A Tale of Two Cities: Multifamily Growth in DFW and Houston
The forecasts for Dallas and Houston multifamily markets are trending in opposite directions according to local publications. The Houston outlook has turned bleak in comparison to the continued cautious optimism of the DFW market. The articles linked and referenced below provide the facts and figures which support these market sentiments.
Houston is set to deliver about 25,000 new multifamily units in 2016, but construction loans have come to a halt, and no new product is currently in the works for 2017 or 2018. The Houston Business Journal article indicates a grade of C and declining for the remainder of 2016 and beyond. This outlook is nothing new for Houston with the energy industry struggling for many months.
Conversely, more than 50,000 units are currently under construction in the DFW area. This is more than anywhere else in the country and accounts for about 10% of all apartments being built in the entire US. So far, occupancy (95%+) and rents (up 6% year over year) continue to indicate the market is still in expansion mode. Even so, the current global economic climate and lending issues give the multifamily sector cause for caution. According to MPF Research VP Greg Willet, “If the economy stumbles for any reason and there are 50,000 units on the way, that means a big correction.” I’ll say, but if demand stays strong and North Texas job creation continues, this could mean great payoffs for those who are able to bring more projects online.
I doubt anyone in either market is as optimistic now as they were a few years back. Even the most risk-prone investors in DFW are at least giving a closer look at optimizing current asset performance as much if not more than investing in new developments. This reality is addressed in our publication of Pain in the Asset Manager. Strategies for optimizing existing assets are covered in several chapters. These can be very helpful as Asset Managers and companies must slightly alter their focus to meet revenue targets and maintain asset values.