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Apartment Demand Rallies in North Texas

Demand for apartments in Dallas/Fort Worth is getting back on track. During the first three months of the year, renters absorbed 6,520 apartment units, the best quarterly demand performance seen since fall 2007. The occupied apartment count climbed by 9,970 units between March 2009 and March 2010.

It appears that a stabilizing local economy is allowing apartment demand to pick up again. While the annual employment change numbers still look pretty bad, most of that loss actually occurred during 2009's first half. Stats for the past few individual months have been fairly steady.

The other big factor in rebounding demand is a sharp reduction in pricing. Effective rents slipped another 0.8 percent during 1st quarter, taking the annual drop in prices to 4.7 percent. Those rent change figures take into account the impact of concessions that are rampant in the market. Rent giveaways were offered for 61 percent of Dallas/Fort Worth's apartment product as of March, with the typical discount equaling five to six weeks of free rent.

Apartment owners are taking an especially big hit on rents in the 1990s-era properties, which are seeing residents move up to heavily-discounted brand new developments in initial lease-up. Still, since the first step in overall recovery is to generate enough demand to push occupancy up to healthier levels, the rent cuts are doing what they're supposed to do.

The apartment occupancy rate in Dallas/Fort Worth stood at 89.3 percent in March. That's up 0.5 points since December but still 1.2 points below early 2009's performance.

Construction reached completion on properties totaling 2,933 apartments during 1st quarter. Additions during the year-ending March totaled 18,921 units, topping Houston's new supply count by about 2,000 units to rank as the biggest block of completions anywhere in the country.

With very few properties started recently, ongoing construction has been drawn down to 9,009 units. About 80 percent of that future supply is scheduled to finish during the next six months.

Almost all of 2010's additions will be done in time to take advantage of the prime leasing season that runs through 2nd and 3rd quarters. With the end of the construction cycle in sight at the same time that demand is improving, everybody should be feeling lots better about the North Texas apartment market's prospects by the end of the year.

*Portions of data collected were collated utilizing property management systems, and various city, county, and state records.

Market Dynamics is an examination of key influences on the apartment industry by MPF Research, the industry's most trusted source of apartment market intelligence. To receive the latest Market Dynamics newsletter in your e-mail inbox, please click here to subscribe.

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