MARKET INSIGHT REPORT FALL 2019 DALLAS-FORT WORTH TEXAS, MSA 2 DALLAS-FORT WORTH METRO MARKET INSIGHT REPORT

LABOR MARKET OVERVIEW

The Dallas-Fort Worth-Arlington metro area (DFW) expansions. Uber is looking to make Dallas its largest hub gained 115,100 jobs YoY ended June 2019, equating to outside of its San Francisco headquarters. While the a gain of 3.1%. This was up from 2.4% a year prior and Dallas-Plano-Irving area has been accelerating at a faster was the metro’s strongest performance since 2015. economic pace than the Fort Worth-Arlington side, The DFW unemployment rate fell to 3.3% in June from at 3.5% versus 2.1%, Fort Worth has made some recent 3.8% one year ago and was 40 basis points below the notable announcements. Chip 1 Exchange, an industry- national rate. leading global distributor of electronic components and peripherals, moved their U.S. headquarters and Driving recent growth, particularly in Dallas, is the logistics operations from Southern California to Fort boom in professional and business services, a sector Worth. In addition, Aeromax Industries, Inc., a leading significant in size that includes accountants, architects, manufacturer of parts and assemblies for military aircraft, management analysts, computer system designers, is relocating its headquarters from Canoga Park, CA to and lawyers. The sector accounts for 647,200 employed the Fort Worth area. Opening in 2020, Stanley Black & persons and increased 4.8% YoY through June. Decker is growing its U.S. manufacturing operations with Announced in August, Uber will open an office with 400 a new plant in North Fort Worth. The 425,000-square- employees in downtown Dallas by year end, with plans foot manufacturing plant will create 500 new jobs in the to staff to 3,000 employees through a series of planned AllianceTexas development near Interstate 35W.

DALLAS-FORT WORTH MSA EST. 7,675,425

EMPLOYMENT / UNEMPLOYMENT 3,810,100

3,695,000 +1.8% ANNUAL GROWTH 3,609,400 3,507,600 3,413,800

3,298,400 DALLAS-FORT WORTH MSA 3,186,100 3,098,900 3,066,200 3,019,600 3,018,400 2019 POPULATION 2,948,100 2,937,400 2,929,400

4,000,000 10.0% 3,500,000 8.0% EST. 3,000,000 6.0% $72,880 DALLAS-FORT WORTH MSA 2,500,000 4.0% MEDIAN HOUSEHOLD INCOME 2,000,000 2.0% '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 Total Employed Unemployment Rate 113.4 DALLAS-FORT WORTH MSA Source: Bureau of Labor. All annual figures through June. COST OF LIVING INDEX U.S. Avg. = 100.0 DALLAS-FORT WORTH METRO MARKET INSIGHT REPORT 3

DALLAS-PLANO-IRVING AVG. RENT $1,464 $886 RENTAL MARKET CLASS A CLASS B / C

Dallas-Plano-Irving market rent increased by 1.3% during the second quarter 6.7% 4.4% of 2019, and the YoY gain was 3.5%, with average rent increasing from $1,168 CLASS A AVG. CLASS B / C AVG. in 2Q 2018 to $1,227 in 2Q 2019. This advance extended the market’s run VACANCY VACANCY of gains to 38 quarters, during which asking rents have advanced by a total of 50.8%. The average apartment vacancy rate was 5.8% in June, up 60 basis points YoY. Class A properties realized an overall 4.2% increase for average rent over the same period, rising from $1,405 to $1,464 over the year ended FORT WORTH-ARLINGTON June, while B / C properties netted a 4.4% gain over the same period, rising AVG. RENT to a metro average of $886 by mid-year 2019.

$1,177 $813 Fort Worth-Arlington market rent increased by 1.7% during the second CLASS A CLASS B / C quarter of 2019, and the YoY gain was 5.0%, with average rent increasing from $964 in 2Q 2018 to $1,012 in 2Q 2019. This advance extended the market’s streak of gains to 37 quarters, during which asking rents have climbed by a total of 42.2%. The average apartment vacancy rate was 4.3% in June, up from 5.2% 3.2% 3.9% one year ago. Class A properties realized an overall 4.7% increase for CLASS A AVG. CLASS B / C AVG. VACANCY VACANCY average rent over the same period, rising from $1,124 to $1,177 over the year ended June, while B / C properties netted a 4.5% gain over the same period, rising to a metro average of $813 by mid-year 2019.

DALLAS-FORT WORTH MSA APARTMENT MARKET ASKING RENT COMPARISON AVERAGE RENT / VACANCY $2,000 $1,600 10.0% $1,500 9.0% $1,000 $1,400 $500 8.0% $1,200 $0 7.0% Studio 1 BR 2 BR 3 BR $1,000 6.0% Source: Reis, 2Q 2019 5.0% $800 4.0% ASKING RENT PSF $3.00 $600 3.0%

$2.00

$1.00 Dallas-Plano-Irving Average Rent Fort Worth-Arlington Average Rent $0.00 Dallas-Plano-Irving Average Vacancy Studio 1 BR 2 BR 3 BR Fort Worth-Arlington Average Vacancy Source: Reis, 2Q 2019

Dallas-Plano-Irving Fort Worth-Arlington Southwest U.S. Source: Reis, All annual figures year end, *Projected 4 DALLAS-FORT WORTH METRO SEMI-ANNUAL REPORT

SUBMARKET CONSTRUCTION

The city of Dallas’s most active apartment development areas are trendy urban redevelopment districts and include downtown Dallas, Uptown, and the emerging Deep Ellum neighborhood. Including these districts, 2,177 units were under construction in the Central area as a whole in August. The neighboring Oaklawn and East Dallas submarkets had a combined total of 2,961 apartment units under way. Overall the DFW’s most active AURA BLUFFVIEW submarkets are in Dallas’s northern suburbs, a leading area for corporate in-migration that has brought thousands of new jobs to Plano, Frisco, and In Northwest Dallas, a combined Richardson. With 4,630 market-rate units under way, the Plano / Allen / total of 1,164 market-rate McKinney submarket (including parts of Frisco) claims the highest under- apartments were under construction construction total. The Fort Worth-Arlington area will see 5,722 units complete as of June 2019. The largest of these construction in 2019, marking its highest annual total since 1999. developments, with 473 units, is the luxury Aura Bluffview complex For 2019, the Dallas area will see apartment inventory growth of 3.3%, at 3900 W. Northwest Highway. A while the Fort Worth area will net an increase of 2.2% to inventory. The Dallas November completion is expected. side of the metro will record a vacancy rate 190 basis points higher than the Trinsic Residential Group is the Fort Worth side by year end, at 6.1% as compared to 4.2%. developer. UNDER PLANNED / SUBMARKET COMPLETED CONSTRUCTION PROPOSED Garland 1,905 1,527 4,364 Southwest Dallas 1,027 384 767 Grand Prairie 1,000 745 1,795 North Irving 1,411 1,040 2,837 Far North 536 633 2,044 N White Rock 1,624 549 1,372 East Dallas 766 2,328 606 Richardson 2,246 871 2,404 Far Northwest 1,453 1,242 2,858 Carrolton / Addison / Coppell 1,235 1,291 558 Lewisville 945 2,802 3,056 Plano / Allen / McKinney 5,456 4,630 22,388 NW Denton County 3,310 1,058 4,723 Central Dallas 1,873 2,177 4,691 Northwest Fort Worth Region 2,008 1,624 3,882 Southwest Fort Worth Region 904 719 4,113 Northeast Fort Worth Region 619 1,152 3,551 Arlington 353 180 3,321

Source: Reis, 2Q 2019, *Completed Construction 1Q 2018 - 2Q 2019. DALLAS-FORT WORTH METRO SEMI-ANNUAL REPORT 5

Mid-Year Permit Volume PERMITS 11,957 17,287 MULTIFAMILY SINGLE FAMILY

Multifamily permitting across Dallas-Fort Worth TOTAL RESIDENTIAL BUILDING PERMITS suggests the beginning of a pull-back by developers, DALLAS-FORT WORTH METRO AREA with the mid-year total of 11,957 units permitted 70,000 running 16% below the same period one year 65,000 ago. Single-family housing permits were also off 60,000 55,000 37,670 10% from mid-year 2018. Developers appears 35,131

50,000 29,540 to be responding to apartment vacancy that is 30,283 45,000 expected to increase short-term, especially on the 40,000 22,898

Dallas side of the metro. 21,666

35,000 18,390 30,000 Fundamentals remain strong, however, and the 25,000 14,126

20,000 14,568

Dallas-Fort Worth metro population, now more 16,652 16,244 18,520 27,606 25,517 27,393 26,223 15,000 than 7.5 million, grew by nearly 132,000 people 10,000 from 2017 to 2018, marking a 1.8% increase. 5,000 This gain made DFW the fastest growing of any 0 metro area in the U.S. Over the past eight years, '10 '11 '12 '13 '14 '15 '16 '17 '18 '19* Dallas-Fort Worth has added more than 1 million Multifamily (5+ Units) Single Family (1-4 Units) people. Dallas-Plano-Irving includes Dallas, Collin, Denton and four other counties, and has Source: U.S. Census, *Through June, Multifamily Includes Condos a population of approximately 5.0 million, while Fort Worth-Arlington includes Tarrant, Johnson, Parker and three other counties and has DALLAS-FORT WORTH MSA APARTMENT MARKET COMPLETIONS / NET ABSORPTION

roughly 2.5 million people. 22,603 20,471 20,126 19,660 Sales volume for single-family housing across 17,624 16,701 DFW decreased 6.2% YoY in June from 10,384 16,605 14,677 14,231 14,226 13,955 transactions in June 2018 to 9,737 transactions 13,893

in June 2019. Year-to-date sales by end of June 11,936 10,767 reached a total of 49,842 closed listings and were

down nearly 1.0% YoY. The median sold price 7,211 6,207 5,240 rose 1.8% YoY from $279,900 to $285,000, while 5,138 the median price per square foot also rose from $130.50 to $133.10. The months inventory for single-unit residential housing rose from 2.9 to 3.4 months supply, and days to sell rose from 68 to 73.

'14 '15 '16 '17 '18 '19* '20* '21* '22* Completions Net Absorption Source: Reis. All figures are annual totals. *Projected 6 DALLAS-FORT WORTH METRO SEMI-ANNUAL REPORT

AVERAGE SALES

DFW apartment transaction sales volume as of mid-year 2019 surpassed $4.6 billion and is on pace to be in the range of annual totals of the past three years, between $9.5 to $10.1 billion. The transaction count was down from 193 trades of $2.5 million and above to 165 transactions for mid-year 2019. Unit count, however, was up slightly from a year ago. This inequity of lower transactions and higher units count was due to the sale of larger buildings thus far for 2019 than one year ago. The average price per unit set a new record high of $136,211 / unit YTD through June.

Institutional owners were net sellers for 2019 through June, at 22.8% of all transactions compared to 17.8% of purchases. But with new product being completed at a record pace, many developers have sold these assets once completed. Private owners were the top buyers through June, surging to 71% of all deals and marking their largest stake since 2009.

Class A assets in the northern suburbs typically range from $150,000 / unit to $200,000 / unit, while those in the urban areas now go for $200,000 / unit or more. The suburban 273-unit Grapevine Station changed hands in January 2019 for $52.0 million ($190,500 / unit), while the 422-unit 801 Las Co was sold to Pacific Life Insurance for $85.6 million ($202,900 / unit). Recorded as the second quarter’s largest sale, Intergerman Gardens of Valley Ranch LP paid Everwest Real Estate Investors $57.1 million ($124,185 / unit) in April for the 460-unit Gardens of Valley Ranch complex in Irving.

DALLAS-FORT WORTH MSA AVERAGE SALES PPU / CAP RATE $136,211 $129,636 $129,047 $114,552 $103,709 $92,705 $91,259 $160,000 9.0% $67,063 $65,672 $63,132 $62,408 $57,037 $56,536 $56,426 $53,279 $140,000 $53,174 8.5% $50,518 $120,000 $48,414 8.0% $100,000 7.5% $80,000 7.0% $60,000 6.5% $40,000 6.0% $20,000 5.5% $0 5.0%

$ / Unit Cap Rate Source: Real Capital Analytics. Based on sales of $2.5 million andgreater. *YTD through June $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0

7 38,086 '19*

$4.681B 83,137 '18 MID-YEAR SALES VOLUME MID-YEAR

95,215 '17

94,948 '16

97,198 '15

87,951 '14 SEMI-ANNUAL REPORT SEMI-ANNUAL

MARKET INSIGHT REPORT INSIGHT MARKET 82,154 '13

59,716 $ (Millions) Volume '12

46,476 '11 greater. *YTDthrough June 30

32,102 '10

16,023 '09 FORT WORTH METRO AREA METRO WORTH FORT - 38,364 '08 Total # Units APARTMENT SALES TRANSACTIONSAPARTMENT SALES DALLAS 71,657 '07

86,542 '06

66,674 '05

32,206 '04

25,994 '03

26,657 '02 0

40,000 20,000 60,000 80,000 Source: Real Capital Analytics. Based on sales of $2.5 and on of $2.5 million sales Based Analytics. Capital Real Source: 100,000 120,000

DALLAS-FORT WORTH METRO METRO WORTH DALLAS-FORT To learn more about Greystone Real Estate Advisors and our capabilities please visit www.greycoadvisors.com

ABRAHAM GARZA JORDON EMMOTT PETER KESH Founding Partner Founding Partner Associate 713.595.9582 713.595.9584 713.269.4380 [email protected] [email protected] [email protected]

CHARLES EMMOTT GREYSTONE NAA Associate 5909 W Loop S, Suite 650 713.818.2100 Houston, TX 77401 [email protected] www.naa-usa.com

Sources: Greystone, Reis, RealCapitalAnalytics, CoStar, U.S. Census, Bureau of Labor, Sperling’s, Censusreporter.org, Dallas News, Fort Worth Chamber of Commerce

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