some areas of Dallas exceeding $3 per square foot and more than $2 per square foot in the suburbs. For comparison, $8 per square foot is the average in New York City. Most significant, they shared that Class C properties were the highest performing asset class the previous 18-months.
Brian, Jay, Jeff believe new apartment development will continue throughout DFW this year. Jeff, Jay, and Brian point out that development in the urban cores is rising with high-rise (8-stories or higher) stock increasing by more than 40% during this latest development-cycle, but, interestingly, more than 70% of apartment residents live in Metroplex suburbs.
These experts caution that new development means stabilized properties will be less aggressive on rent increases and must do a better job managing renewals. Increased supply also impacts the ability to lease higher-priced units. As expected, Jay, Jeff and Brian are concerned that supply does not outpace demand.
Apartment values and buyers are at all-time highs according to Brian, Jeff, & Jay. Apartment sales in 2017 were down 5%, but they expect 2018 sales to be strong. Investors can expect cap rates in the 4.5 to 5.5 range with C-deals at 6. They reminded us that onsite staff performance significantly impacts sales.
While there have been significant increases in foreign-capital and owner-managed properties, the clear majority of DFW multifamily properties continue to have third-party management.