DFW Multifamily 2Q 2018 Marketview CBRE

MARKETVIEW

Dallas/Fort Worth Multifamily, Q2 2018 Demand boom surpasses high construction level: here’s why

94.6% $1.28 PSF 8,380 Units 6,061 Units 8,827 Units

*Arrows indicate trend from previous quarter. Figure 1: DFW Multifamily Market Units (000s) Occupancy Rate (%) 12 96.0

10 95.5 95.0 8 94.5 6 94.0 4 93.5 2 93.0

0 92.5

Q3 2015 Q3 Q2 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q1 2012 Q1 Starts Absorption Delivered Construction Occupancy Source: CBRE Research, Axiometrics, a RealPage Company Q2 2018.

Q2 2018 CBRE Research © 2018 CBRE, Inc. | 1 MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY Figure 2: Market Overview Weighted Under Net Absorption Delivered Submarket Property Count Unit Count Mthly Rent Occupancy (%) Construction Units Units ($/SF) Units CENTRAL East Dallas 49 10,467 1.55 93.3% 265 2,760 273 North White Rock 85 25,780 1.33 93.7% 423 847 397 Oaklawn 92 21,410 1.88 93.9% 710 3,154 678 South White Rock/I-30 40 9,882 1.09 95.9% 67 - - Central Total 266 67,539 1.50 94.0% 1,465 6,761 1,348 NORTH Collin County/Other 11 2,819 1.34 93.7% 104 - 38 Far North 107 31,606 1.28 94.6% 98 585 147 North 28 6,253 1.52 92.6% 535 857 345 Plano/Allen/McKinney 159 46,973 1.30 94.1% 1,091 7,360 891 Richardson 49 13,487 1.30 93.6% 391 1,758 257 North Total 354 101,138 1.31 94.1% 2,220 10,560 1,678 NORTHEAST Far Northeast 24 7,071 1.11 91.5% (82) - - Garland 64 12,777 1.16 95.3% 395 2,427 378 Hunt County 7 912 0.94 97.0% 45 13 39 Northeast Total 95 20,760 1.13 94.1% 359 2,440 417 EAST Kaufman County 5 1,105 1.23 93.4% (40) 272 - Rockwall County 6 1,288 1.37 94.0% 241 679 - East Total 11 2,393 1.31 93.7% 201 951 - SOUTHEAST Mesquite/Seagoville 31 7,981 1.13 95.9% 1 221 - Southeast Dallas 20 3,782 0.97 95.7% 41 - - Southeast Total 51 11,763 1.08 95.9% 42 221 - SOUTH Ellis County 21 2,611 1.17 97.4% 13 1,008 - South 7 1,674 0.98 92.5% 86 253 13 South County 28 5,953 1.14 95.4% 82 - 42 South Total 56 10,238 1.12 95.5% 180 1,261 55 SOUTHWEST Grand Prairie 23 5,303 1.15 95.7% 35 384 - Southwest Dallas 55 13,924 1.17 95.2% 349 1,361 177 Southwest Total 78 19,227 1.16 95.3% 384 1,745 177 WEST South Irving 20 4,140 1.17 95.9% 115 - - West Total 20 4,140 1.17 95.9% 115 - - NORTHWEST Carrollton/Addison/Coppell 98 26,934 1.28 94.8% 324 1,942 192 Denton County/Other 63 14,669 1.30 94.1% 635 3,204 586 Far Northwest/Farmers Branch 43 10,795 1.30 95.1% 32 2,428 - Lewisville 87 27,351 1.29 94.6% 160 580 176 North Irving 106 32,733 1.32 94.7% 376 2,380 267 Northwest 43 10,054 1.51 93.5% 226 1,414 117 Northwest Total 440 122,536 1.32 94.6% 1,753 11,948 1,338

NORTHEAST Grapevine 26 6,571 1.39 94.9% 176 732 222 Hurst/Bedford/Euless 77 17,339 1.21 95.8% 98 634 25 Northeast 71 17,300 1.19 95.0% 252 1,105 77 Tarrant County/Other 7 1,684 1.32 95.0% (0) - - Central Total 181 42,894 1.23 95.3% 526 2,471 324 EAST Central Arlington 61 10,839 1.09 95.3% 24 - - I-820 30 5,619 1.02 95.4% 154 - - North Arlington 110 26,863 1.22 94.8% 399 204 162 East Total 201 43,321 1.16 95.0% 577 204 162 SOUTH Southeast 68 15,895 1.22 95.5% 393 1,095 214 Johnson County 7 1,035 1.27 96.6% (7) 250 - Southwest 110 23,848 1.15 94.5% 213 1,517 144 South Total 185 40,778 1.18 95.0% 599 2,862 358 SOUTHWEST Hood County 1 134 1.06 100.0% 21 - - Southwest Total 1 134 1.06 100.0% 21 - - WEST Parker County 7 1,076 1.19 94.4% 28 - - West Total 7 1,076 1.19 94.4% 28 - - NORTHWEST Northwest 60 11,497 1.25 94.7% 360 3,048 204 Northwest Total 60 11,497 1.25 94.7% 360 3,048 204 DALLAS TOTAL 1,371 359,734 1.31 94.4% 6,718 35,887 5,013 FORT WORTH TOTAL 635 139,700 1.20 95.0% 2,109 8,585 1,048 DALLAS/FORT WORTH TOTAL 2,006 499,434 1.28 94.6% 8,827 44,472 6,061 Source: CBRE Research, Axiometrics, a RealPage Company, Q2 2018.

Figure 3: New Supply and Job Growth Deliveries (000s) Growth % 30 6 25 4 20 2 15 0 10 -2 5 -4

0 -6

1996 2011 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016 2017 2018 Deliveries Year to Date Total Yearly Deliveries Job Growth Rate % Source: CBRE Research, Axiometrics, a RealPage Company, Bureau of Labor Statistics, Q2 2018.

Figure 4: Deliveries Figure 5: Rent Growth Units (000s) Growth 9 8.00% 8 6.00% 7 4.00% 6 2.00% 5 0.00% 4 (2.00)% 3 (4.00)% 2 (6.00)% 1 (8.00)%

0 (10.00)%

1999 1998 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Q12016 Q32016 Q12017 Q32017 Q12018 Q32018 Q12019 Q32019

Deliveries Projected Deliveries Dallas Fort Worth

2019(projected) 2020(projected) Source: CBRE Research, Axiometrics, a RealPage Company , Q2 2018. Source: CBRE Research, Axiometrics, a RealPage Company, Q2 2018.

Figure 6: Select Sale Transactions

Property Units Year Built Address City Pearl on Frankford 582 1998 7421 Frankford Rd Dallas Churchill Estates 472 2010 8501 Lullwater Dr Dallas Bristol at Grapevine 376 1978 2400 Timberline Dr Grapevine

Edentree 360 1983 1721 E Frankford Rd Carrollton

Chestnut Ridge 352 1984 8951 Randol Mill Rd Fort Worth

Montevista 350 1998 5350 Bryant Irvin Rd Fort Worth

Avana McKinney Ranch 343 2008 5500 McKinney Place Dr McKinney

Bexley Lake Forest 334 2013 5201 Collin McKinney Pkwy McKinney

Highland Road Village 332 1965 2704 S Cockrell Hill Rd Dallas

Villas at Legacy 328 1999 5301 W Spring Creek Pkwy Plano

Source: CBRE Research, Real Capital Analytics, Q2 2018.

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Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. MARKETVIEW

Dallas/Fort Worth Multifamily, Q1 2018 Localized oversupply weakens rents, but permits decrease

94.21% $1.26 PSF 9,893 Units 6,532 Units 5,506 Units

*Arrows indicate trend from previous quarter. Figure 1: DFW Multifamily Market Units (000s) Occupancy Rate (%) 12 96.0

10 95.5 95.0 8 94.5 6 94.0 4 93.5 2 93.0

0 92.5

Q3 2015 Q3 2017 Q2 Q2 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q3 2017 Q4 2017 Q1 2018 Q1 2012 Q1 Starts Absorption Delivered Construction Occupancy Source: CBRE Research, Axiometrics, a RealPage Company Q1 2018.

Weighted Mthly Rent Submarket Property Count Unit Count Occupancy (%) Net Absorption Units Under Construction Units Delivered Units ($/SF)

CENTRAL East Dallas 48 10,357 1.54 93.3% 242 2,882 353

North White Rock 85 25,858 1.29 93.2% 540 1,185 583

Oaklawn 90 20,994 1.83 93.8% 638 3,543 561

South White Rock/I-30 40 9,882 1.07 95.4% 20 - -

Central Total 263 67,091 1.47 93.8% 1,439 7,610 1,497

NORTH Collin County/Other 11 2,819 1.29 92.4% 27 38 60

Far North 105 31,130 1.25 94.8% 193 389 100

North 29 6,543 1.51 91.4% 529 1,118 402

Plano/Allen/McKinney 157 46,108 1.29 93.7% 396 7,764 600

Richardson 48 13,399 1.27 92.9% 342 1,904 485

North Total 350 99,999 1.29 93.7% 1,487 11,213 1,647

NORTHEAST Far Northeast 25 7,317 1.10 92.2% (169) - -

Garland 62 12,374 1.15 95.1% 383 2,432 462

Hunt County 7 912 0.94 96.5% 135 17 51

Northeast Total 94 20,603 1.12 94.2% 349 2,449 513

EAST Kaufman County 5 1,105 1.25 95.1% (17) - -

Rockwall County 6 1,288 1.32 92.4% (14) 679 -

East Total 11 2,393 1.28 93.6% (31) 679 -

SOUTHEAST Mesquite/Seagoville 31 7,981 1.11 95.9% 37 - -

Southeast Dallas 20 3,782 0.94 95.2% 50 - -

Southeast Total 51 11,763 1.06 95.7% 87 - -

SOUTH Ellis County 21 2,611 1.14 97.1% (15) 225 -

South 7 1,674 0.94 91.8% 198 103 -

South County 28 5,954 1.12 94.9% 69 262 66

South Total 56 10,239 1.10 95.0% 252 590 66

SOUTHWEST Grand Prairie 23 5,302 1.12 95.3% 140 - 100

Southwest Dallas 53 13,354 1.15 94.7% 184 1,320 264

Southwest Total 76 18,656 1.14 94.9% 323 1,320 364

WEST South Irving 20 4,140 1.14 94.9% 20 - -

West Total 20 4,140 1.14 94.9% 20 - -

NORTHWEST Carrollton/Addison/Coppell 97 26,638 1.27 94.3% (224) 1,786 -

Denton County/Other 63 14,393 1.28 93.8% 161 3,272 441

Far Northwest/Farmers Branch 43 10,799 1.27 94.8% (78) 1,334 -

Lewisville 86 27,181 1.27 94.3% 57 308 216

North Irving 109 33,453 1.30 94.5% 203 2,070 266

Northwest 43 10,066 1.47 92.9% 130 848 169

Northwest Total 441 122,530 1.29 94.2% 249 9,618 1,092

NORTHEAST Grapevine 26 6,725 1.37 94.8% 96 976 99

Hurst/Bedford/Euless 77 17,390 1.18 95.3% 10 659 -

Northeast 70 17,049 1.17 94.2% 242 967 322

Tarrant County/Other 7 1,684 1.28 95.0% (8) - -

Central Total 180 42,848 1.21 94.7% 340 2,602 421

EAST Central Arlington 62 10,870 1.07 95.2% (26) - -

I-820 29 5,499 0.99 93.5% 65 - -

North Arlington 109 26,566 1.20 94.0% 176 328 200

East Total 200 42,935 1.14 94.3% 215 328 200

SOUTH Southeast 67 15,337 1.18 95.1% 408 896 354

Johnson County 7 1,035 1.21 96.9% 0 250 -

Southwest 107 22,951 1.13 94.4% 46 1,539 65

South Total 181 39,323 1.15 94.7% 455 2,685 419

SOUTHWEST Hood County 1 134 1.05 98.7% 32 - -

Southwest Total 1 134 1.05 98.7% 32 - -

WEST Parker County 7 1,076 1.17 92.9% (26) - -

West Total 7 1,076 1.17 92.9% (26) - -

NORTHWEST Northwest 59 11,378 1.23 93.9% 315 3,059 313

Northwest Total 59 11,378 1.23 93.9% 315 3,059 313 DALLAS TOTAL 1,362 357,414 1.29 94.1% 4,175 33,479 5,179 FORT WORTH TOTAL 628 137,694 1.17 94.5% 1,331 8,674 1,353 DALLAS/FORT WORTH TOTAL 1,990 495,108 1.26 94.2% 5,506 42,153 6,532 Source: CBRE Research, Axiometrics, a RealPage Company, Q1 2018.

Figure 3: New Supply and Job Growth Deliveries (000s) Growth % 30 6 25 4 20 2 15 0 10 -2 5 -4

0 -6

Figure 4: Deliveries Figure 5: Rent Growth Units (000s) Growth 9 8.00% 8 6.00% 7 4.00% 6 2.00% 5 0.00% 4 (2.00)% 3 (4.00)% 2 (6.00)% 1 (8.00)%

0 (10.00)%

2011 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016 2017 2018

Q12016 Q32016 Q12017 Q32017 Q12018 Q32018 Q12019 Q32019

Deliveries Projected Deliveries Dallas Fort Worth

2019(projected) 2020(projected) Source: CBRE Research, Axiometrics, a RealPage Company , Q1 2018. Source: CBRE Research, Axiometrics, a RealPage Company, Q1 2018.

Figure 6: Select Sale Transactions

Property Units Year Built Address City

St Marin 603 1999 1717 E Beltline Rd Coppell Legacy at Valley Ranch 504 1997 7902 N Macarthur Blvd Irving

Landmark at Sutherland Park 480 1983 3400 W Park Blvd Plano

Churchill on the Park 448 2000 7601 Churchill Way Dallas

Wimberly Park 440 1981 800 Link Dr Duncanville

Regal Crossing 385 1985 7575 Chaucer Pl Dallas

Bristol at Grapevine 376 1978 2400 Timberline Dr Grapevine

Carrington Park Apartments 364 1994 3001 Communications Pkwy Plano

Sovereign Preston Road 350 2017 9440 Stratton Dr Frisco

Sontera Palms 340 1977 9505 Royal Ln Dallas

Source: CBRE Research, Real Capital Analytics, Q1 2018.

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Dallas/Fort Worth Multifamily, Q4 2017 Absorption & occupancy take a seasonal dip as deliveries rise

94.49% $1.26 PSF 4,972 Units 6,981 Units 1,414 Units

*Arrows indicate trend from previous quarter. Figure 1: DFW Multifamily Market Units (000s) Occupancy Rate (%) 12 96.0

10 95.5 95.0 8 94.5 6 94.0 4 93.5 2 93.0

0 92.5

Q4 2013 Q4 Q1 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Starts Absorption Delivered Construction Occupancy Source: CBRE Research, Axiometrics, Q4 2017.

Q4 2017 CBRE Research © 2018 CBRE, Inc. | 1 MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY Figure 2: Market Overview Weighted Net Under Delivered Submarket Property Count Unit Count Mthly Rent Occupancy (%) Absorption Construction Units ($/SF) Units Units CENTRAL East Dallas 48 10,362 1.54 94.19 173 2,331 272 North White Rock 84 25,540 1.30 93.65 206 1,732 486 Oaklawn 85 19,939 1.83 93.99 407 3,911 686 South White Rock/I-30 40 10,102 1.08 94.21 -17 - 0 Central Total 257 65,943 1.46 93.92 769 7,974 1,444 NORTH Collin County/Other 10 2,597 1.26 93.19 -11 73 75 Far North 105 30,820 1.26 94.68 207 524 259 North 29 6,840 1.50 91.31 78 1,429 309 Plano/Allen/McKinney 154 44,742 1.29 94.16 188 6,725 729 Richardson 47 12,983 1.30 93.79 418 2,339 656 North Total 345 97,982 1.30 94.05 880 11,090 2,028 NORTHEAST Far Northeast 27 7,882 1.10 93.41 -164 - 0 Garland 58 11,980 1.14 95.18 128 2,344 316 Hunt County 7 912 0.94 94.85 23 44 66 Northeast Total 92 20,774 1.12 94.49 -13 2,388 382 EAST Kaufman County 5 1,105 1.26 95.81 -29 - 0 Rockwall County 6 1,288 1.37 93.10 -60 679 0 East Total 11 2,393 1.32 94.35 -89 679 0 SOUTHEAST Mesquite/Seagoville 31 7,981 1.10 95.59 33 - 0 Southeast Dallas 18 3,323 0.94 94.82 74 - 0 Southeast Total 49 11,304 1.05 95.36 107 - 0 SOUTH Ellis County 22 2,723 1.15 97.42 -1 - 0 South 7 1,674 0.94 89.70 -213 103 51 South County 28 5,954 1.12 94.98 -61 323 28 South Total 57 10,351 1.10 94.77 -274 426 79 SOUTHWEST Grand Prairie 24 5,430 1.10 95.08 54 - 150 Southwest Dallas 52 13,295 1.13 95.14 275 - 447 Southwest Total 76 18,725 1.12 95.12 330 - 597 WEST South Irving 18 3,740 1.13 94.42 -189 - 0 West Total 18 3,740 1.13 94.42 -189 - 0 NORTHWEST Carrollton/Addison/Coppell 100 27,123 1.27 95.01 -240 1,437 0 Denton County/Other 62 14,176 1.29 95.06 293 2,723 442 Far Northwest/Farmers Branch 44 11,096 1.27 95.44 -58 1,074 0 Lewisville 86 27,147 1.26 94.93 127 222 333 North Irving 111 34,268 1.30 94.77 80 2,294 365 Northwest 41 9,804 1.46 93.30 22 940 237 Northwest Total 444 123,614 1.29 94.83 225 8,690 1,377

NORTHEAST Grapevine 27 6,941 1.36 95.09 -23 993 0 Hurst/Bedford/Euless 75 17,351 1.18 95.12 -121 200 0 Northeast 69 17,081 1.17 94.45 23 869 247 Tarrant County/Other 7 1,684 1.29 95.36 -23 - 0 Central Total 178 43,057 1.21 94.86 -143 2,062 247 EAST Central Arlington 63 11,177 1.06 95.47 -3 - 0 I-820 31 5,999 0.97 92.77 -94 - 0 North Arlington 109 26,645 1.19 94.06 -114 200 153 East Total 203 43,821 1.13 94.24 -210 200 153 SOUTH Southeast 65 14,945 1.17 95.03 143 1,238 377 Johnson County 7 1,035 1.21 96.84 5 250 0 Southwest 107 22,266 1.11 94.47 -171 919 0 South Total 179 38,246 1.14 94.75 -23 2,407 377 SOUTHWEST Hood County 1 134 1.05 96.70 -53 - 0 Southwest Total 1 134 1.05 96.70 -53 - 0 WEST Parker County 7 1,076 1.18 94.33 -28 - 0 West Total 7 1,076 1.18 94.33 -28 - 0 NORTHWEST Northwest 56 10,796 1.22 94.36 127 2,876 297 Northwest Total 56 10,796 1.22 94.36 127 2,876 297 DALLAS TOTAL 1,349 354,826 1.29 94.45 1,745 31,247 5,907 FORT WORTH TOTAL 624 137,130 1.16 94.59 -331 7,545 1074 DALLAS/FORT WORTH TOTAL 1,973 491,956 1.26 94.49 1,414 38,792 6,981 Source: CBRE Research, Axiometrics, Q4 2017.

Figure 3: New Supply and Job Growth Units (000s) Growth (%) 30 6 25 4 20 2 15 0 10 -2 5 -4

- -6

2002 1996 1997 1998 1999 2000 2001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 New Supply Y-O-Y Job Growth Source: CBRE Research, Axiometrics, Bureau of Labor Statistics, Q4 2017. Figure 4: Deliveries Figure 5: Rent Growth Units (000s) Growth (%) 8% 9 6% 8 4% 7 2% 6 5 0% 4 -2% 3 -4% 2 -6% 1 -8%

0 -10%

2005 2012 1998 1999 2000 2001 2002 2003 2004 2006 2007 2008 2009 2010 2011 2013 2014 2015 2016 2017

Q12016 Q32016 Q12017 Q32017 Q12018 Q32018 Q12019 Q32019

Deliveries Projected Deliveries Dallas Fort Worth

2018(projected) 2019(projected) Source: CBRE Research, Axiometrics, Q4 2017. Source: CBRE Research, Axiometrics, Q4 2017.

Figure 6: Select Sale Transactions

Property Units Year Built Address City

Forest Cove 656 1981 9600 Forest Ln Dallas Neighborhoods at Cypress Waters 608 2014 3211 Scotch Creek Rd Dallas

Windhaven Park 474 1991 6201 Windhaven Pkwy Plano

Dawntree 400 1982 1834 E Peters Colony Rd Carrollton

3939 Rosemeade 390 1985 3939 Rosemeade Pkwy Dallas

Aura Cedar 387 2017 2924 Lucas Dr Dallas

Atera Apartments 380 1995 4606 Cedar Springs Rd Dallas

Highland Park West Lemmon Apartments 372 2009 3600 Wheeler St Dallas

Tschannen Estates 372 1969 8039 Chariot Dr Dallas

Hidden Creek 362 1999 1200 College Pkwy Lewisville

Source: CBRE Research, Real Capital Analytics, Q4 2017.

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Dallas/Fort Worth Multifamily, Q3 2017 Deliveries and starts see midyear gains; occupancy up 40 bps

Occupancy Rate Avg. Rental Rate Construction Starts Delivered Absorption 95.63% $1.20 PSF 7,175 Units 5,937 Units 5,631 Units

*Arrows indicate trend from previous quarter. Figure 1: DFW Multifamily Market Units (000s) Occupancy Rate (%) 12 96.0

Multifamily rental demand during the past 90 robust. Whether demand will be able to keep days in Dallas/Fort Worth fell slightly from a pace with supply and support occupancy and rent record-setting Q2 2017, but grew in comparison to growth remains to be seen, hinging on sustained last year’s Q3 2016 . Driven by job growth in the job growth in professional services and northern suburbs of Plano, Allen, McKinney and hospitality, or unexpected gains elsewhere such Richardson, Q3 2017 net absorption reached as transportation. With 8,722 units projected to 5,631 units across the total metro area. Deliveries be delivered in Q4 2017 and a total of 40,801 units in Q3 2017 increased to 5,937 units, balancing in the pipeline under construction, job growth with absorption to leave the occupancy rate stable needs to stay strong to balance supply. at 95.6%, slightly lower than the previous quarter. Through Q3 2017, the Metroplex claimed more Rents rose to a greater extent across Fort Worth blockbuster corporate arrivals, headlined by the than they did across the Dallas area, though both relocation of Toyota’s North American regions pushed the overall monthly rent up to headquarters to Plano. But the rate of corporate $1.20 per sq. ft. This continued to reflect strong relocations and expansions to North Texas is multifamily demand in the booming North beginning to taper which means the final tally for cluster, though Denton, Oak Lawn, and Northwest new payrolls during Q4 2017 may be slower in Fort Worth submarkets have also remained 2017 than highs seen in recent prior years.

Q3 2017 CBRE Research © 2017 CBRE, Inc. | 1 MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY Figure 2: Market Overview Weighted Under Net Absorption Delivered Submarket Property Count Unit Count Mthly Rent Occupancy (%) Construction Units Units ($/SF) Units CENTRAL East Dallas 46 10,089 1.57 94.55 356 2,268 306 North White Rock 85 25,324 1.32 94.27 245 1,665 348 Oaklawn 83 19,401 1.83 94.13 437 4,282 345 South White Rock/I-30 39 9,922 1.09 94.41 -79 - 0 Central Total 253 64,736 1.48 94.29 959 8,215 999 NORTH Collin County/Other 10 2,579 1.32 94.45 96 118 80 Far North 105 30,893 1.28 95.05 467 733 345 North 29 6,891 1.52 93.47 76 1,383 147 Plano/Allen/McKinney 157 45,693 1.32 94.66 1358 6,345 1,149 Richardson 44 12,689 1.30 94.13 863 2,788 725 North Total 345 98,745 1.32 94.63 2860 11,367 2446 NORTHEAST Far Northeast 27 7,725 1.08 94.89 -76 - 0 Garland 57 11,892 1.16 95.52 281 1,706 266 Hunt County 7 912 0.93 95.61 -13 87 89 Northeast Total 91 20,529 1.12 95.29 192 1,793 355 EAST Kaufman County 4 792 1.20 97.66 43 - 0 Rockwall County 6 1,288 1.46 96.19 7 447 0 East Total 10 2,080 1.36 96.75 50 447 0 SOUTHEAST Mesquite/Seagoville 31 7,981 1.09 95.31 -92 - 0 Southeast Dallas 19 3,531 0.93 93.66 -126 - 0 Southeast Total 50 11,512 1.04 94.80 -218 - 0 SOUTH Ellis County 20 2,489 1.16 97.32 -17 - 0 South 7 1,674 0.97 92.28 -36 205 0 South County 28 5,944 1.10 95.73 -89 111 0 South Total 55 10,107 1.09 95.55 -142 316 0 SOUTHWEST Grand Prairie 24 5,430 1.12 95.65 -90 150 0 Southwest Dallas 53 13,555 1.12 95.33 55 1,770 96 Southwest Total 77 18,985 1.12 95.42 -35 1,920 96 WEST South Irving 20 4,506 1.13 94.47 -115 - 0 West Total 20 4,506 1.13 94.47 -115 - 0 NORTHWEST Carrollton/Addison/Coppell 101 27,455 1.28 95.80 41 1,437 0 Denton County/Other 60 13,278 1.31 95.29 817 3,039 507 Far Northwest/Farmers Branch 42 10,484 1.26 95.96 -23 888 0 Lewisville 87 27,423 1.27 95.17 401 624 255 North Irving 112 35,077 1.32 95.25 249 1,683 352 Northwest 40 9,458 1.49 94.32 196 797 183 Northwest Total 442 123,175 1.31 95.35 1681 8,468 1297

NORTHEAST Grapevine 27 6,941 1.39 95.46 -29 704 0 Hurst/Bedford/Euless 76 17,259 1.19 95.79 -15 - 0 Northeast 69 17,045 1.17 95.14 57 1,087 119 Tarrant County/Other 6 1,594 1.30 96.42 29 - 0 Central Total 178 42,839 1.22 95.50 42 1,791 119 EAST Central Arlington 64 11,425 1.06 95.47 -90 - 0 I-820 32 6,272 0.97 93.78 -102 - 0 North Arlington 109 26,691 1.19 94.83 21 392 119 East Total 205 44,388 1.13 94.85 -171 392 119 SOUTH Southeast 66 15,317 1.17 95.39 38 1,816 119 Johnson County 7 1,070 1.17 96.72 9 250 0 Southwest 109 22,951 1.10 95.19 -9 975 87 South Total 182 39,338 1.13 95.31 38 3,041 206 SOUTHWEST Hood County 1 134 1.05 100.00 59 - 0 Southwest Total 1 134 1.05 100.00 59 - 0 WEST Parker County 7 1,076 1.15 95.89 -30 - 0 West Total 7 1,076 1.15 95.89 -30 - 0 NORTHWEST Northwest 57 10,982 1.24 94.93 461 3,051 300 Northwest Total 57 10,982 1.24 94.93 461 3,051 300 DALLAS TOTAL 1,343 354,375 1.22 95.17 5,232 32,526 5,193 FORT WORTH TOTAL 353 75,981 1.17 96.08 756 7,725 764 DALLAS/FORT WORTH TOTAL 1,696 430,356 1.20 95.63 5,988 40,251 5,957 Source: CBRE Research, Axiometrics, Q3 2017.

Figure 3: New Supply and Job Growth Units (000s) Growth (%) 25 6 20 4 2 15 0 10 -2 5 -4 - -6 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

New Supply Y-O-Y Job Growth 2017 YTD Source: CBRE Research, Moody’s Analytics, Q3 2017. Figure 4: Deliveries Figure 5: Rent Growth Units (000s) Growth (%) 9 3 8 2 7 1 6 0 5 -1 4 3 -2 2 -3 1 -4 0 -5 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 2016 Q3 2016 Q1 2017 Q3 2017 Q1 2018 Q3 2018 Q1 2019 Q3 2019 Deliveries Projected Deliveries Dallas Fort Worth Source: CBRE Research, Axiometrics, Q3 2017. Source: CBRE Research, Axiometrics, Q3 2017.

Figure 6: Select Sale Transactions

Property Units Year Built Address City

Sierra Park 656 1984 11611 Ferguson Rd Dallas Silverbrook I&II 642 1983 2934 Alouette Dr Grand Prarie

Verandahs at Cliffside 538 1986 1705 NE Green Oaks Blvd Arlington

Hyde Park at Valley Ranch 524 1985 10201 N McArthur Blvd Irving

The Link Apartments 514 1971 9450 Forest Springs Dr Dallas

Preston Hollow Village 512 2017 Walnut Hill Ln Dallas

Mercer Crossing I & II 509 2014 11700 Luna Rd Dallas

Legacy At Valley Ranch 504 1999 7902 N Macarthur Blvd Irving

Eagle Crest Apartment Homes 495 1982 4013 W Northgate Dr Irving

Village Oaks 488 1972 3550 E Overton Dallas

Source: CBRE Research, Real Capital Analytics, Q3 2017.

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Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

E. Michelle Miller To learn more about CBRE Research, Research Operations Manager or to access additional research reports, [email protected] please visit the Global Research Gateway at www.cbre.com/research-and-reports. Edward Tszeng Research Coordinator [email protected]

Dallas/Fort Worth Multifamily, Q2 2017 Slowing deliveries see higher occupancy, new renter move-ins

Occupancy Rate Avg. Rental Rate Construction Starts Delivered Absorption 95.70% $1.17 PSF 3,469 Units 4,659 Units 9,659 Units

*Arrows indicate trend from previous quarter. Figure 1: DFW Multifamily Market Units (000s) Occupancy Rate (%) 12 96.0

10 95.5 95.0 8 94.5 6 94.0 4 93.5 2 93.0 0 92.5 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Starts Absorption Delivered Construction Occupancy Source: CBRE Research, Axiometrics, Q2 2017. As both construction starts and deliveries per month, respectively – both reflecting strong experience a decline, absorption registered nearly multifamily demand for each area. The two a three-fold increase in Q2 2017. Construction metro divisions average a $1.17 per sq. ft./month starts dropped nearly 5,000 units from the prior rental rate for the combined multifamily DFW quarter and deliveries went from more than 7,100 market. units in Q1 2017 to just shy of 4,700 in Q2 2017. The North cluster of Dallas had the strongest So far this year, 11,822 units came online combined absorption of nearly 3,000 units during throughout the Metroplex and the area will see the past 90 days with Plano/Allen/McKinney alone over 38,000 units through the end of 2019. Year- contributing over 1,600 units. On the Fort Worth to-date job growth measured a 3.2% increase, the side, the Southwest submarket witnessed demand third highest in the past 17 years. The pipeline of 510 units, making it higher than any other dynamic led to a 70-basis-point (bps) rise in individual submarket in Tarrant County. Lastly, occupancy, resulting in 95.7% at midyear. Oaklawn in Central Dallas scored the highest Breaking it down further, Fort Worth holds a rents at $1.82 per sq. ft./month followed by East 95.9% occupancy while Dallas is at a 95.6% rate. Dallas at $1.55 per sq. ft./month. With the DFW area maintaining high occupancy Interestingly, every submarket in DFW recorded rates, Dallas rents overall are $1.21 per sq. an overall occupancy north of 92% during the ft./month and Fort Worth at $1.13 per sq. ft. midyear reporting period.

Weighted Mthly Net Absorption Under Construction Figure 2: MarketSubmarket Overview Property Count Unit Count Occupancy (%) Delivered Units Rent ($/SF) Units Units CENTRAL East Dallas 44 9,489 1.55 94.61 460 2,938 412 North White Rock 78 24,184 1.33 94.90 383 2,301 466 Oaklawn 82 19,158 1.82 93.77 951 4,345 925 South White Rock/I-30 38 9,398 1.08 95.35 84 - - Central Total 242 62,229 1.48 94.66 1,878 9,584 1,803 NORTH Collin County/Other 10 2,597 1.34 94.25 136 158 - Far North 98 28,879 1.26 94.92 503 1,496 522 North 28 6,795 1.47 94.08 88 1,253 - Plano/Allen/McKinney 151 44,134 1.30 94.44 1,635 7,735 1,532 Richardson 43 12,182 1.27 94.08 568 4,076 634 North Total 330 94,587 1.30 94.35 2,930 14,718 2,688 NORTHEAST Far Northeast 25 7,296 1.07 95.41 25 - - Garland 50 10,452 1.16 95.67 159 2,072 120 Hunt County 5 621 0.94 98.20 63 176 75 Northeast Total 80 18,369 1.12 96.43 248 2,248 195 EAST Kaufman County 3 584 1.21 98.30 19 - - Rockwall County 6 1,288 1.40 95.82 38 447 - East Total 9 1,872 1.34 97.06 57 447 - SOUTHEAST Mesquite/Seagoville 30 7,645 1.11 95.90 90 - - Southeast Dallas 16 2,957 0.94 95.17 95 - - Southeast Total 46 10,602 1.06 95.54 185 - - SOUTH Ellis County 18 2,209 1.15 97.60 23 - - South 7 1,674 0.99 92.66 71 102 - South County 25 5,500 1.10 96.67 66 111 - South Total 50 9,383 1.09 95.64 160 213 - SOUTHWEST Grand Prairie 20 4,612 1.11 96.67 194 150 - Southwest Dallas 50 13,025 1.11 95.71 184 1,651 178 Southwest Total 70 17,637 1.11 96.19 378 1,801 178 WEST South Irving 14 3,286 1.14 95.44 13 - - West Total 14 3,286 1.14 95.44 13 - - NORTHWEST Carrollton/Addison/Coppell 99 26,791 1.26 95.71 88 1,052 - Denton County/Other 58 13,237 1.30 94.86 728 3,226 539 Far Northwest/Farmers Branch 39 9,973 1.27 95.90 95 424 33 Lewisville 81 25,397 1.25 94.89 239 1,530 257 North Irving 99 31,714 1.31 95.56 249 2,235 248 Northwest 37 9,009 1.46 94.69 354 1,467 361 Northwest Total 413 116,121 1.29 95.27 1,752 9,934 1,438

NORTHEAST Grapevine 25 6,353 1.37 96.17 343 704 - Hurst/Bedford/Euless 68 15,600 1.20 95.93 82 - - Northeast 69 17,045 1.15 95.74 69 940 40 Tarrant County/Other 6 1,594 1.27 95.04 45 - 30 Central Total 168 40,592 1.21 95.72 539 1,644 70 EAST Central Arlington 61 10,492 1.04 96.25 125 - - I-820 27 5,338 0.96 94.68 -28 - - North Arlington 103 24,675 1.17 95.28 209 671 159 East Total 191 40,505 1.11 95.40 306 671 - SOUTH Southeast 6 918 1.20 95.77 269 250 - Johnson County 63 14,165 1.15 95.96 15 1,390 104 Southwest 108 22,878 1.09 95.49 510 933 278 South Total 177 37,961 1.12 95.74 794 2,573 382 SOUTHWEST Hood County 1 134 1.03 96.30 53 - - Southwest Total 1 134 1.03 96.30 53 - - WEST Parker County 7 1,076 1.13 97.55 19 - - West Total 7 1,076 1.13 97.55 19 - - NORTHWEST Northwest 55 10,729 1.21 94.43 380 2,359 321 Northwest Total 55 10,729 1.21 94.43 380 2,359 321 DALLAS TOTAL 1,254 334,086 1.21 95.55 7,601 23,474 4,251 FORT WORTH TOTAL 599 130,997 1.13 95.86 2,091 4,215 408 DALLAS/FORT WORTH TOTAL 1,853 465,083 1.17 95.70 9,692 27,689 4,659 Source: CBRE Research, Axiometrics, Q2 2017.

Figure 3: New Supply and Job Growth Units (000s) Growth (%) 25 6 20 4 2 15 0 10 -2 5 -4 - -6 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

New Supply Y-O-Y Job Growth 2017 YTD Source: CBRE Research, Moody’s Analytics, Q2 2017. Figure 4: Deliveries Figure 5: Rent Growth Units (000s) Growth (%) 9 1.0 8 0.5 7 0.0 6 -0.5 5 -1.0 4 3 -1.5 2 -2.0 1 -2.5 0 -3.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Deliveries Projected Deliveries Dallas Fort Worth Source: CBRE Research, Axiometrics, Q2 2017. Source: CBRE Research, Axiometrics, Q2 2017.

Figure 6: Select Sale Transactions

Property Units Year Built Address City

Mandolin 486 2001 2525 Hwy 360 Euless Benton Pointe 456 1999 205 Benton Drive Allen

Northrock of Lake Highlands 362 2015 6808 Skillman Dallas

Forum at Denton Station 348 2009 201 Inman Street Denton

Maple District Lofts 342 2016 5415 Maple Avenue Dallas

Alta Market Central 300 2016 3700 Mapleshade Lane Plano

Lansbrook at Twin Creeks 288 2002 505 Benton Drive Allen

Dominion Town Center 276 2003 1300 Keller Parkway Keller

Lot A 233 2015 1250 State Street Richardson

The Davis Building 183 1926 1309 Main Street Dallas

Source: CBRE Research, Real Capital Analytics, Q2 2017.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

Dallas/Fort Worth Multifamily, Q1 2017 Growing pipeline brings flux to Dallas/Fort Worth

Occupancy Rate Avg. Rental Rate Construction Starts Delivered Absorption 94.7% $1.23 PSF 7,161 Units 7,163 Units 3,934 Units

*Arrows indicate trend from previous quarter. Figure 1: DFW Multifamily Market Units (000s) Occupancy Rate (%) 8 96.0 7 95.5 6 95.0 5 94.5 4 94.0 3 2 93.5 1 93.0 0 92.5 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Starts Absorption Delivered Construction Occupancy Source: CBRE Research, Axiometrics, Q1 2017.

Apartment analysts and developers remain amount of Class A product being added to the optimistic that continued job growth in DFW will market. In Fort Worth, rents grew 40 bps to $1.14 mitigate the additional supply. Dallas/Fort Worth per sq. ft., an annual growth rate of 5.4%. delivered 7,163 units in Q1 2017, down slightly Construction starts totaled 7,151 units, a 49.6% from last quarter which set a market record. increase over Q1 2016 starts. Gross absorption for Plano/Allen/McKinney reported the highest levels Q1 2017 was 3,934 units with Plano/Allen/ of new supply at 1,486 units, making it the most McKinney, Oaklawn, and Carrollton/Addison/ active submarket in DFW this quarter. North Coppell submarkets leading the way. Texas is second only to New York City in apartment deliveries scheduled for 2017, DFW posted the highest population growth in the according to Axiometrics. U.S., adding 143,435 new residents in 2016. DFW also showed robust employment gains with 4.0% With the arrival of these deliveries, occupancy has year-over-year growth through January 2017, slumped under 95.0% for the first time since Q1 which was second only to Orlando which 2015. Properties in lease-up continue to offer expanded employment by an impressive 4.6%. concessions including one -month of free rent. In DFW continues to attract corporate relocations Dallas, overall effective rent increased 20 basis and job seekers due to its south central location points (bps) to $1.27 per sq. ft., largely due to the and pro-business environment.

Q1 2017 CBRE Research © 2017 CBRE, Inc. | 1 MARKETVIEW DALLAS/FORT WORTH MULTIFAMILY Figure 2: Market Overview Property Unit Mthly Rent Occupancy Under Delivered Units Submarket Count Count ($/SF/Mth) (%) Construction Units Absorbed DALLAS CENTRAL East Dallas 47 10,125 1.53 93.8 3,043 219 25 North White Rock 86 25,979 1.26 94.9 2,777 715 217 Oaklawn 86 19,783 1.79 93.7 4,940 736 492 South White Rock/I-30 38 9,398 1.06 94.8 59 Total 257 65,285 1.43 94.3 10,760 1,670 793 NORTH Collin County/Other 10 2,597 1.27 91.7 158 Far North 111 32,737 1.25 94.8 1,742 261 111 North 27 6,587 1.41 94.0 1,257 143 136 Plano/Allen/McKinney 160 47,054 1.29 94.2 7,998 1,486 595 Richardson 44 12,422 1.25 93.8 4,257 571 146 Total 352 10,1397 1.28 94.3 15,412 2,461 988 NORTHEAST Far Northeast 26 7,474 1.05 95.0 Garland 53 11,590 1.12 95.4 1,148 138 244 Hunt County 5 621 0.92 98.3 176 132 Total 84 19,685 1.09 95.4 1,324 270 244 EAST Kaufman County 3 584 1.18 97.5 62 123 Rockwall County 6 1,288 1.37 93.9 447 Total 9 1,872 1.31 95.0 447 62 123 SOUTHEAST Mesquite/Seagoville 33 8,188 1.08 95.0 Southeast Dallas 16 3,125 0.91 93.9 Total 49 11,313 1.03 94.7 SOUTH Ellis County 18 2,209 1.13 97.0 South 8 2,034 0.98 92.6 102 39 South County 25 5,500 1.07 96.0 Total 51 9,743 1.07 95.5 102 39 SOUTHWEST Grand Prairie 21 4,727 1.09 96.3 150 Southwest Dallas 50 13,065 1.09 95.7 2,003 324 120 Total 71 17,792 1.09 95.9 2,153 324 120 WEST South Irving 16 4,030 1.11 95.0 Total 16 4,030 1.11 95.0 NORTHWEST Carrollton/Addison/Coppell 106 28,779 1.24 95.0 818 Denton County/Other 60 13,789 1.26 94.2 4,124 613 447 Far Northwest/Farmers Branch 39 9,973 1.24 95.4 1,289 99 141 Lewisville 89 28,015 1.23 94.8 1,952 248 262 North Irving 105 33,619 1.27 94.6 2,170 113 233 Northwest 36 8,952 1.45 94.7 1,424 356 170 Total 435 123,127 1.26 94.8 11,777 1,429 1,253 FORT WORTH NORTHEAST Grapevine 27 6,917 1.34 95.8 1,172 Hurst/Bedford/Euless 73 16,770 1.18 95.3 Northeast 75 18,734 1.13 95.5 759 113 46 Tarrant County/Other 6 1,594 1.26 94.1 90 45 33 Total 181 44,015 1.19 95.4 2,021 158 79 EAST Central Arlington 63 11,184 1.04 95.4 244 1 I-820 29 5,558 0.93 94.6 North Arlington 112 27,728 1.15 94.8 671 53 4 Total 204 44,470 1.10 94.9 915 53 5 SOUTH Southeast 69 16,315 1.13 95.1 1,545 206 160 Johnson County 6 918 1.18 95.2 Southwest 113 24,468 1.08 94.4 1,138 397 118 Total 188 41,701 1.11 94.7 2,683 603 278 SOUTHWEST Hood County 1 134 0.98 93.0 Total 1 134 0.98 93.0 WEST Parker County 7 1,076 1.11 96.5 Total 7 1,076 1.11 96.5 NORTHWEST Northwest 60 11,810 1.21 94.0 1,809 133 12 Total 60 11,810 1.21 94.0 1,809 133 12 DALLAS TOTAL 1,324 354,244 1.27 94.7 23,474 6,216 3,560 FORT WORTH TOTAL 641 143,206 1.14 94.9 4,215 947 374 DALLAS/FORT WORTH TOTAL 1,965 497,450 1.23 94.7 27,689 7,163 3,934 Source: CBRE Research, Axiometrics, Q1 2017.

Figure 3: New Supply and Job Growth Units (000s) Growth (%) 25 6 20 4 2 15 0 10 -2 5 -4 - -6 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

New Supply Y-O-Y Job Growth 2017 YTD Source: CBRE Research, Moody’s Analytics, Q1 2017. Figure 4: Deliveries Figure 5: Rent Growth Units (000s) Growth (%) 9 3.0 8 2.0 7 1.0 6 0.0 5 -1.0 4 -2.0 3 -3.0 2 -4.0 1 -5.0 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Deliveries Projected Deliveries Dallas Fort Worth Source: CBRE Research, Axiometrics, Q1 2017. Source: CBRE Research, Axiometrics, Q1 2017.

Figure 6: Select Sale Transactions

Property Units Year Built Address City

Mandolin 486 2001 2525 Hwy 360 Euless Benton Pointe 456 1999 205 Benton Drive Allen

Northrock of Lake Highlands 362 2015 6808 Skillman Dallas

Forum at Denton Station 348 2009 201 Inman Street Denton

Maple District Lofts 342 2016 5415 Maple Avenue Dallas

Alta Market Central 300 2016 3700 Mapleshade Lane Plano

Lansbrook at Twin Creeks 288 2002 505 Benton Drive Allen

Dominion Town Center 276 2003 1300 Keller Parkway Keller

Lot A 233 2015 1250 State Street Richardson

The Davis Building 183 1926 1309 Main Street Dallas

Source: CBRE Research, Real Capital Analytics, Q1 2017.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

E. Michelle Miller To learn more about CBRE Research, Research Operations Manager or to access additional research reports, [email protected] please visit the Global Research Gateway at www.cbre.com/research-and-reports. Robert Siddall Research Coordinator +1 214 979 6589 [email protected]

Dallas/Fort Worth Multifamily, Q4 2016 High construction numbers disrupt DFW apartment metrics

Vacancy Rate Under Construction Net Absorption Completions 4.8% 4,683 Units 3,180 Units 6,499 Units

*Arrows indicate change from previous quarter. Figure 1: DFW Multifamily Market Units (000s) Occupancy Rate 8 96.0% 7 95.5% 6 95.0% 5 4 94.5% 3 94.0% 2 93.5% 1 0 93.0% Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Under Construction Absorption Delivered Construction Occupancy Source: Axiometrics, CBRE Research, Q4 2016.

POPULATION GAINS DRIVE DEMAND • Delivered units swelled by 23% to hit a new record The key market indicators of occupancy, of 6,499 completions during the final quarter. • In the past 180 days, deliveries exceeded the 5,000 absorption and construction slowed as supply unit threshold with the Denton, Oaklawn, and catches up to demand. However, sustained Plano/Allen/McKinney submarkets accounting for population growth coupled with the dearth of 44% of them. affordable single–family homes translate into a • Absorption balanced out to 3,180 units in Q4 2016 positive demand rental outlook across DFW, with Plano/Allen/McKinney leading the way with especially in the North Central Expressway 471 units freshly occupied. • Under construction continued to swing with 33% less corridor. For developers this means that the rise units underway than in Q3 2016. in construction costs, along with higher equity • Metroplex vacancy increased to 4.8%, rising40 basis requirements, will begin to put a burden on point (bps) over Q3 2016. future starts, stabilizing the construction pipeline • Class A properties had the sharpest effective rent but only for a short time: DFW’s residential decline, stumbling 1.7% with Oaklawn home to the population is expected to increase 9.0% by 2021, highest average rents at $1.55 per sq. ft. equating to one new person in DFW every 4.3 minutes.

Figure 2: Deliveries FINAL DELIVERIES GROW AS CONSTRUCTION TAPERS According to Axiometrics, 18,476 multifamily units Units (000s) 10 were delivered in 2016, a 4% increase over 2015 deliveries. In Q4 2016, 6,499 units were completed 8 marking the highest quarter for deliveries on 6 record. Of the delivered units in DFW, 1,332 units were in the Plano/Allen/McKinney submarket, 4 bringing the submarket total to 2,933 units 2 delivered in 2016. This marks the most active submarket for multifamily development in 2016. 0 One of the major projects is the 284-unit Jefferson

2018 Stonebriar by JPI , which delivered 213 units in Q4

Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 2016. Columbus Realty Partners made a major play Deliveries Projected Deliveries in this submarket as well, with the 311-unit Grand at Legacy West that delivered 186 units in Q4 2016. Source: Axiometrics, CBRE Research, Q4 2016.

Figure 3: Avg. Effective Rent Dallas will see the largest volume of new $ per sq. ft. 1.75 apartments of any metro with 24,258 units planning to deliver in 2017. Despite this record, the pipeline is expected to slow in the second half of 1.50 2017 as the urban skyline begins to take a different shape. It remains to be seen what developers will 1.25 do in response to high construction costs and tightening financing requirements looking ahead. 1.00

OCCUPANCY STALLS AS DEMAND HITS A SPEED BUMP 0.75 Demand for rental units slowed as absorption Class A Class B Class C Class A Class B Class C lagged behind deliveries with 3,180 units absorbed in Q4 2016 compared to 4,077 units in Q3 2016. In Dallas Fort Worth Dallas, overall effective rent decreased by 0.9% from $1.28 per sq. ft. in Q3 2016 to $1.27 per sq. ft. Source: Axiometrics, CBRE Research, Q4 2016. Class A rents also decreased over this time to $1.58 Figure 4: Occupancy Rate per sq. ft., a 1.7% decrease over last quarter and the largest decline of all property classes in DFW. % Occupied The effective rent growth in Dallas for 2016 rose 96.0 4.0% in total, compared to 2.6% nationally. The 95.5 effective rent in Fort Worth remained relatively 95.0 stable at $1.16 per sq. ft. in Q4 2016, finishing the 94.5 year at 5.7% rental rate growth. 94.0 93.5 Occupancy in Dallas decreased 40 basis points to 93.0 95.1% in Q4 2016, which is down 20 bps from a 92.5 year ago. In Fort Worth, occupancy decreased 20 92.0 bps, bringing it to within 10 bps of 2015 occupancy

2011 2012 2013 2014 2015 levels. The occupancy rates of Dallas and Fort Dallas Fort Worth Q4 2016 Worth were both above the national average of 94.7% at year-end 2016. Source: Axiometrics, CBRE Research, Q4 2016.

4 10,000 3

2 5,000 1

0 0 2010 2011 2012 2013 2014 2015 2016 Absorption Y-o-Y Job Growth Source: Texas Workforce Commission, CBRE Research, Q4 2016.

TEXAS’ HUB FOR STATE JOB CREATION homes has caused the gap to widen between As a result of the economic diversity surrounding buying and renting for North Texans. the DFW market, the metro area continued to According to the U.S. Bureau of Labor Statistics, experience a high demand for apartment units nonfarm payrolls in DFW increased 3.4% year- which has helped stabilized the increased supply over-year, coming in just shy of 3.6 million jobs levels. Newly constructed properties have begun to at the close of Q4 2016. Unemployment dipped offer concessions of up to one month free upfront to 4.1% and 3.2% in Dallas and Fort Worth, to entice potential renters. respectively, while the national unemployment rate ended the year at 4.6%. The robust pipeline in DFW is likely in response to tight single-family market conditions where DFW residents are a strong consumer force months of inventory has stayed near record lows, with a median household income estimated at while the average sale price has hit $295,000, $61,644 annually. According to Moody’s according to The Real Estate Center at Texas A&M Analytics, personal income growth is expected University. North Texas home sales swelled in to rise 5.0% in 2017, bolstered by favorable December, increasing by 8.7% from a year earlier. migration trends and close proximity to several Driven by the speculative interest rate hikes in the major corporate headquarters. year ahead, the record low supply of single-family

Figure 6: Unemployment and Jobs Unemployment Rate (%) Job Count (M) 10 4 9 8 7 6 5 3 4 3 2 1 0 2 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Total DFW Jobs U.S. Texas DFW Source: Moody’s Analytics, CBRE Research, Q4 2016.

METROPLEX MULTIFAMILY INVESTMENT MARKET According to Real Capital Analytics (RCA), DFW Many lenders and developers continue to favor multifamily sales volume grew 25% and totaled multifamily product in DFW as historic market $3.1 billion from 119 transactions in Q4 2016. fundamentals persist in one of the country’s most Total sales volume in 2016 reached $9.31 billion, a dynamic multifamily markets. 16% increase over 2015 as private and capital investors continue to target DFW as a safe haven The outlook for the DFW multifamily market is for their next investment. robust going into 2017. Fueled by a diverse local economy and incoming corporate relocations, Average infill/urban stabilized cap rates in DFW DFW is consistently a leader for employment were steady across the board. Class A property cap growth in the state of Texas, reinforcing rates remained between the ranges of 4.25% to multifamily demand. Furthermore, the 4.75%. Class B properties held at 5.00% to 6.00% constricted single-family housing market should and Class C properties stand at 6.00% to 6.50%. continue to push multifamily demand forward, In suburban areas, average stabilized cap rates keeping net absorption above new supply levels ranged from 4.75% to 5.25% for Class A properties. for the foreseeable future. Class B properties remained at 5.50% to 6.50%, and Class C properties are now 6.25% to 6.75%.

Figure 7: Q4 2016 Major Transactions

Property Units Address City

Post Addison Circle 1,334 5009 Addison Cir Addison

Ilume Apartments 632 4123 Cedar Springs Rd Dallas

Gardens at Vail 580 17811 Vail St Irving

The Oaks of Valley Ranch 530 9519 Valley Ranch Pkwy E Irving

Providence in the Park 524 1601 W Arbrook Arlington

Post Uptown Village I/II 496 2121 Routh St Dallas

The Phoenix 449 555 E Mockingbird Ln Dallas

Post Eastside 435 1801 N Greenville Ave Richardson

Franciscan Of Arlington 418 3006 Franciscan Dr Arlington

Standard at CityLine Phase 1 403 1125 E Renner Rd Richardson

Park Central V & VI 387 7800 Banner Dr Dallas

Post Legacy 384 5741 Martin Rd Plano

Overlook at Bear Creek 350 800 E Ash Ln Euless

Waterford Court 196 14700 Marsh Ln Addison

Loft + Row 180 2110 N Peak St Dallas

Source: CBRE Research, Real Capital Analytics, Q4 2016.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

E. Michelle Miller To learn more about CBRE Research, Research Operations Manager or to access additional research reports, [email protected] please visit the Global Research Gateway at www.cbre.com/research-and-reports. Robert Siddall Research Coordinator +1 214 979 6589 [email protected]

Dallas/Fort Worth Multifamily, Q3 2016 DFW relocations and employment growth help mitigate oversupply

Vacancy Rate Under Construction Net Absorption Completions 4.4% 7,020 Units 4,077 Units 5,299 Units

*Arrows indicate change from previous quarter. Figure 1: DFW Multifamily Market

Units (000s) Occupancy Rate 8 96.0% 7 95.5% 6 95.0% 5 4 94.5% 3 94.0% 2 93.5% 1 0 93.0% Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Under Construction Absorption Delivered Construction Occupancy Source: Axiometrics, CBRE Research, Q3 2016.

POPULATION GAINS DRIVE DEMAND • Under construction hit a record high with 7,020 THROUGH 2016 units in Q3 2016. • Year-to-date absorption totaled 10,466 units in Pull factors ranging from a prime U.S. central DFW with the Oaklawn submarket leading the way location to world-class cultural amenities have all with1,806 units absorbed. contributed to making the DFW Metroplex a • For the first time, delivered units exceeded the standout destination for corporate relocations. 5,000-unit threshold in Q3 2016, with the majority The population in DFW is estimated to have of new product coming from the Denton, Oaklawn, grown by 9.9% since 2010 and is expected to and Plano submarkets. • The effective rent in Fort Worth grew 1.8% quarter- reach 7.7 million people, or another 9.0%, by over-quarter while Dallas increased at a modest 2021. The three key market indicators; 1.3% over that same time, marking three occupancy, absorption, and under construction consecutive quarters of positive rent growth. have remained strong and are expected to hold • The total occupancy rate for the Metroplex fell steady throughout the rest of the year. Population slightly to 95.6%, showing a decline of 17 bps from growth and the limited amount of affordable Q2 2016. single–family homes are expected to maintain a stable pool of renters in DFW.

Figure 2: Deliveries Units (000s) RECORD SETTING SUPPLY 10 According to Axiometrics, 12,141 apartment units have been delivered year-to-date. In Q3 2016, 5,299 8 units were delivered marking the largest delivered 6 units in the last three years. Of the delivered units in DFW, 19% were located in the Oaklawn 4 submarket, bringing the submarket total to 1,967 2 units delivered year-to-date. Moreover, 65% of this Oaklawn construction pipeline consists of high- 0 rise or high-rise conversion projects.

2018 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Dallas will see the largest volume of new Deliveries Projected Deliveries apartments of any metro with 24,258 units Source: Axiometrics, CBRE Research, Q3 2016. planning to deliver in 2017. Despite this record, the Figure 3: Avg. Effective Rent pipeline is expected to slow near the end of 2017 as $ per sq. ft. the urban skyline begins to take a different shape. 1.75 It remains to be seen what developers will do in response to high construction costs and tightening 1.50 financing requirements looking forward.

1.25 DEMAND KEEPS PACE Demand for rental units remained robust as 4,077 1.00 units were absorbed in Q3 2016, compared to 3,677 units in Q2 2016, according to Axiometrics. The U.S. Census Bureau reports that 14,551 multifamily 0.75 Class A Class B Class C Class A Class B Class C housing permits were issued in DFW year-to-date, which is on pace with last year’s count. In Dallas, effective rent increased 1.3% from $1.26 Fort Worth Dallas to $1.28 per sq. ft. Class A rents rose further to $1.61 per sq. ft., a 2.8% increase over last quarter Source: Axiometrics, CBRE Research, Q3 2016. and 12.7% higher than Class A rents in Fort Worth. Figure 4: Occupancy Rate % Occupied OCCUPANCY STILL HIGH DESPITE DROP 96.0 Occupancy in Dallas decreased 17 basis points 95.5 (bps) to 95.6% in Q3 2016, which is down 10 bps 95.0 from a year ago. Class B occupancy in Dallas 94.5 remained the highest at 94.5%, 150 bps higher 94.0 then Class A, and 16 bps higher than Class C. 93.5 In Fort Worth the market's occupancy rate remained flat at 95.7% between quarters, which is 93.0 above the national average of 95.1%, but down 10 92.5 bps from Q3 2015. Class B properties in Fort Worth 92.0 have the best occupancy in DFW at 95.2%, a full 66

2011 2012 2013 2014 2015 bps above Class B units in Dallas. Dallas Fort Worth Q3 2016

Source: Axiometrics, CBRE Research, Q3 2016.

Units (000s) % Job Growth 16 5 14 4 12 10 3 8 6 2 4 1 2 0 0 2010 2011 2012 2013 2014 2015 2016 YTD Absorption Y-o-Y Job Growth Source: Texas Workforce Commission, CBRE Research, Q3 2016.

DFW: TEXAS’ HUB FOR JOB CREATION As a result of DFW’s economic diversity, the prices climb to over $285,000, according to the metro area continued to experience a high Texas A&M Real Estate Center. Many lenders and demand for apartment space as new units developers continue to favor multifamily product continue to be absorbed. Newly constructed in DFW as strong economic fundamentals persist properties in lease-up are offering concessions of in DFW. one month’s rent free upfront on average. By offering concessions, properties in particularly According to the U.S. Bureau of Labor Statistics, active submarkets such as Oaklawn, Plano, nonfarm payrolls in DFW increased 3.2% year- Lewisville, and Denton can attract and retain over-year, coming in at 3,511,500 total jobs at the tenants in hopes of reaching stabilization sooner. end of Q3 2016. DFW residents are a strong The number of units in the pipeline continues to consumer force with a median household income grow as 54% more units are under construction estimated at $61,800 annually. According to now compared to this time last year. The robust Moody’s Analytics, personal income growth is pipeline is likely in response to single-family expected to rise to 3.6% in 2016, bolstered by market conditions where months inventory has favorable migration trends and close proximity to compressed to record lows, while average sale several major corporate headquarters.

Figure 6: Unemployment and Jobs Unemployment Rate (%) Job Count (M) 10 4 9 8 7 6 5 3 4 3 2 1 0 2 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Total DFW Jobs U.S. Texas DFW Source: Moody’s Analytics, CBRE Research, Q3 2016.

DFW INVESTMENT MARKET REMAINS STRONG AS CAP RATES REMAIN STABLE According to Real Capital Analytics (RCA), DFW The outlook for the DFW multifamily market is sales volume grew 7.0% and totaled $8.3 billion in robust going into 2017. Fueled by a diverse local transactions year-to-date. In Q3 2016, there were economy and incoming corporate relocations, $2.3 billion in transactions, or an average of DFW is consistently a leader for employment $132,728 per unit, a 51% increase from Q2 2016. growth in the nation and the state, which should Average infill/urban stabilized cap rates in DFW continue to bolster multifamily demand. were steady across the board. Class A property cap Furthermore, the constricted single family housing rates remained in the ranges of 4.25% to 4.75%. market should continue to push multifamily Class B properties held at 5.00% to 6.00% and demand forward, keeping net absorption above Class C properties stood at 6.00% to 6.50%. In new supply levels over time. suburban areas, average stabilized cap rates ranged from 4.75% to 5.25% for Class A properties. Unchanged from last quarter, Class B properties remained at 5.50% to 6.50%, and Class C properties compressed 25 bps to a range of 6.25% to 6.75%.

Figure 7: Q3 2016 Major Transactions

Property Units Address City

Chapel Hill 1,183 300 E Round Grove Rd Lewisville

Cirque 252 2500 N Houston St Dallas

Fountain Pointe Las Colinas 386 5225 Las Colinas Blvd Irving

Gallery at Turtle Creek 352 3427 Cedar Springs Rd Dallas

Lakewood Flats 435 7425 La Vista Dr Dallas

Marabella at Las Colinas 416 4701-4805 N O’Connor Rd Irving

Orion Lake Ray Hubbard 334 1650 S John King Blvd Rockwall

Pavilions at Pebble View & Vantage Point 636 9001 Markville Rd Dallas

Residences at the Collection 312 4025 Huffines Blvd Carrollton

Santa Rosa at Las Colinas 476 2900 W Royal Ln Irving

Sixteen50 at Lake Ray Hubbard 334 1650 S John King Blvd Rockwall

The Avenue on Fairmount 368 4210 Fairmount St Dallas

The Grand Estates of McKinney 453 2580 Collin McKinney Pkwy McKinney

The Mansions by the Lake 416 2050 FM 423 Little Elm

Verandas at Cityview 314 7301 Oakmont Blvd Fort Worth

Source: Real Capital Analytics, CBRE Research, Q3 2016.

CONTACTS CBRE OFFICES

Robert C. Kramp CBRE Dallas Director, Research & Analysis 2100 McKinney Ave., Suite 700 [email protected] Dallas, TX 75201

E. Michelle Miller To learn more about CBRE Research, Research Operations Manager or to access additional research reports, [email protected] please visit the Global Research Gateway at www.cbre.com/research-and-reports. Robert Siddall Research Coordinator +1 214 979 6589 [email protected]

Dallas / Fort Worth Multifamily, Q2 2016 Urban markets grabbing headlines; suburban markets gaining renters

Vacancy Rate Under Construction Completions Net Absorption 6.7% 27,689 Units 4,659 Units 5,112 Units

*Arrows indicate change from previous quarter. . A lot of reporting has been seen on DFW’s urban multifamily renaissance over the past few months and Figure 1: Net Absorption Dallas it’s understandable: more than 6,022 multifamily units Units are under construction in Dallas’s Uptown/Downtown 2,850 area, 21.7% of all apartment construction in the metro. 2,350 Moreover, 65% of the Uptown/Downtown construction pipeline consists of high-rise or high-rise conversion 1,850 projects. Dallas has yet to become a high-rise market, 1,350 but by 2019, Big D will boast a much different skyline. 850 . Still, looking at the renter demand, North Dallas, Central Dallas and North Dallas saw more than 5,191 350 new move-ins (about 29 per day) during the first half of (150) the year which means there is hefty Metroplex renter demand for multiple types of multifamily product. East Dallas North Dallas South Dallas Central Dallas Northeast Dallas Southeast Dallas Northwest Dallas Southwest Dallas . The multifamily construction pipeline swelled to a new Q1 Q2 record in the second quarter 2016 to over 27,689 units, Source: CBRE Research, Q2 2016. the highest level recorded by CBRE’s tracking of the Metroplex market, as it remains a compelling one for Figure 2: Net Absorption Fort Worth multifamily developers. The current inventory cycle Units 1,000 indicates that despite such a robust pipeline, the sheer inertia of the metro’s new jobs rate, where employers 800 added 129,100 payrolls in the second quarter alone, still leans towards brisk lease-up schedules for leasing 600 agents as these units deliver. 400

. Class A occupancy increased for the first time in over 200 two quarters even though new product was delivered and entered the lease up stage but at 89% occupied, is 0 only 110 bps off from this period last year. On the other (200) hand, the newer more expensive product is pushing up the group average where DFW’s Class A rents increased $0.03 per sq. ft. to $1.51 per sq. ft. which is 21.9% East Ft. Worth West Ft. Worth West South Ft. Worth South Ft. higher than Class B and 36% higher than Class C. Central Ft. Worth Northeast Ft. Worth Ft. Northeast Northwest Ft. Worth Northwest Southwest Ft. Worth Southwest Ft. Q1 Q2 Source: CBRE Research, Q2 2016.

Figure 3: Market Overview

Net Under New Construction Property Unit Mthly Rent Occupancy Absorption Construction Delivered Submarket Count Count ($/SF) (%) Units Units Units DALLAS MARKETS CENTRAL Downtown Dallas/ West End/ Deep Ellum 49 10,336 1.53 84.8 387 1,446 590 Uptown/ Oaklawn/ Highland Park 140 29,999 1.75 88.1 881 4,576 369 East Central Dallas/ Lower Greenville Ave 49 5,508 1.44 94.9 103 974 - White Rock Lake/ Tenison Park 69 15,131 0.99 94.9 175 - - North Central Dallas/ Upper Greenville Ave 99 26,702 1.33 89.8 98 2,435 - Skillman St/ I-635 94 25,819 1.02 93.3 86 540 - Central Total 500 113,495 1.35 90.6 1,730 9,971 959 EAST Far East Dallas 19 3,280 1.08 96.8 2 - - East Total 19 3,280 1.08 96.8 2 - - NORTHEAST Garland 94 15,672 1.03 95.4 (136) - - Northeast Total 94 15,672 1.03 95.4 (136) - - NORTH North Dallas/ Addison 111 30,426 1.23 95.2 311 1,282 - Far North Dallas/ Collin County 78 24,522 1.24 95.4 (182) - - East Plano/ Richardson 84 22,742 1.26 90.9 422 1,957 299 West Plano/ Frisco 153 48,198 1.32 91.1 604 5,016 1,655 Allen/ McKinney 66 16,826 1.22 91.4 314 1.207 - North Total 492 142,714 1.26 92.7 1,469 8,136 1,954 NORTHWEST East Irving 57 7,538 0.95 96.3 (15) - - West Irving 81 18,299 1.09 95.1 (82) - - Las Colinas/ Valley Ranch/ Coppell 76 27,512 1.33 92.9 149 1,557 - Northwest Dallas/ Bachman Lake 61 11,451 1.00 96.2 37 575 - Carrollton/ Farmers Branch 114 27,724 1.21 93.0 192 - 731 Lewisville 71 20,983 1.21 94.4 281 242 358 Denton 62 12,274 1.12 94.9 (59) - - Northwest Total 522 125,781 1.17 94.2 503 2,374 1,089 SOUTHEAST Southeast Dallas/ Mesquite 101 21,783 0.94 94.5 (76) 419 - Southeast Total 101 21,783 0.94 94.5 (76) 419 - SOUTH South Oak Cliff 63 13,081 0.83 91.8 (40) - - Duncanville/ DeSoto/ Cedar Hill/ Lancaster 90 19,870 0.96 94.7 141 - - Far South Dallas/ Waxahachie 24 3,007 1.02 96.9 (17) - - South Total 177 35,958 0.92 93.8 84 - - Trinity Groves/ Oak Cliff North 37 6,132 1.17 94.0 122 1,001 - SOUTHWEST Grand Prairie 51 11,516 1.06 94.4 111 551 249 Southwest Total 88 17,648 2.24 94.3 233 1,552 249 FORT WORTH MARKETS CENTRAL Downtown Ft Worth/ TCU 55 9,954 1.43 91.3 306 2,104 - Central Total 55 9,954 1.43 91.3 306 2,104 - EAST East Ft Worth/ Woodhaven/ I-30E 68 12,536 0.86 90.3 46 - - North Arlington 95 21,278 1.07 94.8 163 353 - South Arlington 137 27,802 1.01 94.3 138 789 408 East Total 300 61,616 1.00 93.7 347 1,142 408 NORTHEAST Haltom City/ Richland Hills/ Fossil Creek 70 16,959 1.05 95.6 (18) - - Hurst/ Euless/ Bedford 129 29,956 1.10 95.9 300 - - Grapevine/ Roanoke/ Keller 62 15,879 1.27 95.7 109 390 - Northeast Total 261 62,794 1.13 95.8 391 390 - NORTHWEST Northwest Ft Worth/ Saginaw/ Eagle Mtn 28 4,728 0.88 93.7 146 194 - Northwest Total 28 4,728 0.88 93.7 146 194 - SOUTH South Ft Worth 61 10,872 0.88 93.5 62 - - South Total 61 10,872 0.88 93.5 62 - - SOUTHWEST Southwest Ft Worth/ Benbrook 44 12,290 1.08 95.1 74 385 - Far Southwest Ft Worth 23 2,764 0.94 91.7 (141) - - Southwest Total 67 15,054 1.05 94.5 (67) 385 - WEST Western Hills/ Ridgmar/ Ridglea 76 13,054 0.88 92.9 118 - West Total 76 13,054 0.88 92.9 118 - - DALLAS TOTAL 1,993 476,331 1.25 92.9 3,809 23,474 4,251

FORT WORTH TOTAL 848 178,072 1.05 94.3 1,303 4,215 408

DALLAS/FORT WORTH TOTAL 2,841 654,403 1.15 93.3 5,112 27,689 4,659 Source: Apartment Data Service, Q2 2016. CBRE Research, Q2 2016.

RENTS BREAK RECORDS (AGAIN); NEW SUPPLY Figure 4: Avg. Rent, Monthly by Class FORECAST TO DING NEAR-TERM GAINS $/SF 1.50 Average market rents continue to increase as DFW adds 1.40 population and payrolls at one of the fastest rates in the 1.30 U.S. At the end of the second quarter 2016, nearly 40% 1.20 of DFW’s multifamily submarkets reported above- 1.10 market rental averages (higher than $1.15 per sq. ft., a 1.00 new market high). Both Class A and Class B properties 0.90 saw average monthly rents increase by $0.03 in the 0.80 second quarter 2016. Rents in Class A apartments, built 0.70 in 2010 or after, are trending even higher despite softer 0.60 overall occupancies. Class A properties are offering incentives to entice new residents where about one-in- Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 four are offering some type of rental concession or Class A Class B Class C discount compared to only one in five for the broader Source: Apartment Data Service, Q2 2016. DFW multifamily market. CBRE Research, Q2 2016.

COMPONENTS FOR HISTORIC OCCUPANCY: ESCALATING HOME PRICES+POPULATION GROWTH

90% threshold. Moreover, according to Nielsen, the Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 DFW metro area population is forecasted to grow 7.7% Class A Class B Class C by 2021 as compared to 10.9% in the most recent five years, another factor pointing to a growing reservoir of new, potential renters. Source: Apartment Data Service, Q2 2016. CBRE Research, Q2 2016.

Looking at the numbers, overall occupancy compressed slightly to 93.3% in the second quarter of 2016. Class A occupancy rebounded as new product which has been in the lease-up stage saw an influx of renters in the active leasing season. We can expect to see Class A occupancy to fluctuate as many new communities are expected to deliver over the next 18 months. Class B occupancy increased 20 bps from 95.5% to 95.7%, the highest occupancy of all assets.

CONSTRUCTION PERMITS REBOUNDS AT THE AT THE MID POINT OF 2016

As a result of the economic diversity in DFW’s multifamily market, DFW continued to experience a high demand for apartment space, as new units continue to be absorbed steadily. The U.S. Census Bureau reports that 7,397 multifamily housing permits were issued in DFW thus far in 2016, a slight increase of 561 permits from the same time period last year.

Breaking two straight quarters of compression the number of proposed units in the pipeline increased, potentially in response to the single family market conditions at this time in 2016. However, many lenders and developers continue to favor multifamily product in DFW as historic market fundamentals persist. Additionally, there were 7,512 new unit starts the second quarter 2016, adjusting the total number of units under construction to 27,689 units. Figure 6: Construction Activity and Net Absorption

Under Construction Delivered Net Absorption Unit Count (K) 26 24 22 20 18 16 14 12 10 8 6 4 2 0 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016

Source: Apartment Data Service, Q2 2016. CBRE Research, Q2 2016.

A ROOM OF ONE’S OWN: POPULATION AND Figure 7: Total Employment Growth PAYROLLS MAKING ONE A BIT HARDER TO FIND Unemployment Rate % 10 In the second quarter 2016, DFW created 129,100 jobs year-over-year, translating to a 3.7% annual 9 growth rate, a robust number by any measure. 8 Unemployment fell from 3.9% in the first quarter to the current level of 3.5% this quarter, making for a tight 7 labor market. Consider this: DFW’s unemployment is 6 now 90 bps lower than the state average and a full 1.2% tighter than the U.S. overall. With a current 5 estimated population of 7.1 million, the Metroplex’s 4 population has grown by 8.2% since 2010, and what’s 3 more, an additional growth of 7.7% is projected for

2016 to 2021, according to Nielsen. 2008 2009 2010 2011 2012 2013 2014 2015 Q2 2016 U.S. Texas Dallas/Fort Worth MSA

Source: Bureau of Labor Statistics, June 2016.

CAPITAL MARKETS OFFER NO NEW NEWS WITH Moreover, the skyline is changing in Dallas’s STABLE CAP RATES AND ACTIVITY MIRRORS U.S. Uptown/Downtown area as 65% of the

On the national stage, the multifamily market is still Uptown/Downtown construction pipeline consists of performing as forecasted. As of June 2016, U.S. high-rise or high-rise conversion projects and many occupancy closed out at 95.2%, in the second quarter. are expected to deliver in 2017. The second quarter 2016 rent growth was 2.3%, and overall the year-over-year rate was under 4.0%, the At the half way mark of 2016, average infill/urban first time since 2014, as reported by Axiometrics. stabilized cap rates in DFW remained steady across the According to Real Capital Analytics (RCA), national board. Class A property cap rates remained between sales volume decreased 33% quarter-to-quarter and the ranges of 4.25% to 4.75%. Class B properties totaled $26.3 billion in transactions in the second remained at 5.00% to 6.00% and Class C properties quarter 2016; year-to-date, $151.8 billion has traded stand at 6.00% to 6.50%. over the past 12 months, a 15% increase. RCA reported sales DFW volume totaled $916.7 million in In suburban areas, average stabilized cap rates the second quarter 2016, and the average price per ranged from 4.75% to 5.25% for Class A properties; a unit, $82,313, a 6.5% increase from the first quarter compression of 25 bps from last quarter. Unchanged 2016. Most sales continue to occur in the suburbs from last quarter, Class B properties remained at while urban areas such as Downtown Dallas/West 5.50% to 6.50%, and Class C properties compressed End/Deep Ellum/Uptown and Downtown Ft. 25 bps to a range of 6.25% to 6.75%. Worth/TCU continue to experience extensive construction activity.

Figure 8: Q2 2016 Major Recent Transactions

Units Property Address City

1,183 Chapel Hill 300 E Round Grove Rd Lewisville

494 Chatham Court and Reflections 7825 McCallum Dallas

480 Harbors and Plumtree Apartments 7676 S Westmoreland Rd Dallas

476 Santa Rosa at Las Colinas 2900 W Royal Ln Irving

453 Estates at McKinney 2580 Collin McKinney Pkwy McKinney

416 The Mansions by the Lake 2050 FM 426 Little Elm

356 Legends on Lake Highlands 11201 E Lake Highlands Dr Dallas

324 Provenza at Windhaven 4900 Windhaven Pkwy The Colony

317 Sedona Ridge 11100 Walnut Hill Dallas

316 Aura Castle Hills 5500 S State Hwy 121 The Colony

312 Estates of Prosper 980 S Coit Rd Prosper

308 Mansions at Prosper 880 S Coit Rd Prosper

299 View at Kessler 2511 Wedgela Dr Dallas

295 Advenir at Mission Ranch 901 Hwy 80 E Mesquite

290 Holly Ridge 2504 Ivy Brook Ct Arlington

Source: Real Capital Analytics, Q2 2016. CBRE Research, Q2 2016.

FORT WORTH MARKETS DALLAS MARKETS CENTRAL FW1 Downtown Ft Worth/ TCU CENTRAL D1 Downtown Dallas/ West End/ Deep Ellum EAST FW2 East Ft Worth/ Woodhaven/ I-30E D2 Uptown/ Oaklawn/ Highland Park FW3 North Arlington D3 East Central Dallas/ Lower Greenville Ave FW4 South Arlington D4 White Rock Lake/ Tenison Park NORTHEAST FW5 Haltom City/ Richland Hills/ Fossil Creek D5 North Central Dallas/ Upper Greenville Ave FW6 Hurst/ Euless/ Bedford FW7 Grapevine/ Roanoke/ Keller D6 Skillman St/ I-635 EAST D6 Far East Dallas NORTHWEST FW8 Northwest Ft Worth/ Saginaw/ Eagle Mtn NORTHEAST D7 Garland SOUTH FW9 South Ft Worth NORTH D8 North Dallas/ Addison SOUTHWEST FW10 Southwest Ft Worth/ Benbrook D9 Far North Dallas/ Collin County FW11 Far Southwest Ft Worth D10 East Plano/ Richardson WEST FW12 Western Hills/ Ridgmar/ Ridglea D11 West Plano/ Frisco D12 Allen/ McKinney NORTHWEST D13 East Irving D14 West Irving D15 Las Colinas/ Valley Ranch/ Coppell D16 Northwest Dallas/ Bachman Lake D17 Carrollton/ Farmers Branch D18 Lewisville/Flower Mound D19 Denton SOUTHEAST D20 Southeast Dallas/ Mesquite SOUTH D21 Oak Cliff South D22 Duncanville/ DeSoto/ Cedar Hill/ Lancaster D23 Far South Dallas/ Waxahachie SOUTHWEST D24 Trinity Groves/ Oak Cliff North D25 Grand Prairie MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY

CONTACTS

Robert C. Kramp Director, Research & Analysis Texas-Oklahoma Division [email protected]

E. Michelle Miller Research Operations Manager [email protected]

Robert Basiliere Senior Research Analyst +1 214 252 1033 [email protected]

Brian Ashton Research Coordinator +1 214 979 6589 [email protected]

CBRE OFFICES

CBRE Dallas 2100 McKinney Ave, Suite 700 Dallas, TX 75201

To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway.

Dallas / Fort Worth Multifamily, Q1 2016 Urban markets grabbing headlines; suburban markets gaining renters

Vacancy Rate Under Construction Completions Net Absorption 6.6% 24,836 Units 3,037 Units 3,780 Units

*Arrows indicate change from previous quarter. . A lot of reporting has been seen on DFW’s urban multifamily renaissance over the past few months and its Figure 1: Net Absorption Dallas understandable: more than 5,600 multifamily units are Units under construction in Dallas’s Uptown/Downtown area, 1,200 23% of all apartment construction in the metro. 1,000 Moreover, 65% of the Uptown/Downtown construction pipeline consists of high-rise or high-rise conversion 800 projects. Dallas has yet to be a high-rise market, but by 600 2019, Big D will boast a much different skyline. 400 . Still, looking at the renter demand, North Dallas, 200 Central Dallas and Northwest Dallas saw more than 2,600 new move-ins (about 30 per day) during the 0 winter months of the first quarter which means there is hefty Metroplex renter demand for multiple types of East Dallas North Dallas North South Dallas South

multifamily product. Pun on the word ‘multi’ intended. Dallas Central Northeast Dallas Northeast Southeast Dallas Northwest Dallas Q1 Dallas Southwest . The multifamily construction pipeline swelled in Q1 Source: CBRE Research, Q1 2016. 2016 to over 24,800 units, the highest level recorded by CBRE’s tracking of the Metroplex market as it remains a Figure 2: Net Absorption Fort Worth compelling one for multifamily developers. The current Units inventory cycle indicates that despite such a robust 480 pipeline, the sheer inertia of the metro’s new jobs rate, 380 where employers added 44,000 payrolls in the first quarter alone, still leans towards brisk lease-up 280 schedules for leasing agents as these units deliver. 180 . Nevertheless, for the second consecutive quarter Class A 80 occupancy compressed as new product was delivered and entered the lease up stage but at 88.5% occupied, (20) is only 10 bps off from this period last year. On the (120) other hand, the newer more expensive product is pushing up the group average where DFW’s Class A rents increased $0.03 per sq. ft. to $1.49 per sq. ft. East Ft. Worth Ft. East West Ft. Worth South Ft. Worth which is 23% higher than Class B and 36% higher than Central Ft. Worth Northeast Ft. Worth Northwest Ft. Worth Southwest Ft. Worth Class C. Q1 Source: CBRE Research, Q1 2016.

Figure 3: Market Overview

Net Under New Construction

Property Unit Mthly Rent Occupancy Absorption Construction Delivered Submarket Count Count ($/SF) (%) Units Units Units DALLAS MARKETS CENTRAL Downtown Dallas/ West End/ Deep Ellum 48 10,102 1.49 88.9 195 1,744 290 Uptown/ Oaklawn/ Highland Park 137 29,245 1.74 86.3 360 3,924 951 East Central Dallas/ Lower Greenville Ave 49 5,508 1.44 93.2 (19) 574 - White Rock Lake/ Tenison Park 69 15,131 0.96 93.1 64 - - North Central Dallas/ Upper Greenville Ave 99 26,697 1.14 90.0 (43) 1,213 395 Skillman St/ I-635 94 25,819 0.99 93.1 11 540 - Central Total 496 112,502 1.31 90.2 876 8,092 1,636 EAST Far East Dallas 19 3,280 1.06 96.7 3 - - East Total 19 3.280 1.06 96.7 3 - - NORTHEAST Garland 94 15,672 1.01 96.7 3 - - Northeast Total 94 15.672 1.01 96.7 3 - - NORTH North Dallas/ Addison 111 30,426 1.12 93.1 295 1,282 - Far North Dallas/ Collin County 78 24,522 1.12 95.8 75 - - East Plano/ Richardson 82 22,123 1.23 90.2 224 1,957 386 West Plano/ Frisco 149 46,683 1.28 93.1 364 5,016 275 Allen/ McKinney 66 16,717 1.12 94.3 158 1.207 267 North Total 486 140,471 1.19 93.3 1,116 9,462 928 NORTHWEST East Irving 57 7,538 0.93 95.8 65 - - West Irving 81 18,299 1.06 95.0 88 - - Las Colinas/ Valley Ranch/ Coppell 76 27,512 1.31 93.4 61 1,557 374 Northwest Dallas/ Bachman Lake 61 11,451 0.98 95.1 62 - - Carrollton/ Farmers Branch 113 27,112 1.16 95.5 257 210 - Lewisville 70 20,445 1.15 94.3 76 599 - Denton 62 12,274 1.15 95.1 19 - - Northwest Total 520 124,631 1.15 94.7 628 2,366 374 SOUTHEAST Southeast Dallas/ Mesquite 101 21,783 0.92 94.4 114 - - Southeast Total 101 21,783 0.92 94.4 114 - - SOUTH South Oak Cliff 63 13,081 0.80 91.4 (61) - - Duncanville/ DeSoto/ Cedar Hill/ Lancaster 89 19,794 0.91 93.5 60 - - Far South Dallas/ Waxahachie 24 3,007 0.95 97.2 8 - - South Total 176 35,882 0.90 93.0 (47) - - Trinity Groves/ Oak Cliff North 37 6.123 1.14 90.9 61 693 SOUTHWEST Grand Prairie 49 11,119 1.03 96.3 52 551 - Southwest Total 86 17,251 2.17 94.4 113 1,244 - FORT WORTH MARKETS CENTRAL Downtown Ft Worth/ TCU 54 9,931 1.40 91.5 42 436 - Central Total 54 9,931 1.40 91.5 42 436 - EAST East Ft Worth/ Woodhaven/ I-30E 68 12,536 0.85 89.5 53 - - North Arlington 97 21,534 1.02 94.5 (170) - - South Arlington 137 27,802 0.99 94.4 204 747 99 East Total 302 61,872 0.97 93.4 87 747 99 NORTHEAST Haltom City/ Richland Hills/ Fossil Creek 70 16,959 1.02 95.3 53 - - Hurst/ Euless/ Bedford 129 29,956 1.07 93.7 278 - - Grapevine/ Roanoke/ Keller 62 15,882 1.23 95.1 121 300 - Northeast Total 261 62,797 1.09 94.5 452 300 - NORTHWEST Northwest Ft Worth/ Saginaw/ Eagle Mtn 28 4,728 0.87 95.2 105 194 - Northwest Total 28 4,728 0.87 95.2 105 194 - SOUTH South Ft Worth 60 10,692 0.88 93.2 61 180 - South Total 60 10,692 0.88 93.2 61 180 - SOUTHWEST Southwest Ft Worth/ Benbrook 44 12,920 1.04 95.4 (93) 374 - Far Southwest Ft Worth 23 2,764 0.92 95.6 (10) - - Southwest Total 67 15,054 1.00 95.4 (103) 374 - WEST Western Hills/ Ridgmar/ Ridglea 76 13,054 0.86 90.8 132 - - West Total 76 13,054 0.86 90.8 132 - - DALLAS TOTAL 1,979 471,548 1.20 93.1 3,004 22,605 2,938

FORT WORTH TOTAL 848 178,128 1.03 93.7 776 2,231 99

DALLAS/FORT WORTH TOTAL 2,827 649,676 1.14 93.4 3,780 24,836 3,037 Source: Apartment Data Service, Q1 2016. CBRE Research, Q1 2016.

RENTS BREAK RECORDS (AGAIN); NEW SUPPLY Figure 4: Avg. Rent, Monthly by Class FORECAST TO DING NEAR-TERM GAINS (THOUGH) $/SF 1.50 Average market rents continue to increase as DFW adds 1.40 population and payrolls at one of the fastest rates in the 1.30 U.S. At the end of Q1 2016, nearly 40% of DFW’s 1.20 multifamily submarkets reported above-market rental 1.10 averages (higher than $1.14 per sq. ft., a new market 1.00 high). Both Class A and Class B properties saw average 0.90 monthly rents increase by $0.03 and $0.02 per sq. ft., 0.80 respectfully, in Q1 2016. Rents in Class A apartments, 0.70 built in 2010 or after, are trending even higher despite 0.60 softer overall occupancies. Class A properties are offering concessions to entice new residents where Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 about one-in-four are offering some type of rental Class A Class B Class C concession or discount compared to only one in five for Source: Apartment Data Service, Q1 2016. the broader DFW multifamily market. CBRE Research, Q1 2016.

COMPONENTS FOR HISTORIC OCCUPANCY:

ESCALATING HOME PRICES+POPULATION GROWTH

Demand for apartments has increased over the past Figure 5: Occupancy by Class four years as factors such as strong employment and Occupancy (%) population growth contributed to the historic 96 performance. As mentioned, with the dearth of 95 affordable single-family homes, we are seeing would- 94 93 be buyers being kept within the Metroplex multifamily 92 rental market. To supplement this reasoning, North 91 Texas Real Estate Information Systems (NTREIS) reports 90 89 that North Texas saw the median single-family home 88 prices continued to leap at the start of 2016 by 9.6% on 87 a trailing 12-month total, explaining why multifamily 86 occupancy remains over the 90% threshold. Moreover, Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 according to Nielsen, the DFW metro area population is forecasted to grow 7.7% by 2021 as compared to Class A Class B Class C 10.9% in the most recent 5 years, another factor pointing to a growing reservoir of new, potential renters. Source: Apartment Data Service, Q1 2016. Looking at the numbers, overall, occupancy remained CBRE Research, Q1 2016. flat at 93.4% in Q1 2016. Class A occupancy continued to compress as new product delivered and entered the lease-up stage in the production cycle. We can expect to see Class A occupancy to fluctuate as many new communities are expected to deliver over the next 18 months. Class B occupancy increased 20 bps from 95.3% to 95.5%; the highest occupancy of all assets.

CONSTRUCTION PERMITS COMPRESS AT THE START OF 2016

As a result of the Economic diversity in DFW’s multifamily market, DFW continued to experience a high demand for apartment space, as new units continue to be absorbed steadily. The U.S. Census Bureau reports that 2,913 multifamily housing permits were issued in DFW thus far in 2016, a slight compression of 575 permits from the same time period last year.

For the second quarter in a row the number of proposed units in the pipeline compressed, potentially in response to market volatility at the end of 2015 and beginning of 2016. However, many lenders and developers continue to favor multifamily product in DFW as historic market fundamentals persist. Additionally, there were 8,624 new unit starts in Q1 2016, adjusting the total number of units under construction to 24,854 units.

Figure 6: Construction Activity and Net Absorption

Source: Apartment Data Service, Q1 2016. CBRE Research, Q1 2016.

A ROOM OF ONE’S OWN: POPULATION AND Figure 7: Total Employment Growth PAYROLLS MAKING ONE A BIT HARDER TO FIND Unemployment Rate % 10 In Q1 2016, DFW created 112,000 jobs year-over- year, translating to a 3.3% annual growth rate, a 9 robust number by any measure. Unemployment fell 8 from 4.1% at the end of 2015 to the current level of 3.9% this quarter, making for a tight labor market. 7

Consider this: DFW’s unemployment is now 60 bps 6 lower than the state average and a full 1% tighter than the U.S. overall. With a current estimated population 5 of 7.1 million, The Metroplex’s population has grown 4 by 8.2% since 2010, and what’s more, an additional 3 growth of 7.7% is projected for 2016 to 2021, according to Nielsen. 2008 2009 2010 2011 2012 2013 2014 2015 Q1 2016 U.S. Texas Dallas/Fort Worth MSA Source: Bureau of Labor Statistics, February 2016.

CAPITAL MARKETS OFFER NO NEW NEWS WITH Moreover, the skyline is changing in Dallas’s STABLE CAP RATES AND ACTIVITY MIRRORS U.S. Uptown/Downtown area as 65% of the Uptown/Downtown construction pipeline consists of On the national stage, the multifamily market is off to high-rise or high-rise conversion projects. a modest start. As of March 2016, U.S. occupancy closed out at 95%, the second consecutive monthly At the start of 2016, average infill/urban stabilized cap increase. Annual rent growth was 0.5%, and overall rates in DFW remained steady across the board. Class has been 4.0% or greater for 20 continuous months, A property cap rates remained between the ranges of as reported by Axiometrics’s latest report. According to 4.25% to 4.75%. Class B properties remained at 5.00% Real Capital Analytics (RCA), national sales volume to 6.00% and Class C properties stand at 6.00% to decreased 28% quarter-to-quarter and totaled $36.8 7.00%. billion in transactions in Q1 2016; year-to-date, $152.7 billion has traded over the past 12 months, a In suburban areas, average stabilized cap rates 20% increase. RCA reported sales DFW volume totaled ranged from 4.50% to 5.50% for Class A properties; a $1.8 billion in Q1 2016, and the average price per compression of 25 bps from Q4 2015. Unchanged unit , $101,905, a 22% decrease from Q4 2015. from last quarter, Class B properties remained at Most sales continue to occur in the suburbs while urban 5.50% to 6.50%, and 7.00% to 7.80% for Class C areas such as Downtown Dallas/West End/ Deep properties. Ellum/Uptown and Downtown Ft. Worth/ TCU continue to experience extensive construction activity.

Figure 8: Q1 2016 Major Recent Transactions

Units Property Address City

586 Parks at Treepoint 6601 Treepoint Dr Arlington

472 Churchill Estates 8501 Lullwater Dr Dallas

435 Lakewood Flats 7425 La Vista Dr Dallas

360 Estates of Richardson 955 W President George Bush Hwy Richardson

354 Post Oak Place 13950 Trinity Blvd Euless

344 Heights of Cityview 5270 Bryant Irving Rd Fort Worth

334 Gateway Cedars 1100 N Gateway Blvd Forney

318 El Sol Del Lago 3102 Oradell Lane Dallas

312 Mill Valley 9001 Randol Mill Fort Worth

297 Terraces on the Parkway 1109 N Carrier Pkwy Grand Prairie

268 4689 Mustang Pkwy 4689 Mustang Pkwy Carrollton

264 Woodlands of Arlington 2800 Lynnwood Dr Arlington

250 Colorado Court 1939 Colorado Court Denton

248 Riverstone 3450 River Park Dr Fort Worth

241 Courtyards on Glenview 4401 Glennview Ct North Richland Hills

Source: Real Capital Analytics, Q1 2016. CBRE Research, Q1 2016.

CONTACTS

Robert C. Kramp Director, Research & Analysis Texas-Oklahoma Division [email protected]

E. Michelle Miller Research Operations Manager [email protected]

Lauren Paris Senior Research Analyst +1 214 979 6587 [email protected]

Brian Ashton Research Coordinator +1 214 979 6589 [email protected]

CBRE OFFICES

CBRE Dallas 2100 McKinney Ave, Suite 700 Dallas, TX 75201

To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway.

Dallas / Fort Worth Multifamily, Q4 2015 Fundamentals make for strong 2015; deliveries in 2016 merit watching jobs/population gains

Vacancy Rate Under Construction Completions Net Absorption 6.6% 18,159 Units 1,090 Units 1,261 Units

*Arrows indicate change from previous quarter. Figure 1: Net Absorption Dallas . Dallas/Fort Worth’s expanding economy added to Units the fundamentals of the multifamily market last year 4,950 which trended positively across all classes and this pattern is expected to continue into 2016. 3,950

. The dip in the final quarter’s absorption was due to 2,950 more to a seasonal pattern that left the overall performance of the market unaffected for the year. 1,950 In fact, unit demand ended 2015 where expected, 950 with just under 19,000 new units occupied by the close of the year, the majority stemming from newly (50) delivered Class A product.

East Dallas North Dallas North South Dallas South

. One favoring tailwind to DFW is that area home Dallas Central Northeast Dallas Northeast Southeast Dallas Northwest Dallas Southwest Dallas Southwest prices are up and putting pressure on the affordable Q1 Q2 Q3 Q4 housing sector while another tailwind for demand Source: CBRE Research, Q4 2015. and rents is coming from the sheer heft seen with the Figure 2: Net Absorption Fort Worth one-two of rising corporate relocations and sustained in-migration to the DFW area. Units 1,570

. Still, with nearly 19,000 units in the Metroplex 1,370 construction pipeline, approximately 80% of them 1,170 located in Dallas, CBRE Research is keeping an eye 970 on the lease up of the deliveries in addition to 770 population gains and new jobs growth, mainly in 570 industries which create the payrolls needed to qualify for these high-end lux rental agreements. 370 170 . Conversely, Class B and Class C properties (30) persistently gain renters and can be classified as completely full at 95.3% and 95%, respectively. We East Ft. Worth Ft. East West Ft. Worth

expect this to continue in the year ahead as DFW’s South Ft. Worth Central Ft. Worth Northeast Ft. Worth Northwest Ft. Worth affordable housing dearth becomes more than just a Southwest Ft. Worth Q1 Q2 Q3 Q4 topic of conversation. Source: CBRE Research, Q4 2015.

Figure 3: Market Overview

Net Under New Construction

Property Unit Mthly Rent Occupancy Absorption Construction Delivered Submarket Count Count ($/SF) (%) Units Units Units DALLAS MARKETS CENTRAL Downtown Dallas/ West End/ Deep Ellum 46 9,472 1.47 86.3 138 1,904 499 Uptown/ Oaklawn/ Highland Park 137 29,115 1.66 86.3 219 2,702 - East Central Dallas/ Lower Greenville Ave 49 5,508 1.46 93.2 80 321 180 White Rock Lake/ Tenison Park 70 15,163 0.95 93.1 18 - - North Central Dallas/ Upper Greenville Ave 100 26,588 1.14 90.0 (43) 1,213 - Skillman St/ I-635 94 25,819 0.96 93.1 (74) - - Central Total 496 111,665 1.28 90.0 338 6.140 679 EAST Far East Dallas 19 3,280 1.00 96.7 (6) - - East Total 19 3.280 1.00 96.7 (6) - - NORTHEAST Garland 94 15,672 0.99 95.5 16 326 - Northeast Total 94 15.672 0.99 95.5 16 326 - NORTH North Dallas/ Addison 111 30,432 1.15 93.1 8 1,004 - Far North Dallas/ Collin County 78 24,522 1.17 95.8 (37) - - East Plano/ Richardson 82 22,123 1.21 90.2 220 1,258 - West Plano/ Frisco 147 46,051 1.24 93.1 254 2,543 - Allen/ McKinney 63 15.747 1.18 94.3 63 998 - North Total 481 138,875 1.20 93.3 508 5,803 - NORTHWEST East Irving 57 7,538 0.91 95.8 52 - - West Irving 81 18,288 1.02 95.0 (10) - - Las Colinas/ Valley Ranch/ Coppell 75 27,138 1.27 93.4 89 1,504 - Northwest Dallas/ Bachman Lake 61 11,419 0.94 95.1 26 - - Carrollton/ Farmers Branch 110 24,212 1.13 95.5 24 210 - Lewisville 70 20,445 1.15 95.1 27 899 - Denton 62 12,274 1.14 95.1 (12) - - Northwest Total 516 123,314 1.12 94.7 196 2,313 - SOUTHEAST Southeast Dallas/ Mesquite 101 21,783 0.89 94.4 71 - - Southeast Total 101 21,783 0.89 94.4 71 - - SOUTH South Oak Cliff 63 18,288 0.88 91.4 42 - - Duncanville/ DeSoto/ Cedar Hill/ Lancaster 89 19,794 0.91 93.5 (97) - - Far South Dallas/ Waxahachie 24 3,007 0.95 97.2 8 - - South Total 176 35,882 0.90 93.0 (47) - - Trinity Groves/ Oak Cliff North 37 6.123 0.91 90.9 693 SOUTHWEST Grand Prairie 48 10,920 0.99 95.9 13 614 - Southwest Total 42 17,052 1.90 95.9 13 1,307 - FORT WORTH MARKETS CENTRAL Downtown Ft Worth/ TCU 53 9,541 1.39 91.5 231 828 - Central Total 53 9,541 1.39 91.5 231 828 - EAST East Ft Worth/ Woodhaven/ I-30E 68 12,536 0.82 89.5 (10) - - North Arlington 97 21,534 1.01 94.5 186 - - South Arlington 135 27,394 0.97 94.4 135 526 - East Total 300 61,464 0.95 93.4 311 526 - NORTHEAST Haltom City/ Richland Hills/ Fossil Creek 70 16,959 1.01 95.3 (89) - - Hurst/ Euless/ Bedford 129 29,956 1.04 93.7 42 - - Grapevine/ Roanoke/ Keller 61 15,580 1.19 95.1 312 - - Northeast Total 260 62,495 1.07 94.5 265 - - NORTHWEST Northwest Ft Worth/ Saginaw/ Eagle Mtn 26 4,187 0.85 95.2 33 542 - Northwest Total 26 4,187 0.85 95.2 33 542 - SOUTH South Ft Worth 60 10,692 0.87 93.2 (45) - - South Total 60 10,692 0.87 93.2 (45) - - SOUTHWEST Southwest Ft Worth/ Benbrook 44 12,920 1.02 95.4 (19) 374 - Far Southwest Ft Worth 24 2,810 0.91 95.6 40 - - Southwest Total 68 15,100 1.00 95.4 21 374 - WEST Western Hills/ Ridgmar/ Ridglea 76 13,054 0.85 90.8 (24) - - West Total 76 13,054 0.85 90.8 (24) - - DALLAS TOTAL 1,968 467,523 1.18 93.0 3,988 15,889 1,090

FORT WORTH TOTAL 843 176,533 1.01 93.7 792 2,270 -

DALLAS/FORT WORTH TOTAL 2,811 644,056 1.12 93.4 4,780 18,159 1,090 Source: Apartment Data Service, Q4 2015. CBRE Research, Q4 2015.

RENTAL GAINS SEE SLOWER MOMENTUM IN Q4 Figure 4: Rent, Avg. Monthly by Class BUT CHALKED SOLID GAINS FOR THE YEAR $/SF 1.50 DFW’s average monthly rents have eclipsed the 1.40 1.30 $1.00 per sq. ft. threshold now for nearly two full 1.20 years and 2015 saw them surge ahead by 7.7% 1.10 year-over-year. At the end of Q4 2015, 14 of the 38 1.00 0.90 submarkets reported above-market rental averages 0.80 (higher than $1.12 per sq. ft.). Both Class A and 0.70 Class B properties saw average rents increase by 0.60 $0.01 per sq. ft. from Q3 2015 to Q4 2015. Class

A apartments, built in 2010 or after, have their Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 asking rents trending higher despite lower overall occupancies which helps to explain why we see Class A Class B Class C concessions on the rise in that class category. One in four now are offering some type of rental concession Source: Apartment Data Service, Q4 2015. compared to nearly only one-in-five for the overall CBRE Research, Q4 2015. category offering some type of rental discount.

HISTORIC HIGH OCCUPANCIES, JOB GAINS AND NEW POPULATION GROWTH FUEL DEVELOPMENT Figure 5: Occupancy Rate by Class Occupancy (%) DFW’s demand curve over the past four years coming out of the recession have triggered 96 95 developers to rush new supply additions in order to 94 keep pace with the rental demand. As mentioned, 93 with the dearth of affordable single family homes, we 92 91 are seeing would-be buyers being kept within the 90 Metroplex multifamily rental market. To supplement 89 this reasoning, DFW saw single-family home prices 88 87 leap during 2016 by 6% year-over-year to an home 86 price of $264,804, explaining why multifamily occupancy remained over the 90% threshold in Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 2015. Moreover, according to Moody’s Analytics, Class A Class B Class C the DFW metro area population is forecast to reach 7.8 million by 2020, another factor pointing to a vast reservoir of new, future renters. Source: Apartment Data Service, Q4 2015. CBRE Research, Q4 2015. Looking at the numbers, overall, occupancy decreased by 40 bps from 93.8% to 93.4% at the end of 2015. Class A occupancy broke a three year high as new product delivered, however there was still a year-over-year increase of 20 bps up from 89.3% to 89.5% as 2015 came to a close. Class B occupancy slipped 50 bps from 95.8% to 95.3%, but has remained above 95.0% for the past full year.

Source: CBRE Research, Q4 2015.

CONSTRUCTION PERMITS UP DURING 2015

As forecasted at the end of 2014, DFW’s multifamily market experienced a high demand for apartment space as new units were absorbed steadily. The U.S. Census Bureau reports that 23,612 multifamily housing permits were issued in DFW from January through December 2015, an increase of 5,924 permits from the same time period last year.

The number of proposed units in the pipeline compressed slightly over last quarter. There was a decrease of 1,146 units in Q4 2015, yielding a total proposed count of 21,115 units. In addition, there were 395 new unit starts in Q4 2015, adjusting the total number of units under construction to 18,154 units. About 66% of DFW’s under construction activity is concentrated within the North Dallas and Central Dallas submarket clusters, with 11,943 units currently under construction. Many of those units, about 44%, are concentrated in West Plano/Frisco and Uptown/Oaklawn/Highland Park submarkets., the most active areas in the Metroplex.

Figure 6: Construction Activity and Net Absorption Under Construction Delivered Net Absorption Unit Count (K) 22 20 18 16 14 12 10 8 6 4 2 0 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

Source: Apartment Data Service, Q4 2015. CBRE Research, Q4 2015.

PAYROLLS ADVANCED, RESIDENTIAL GROWTH Figure 7: Total Employment Growth RATES MAKE FOR TIGHT MARKET AT YEAR-END Unemployment Rate % 10 In Q4 2015, DFW created 101,000 jobs year-over- year, translating to a 3.0% annual growth rate, 9 robust number by any measure. Unemployment fell 8 from 3.9% at the end of Q3 2015 to the current level of 3.8% this quarter, making for a tight labor 7 market. Consider this: DFW’s unemployment is now 6 l80 bps lower than the state’s and a full 1.3% tighter than the nation’s. With a current estimated 5 population of 6.9 million, the area’s population has 4 grown by 8.2% since 2010, and what’s more, an 3 additional growth of 7.1% is projected for 2015 to 2020, according to Nielsen. 2008 2009 2010 2011 2012 2013 2014 2015 U.S. Texas Dallas/Fort Worth MSA Source: Bureau of Labor Statistics, September 2015.

CAPITAL MARKETS ACTIVITY SEE A YEAR OF METROPLEX INVESTOR INTEREST Deep Ellum/Uptown and Downtown Ft. Worth/ TCU On the national stage, the multifamily market continue to experience extensive construction finished out strong in 2015. In Q4 2015, U.S. activity. occupancy closed out at 95%, a 15 year high. Annual rent growth was 4.7%, and overall, rent At the end of 2015, average infill/urban stabilized growth is the highest year-end figure since 2005, cap rates in DFW remained stable between the when effective rent growth was 5.8%, as reported by ranges of 4.25% to 4.75% for Class A properties. Axiometrics. According to Real Capital Analytics, Class B properties remained stable at 5.00% to national sales volume increased 47% quarter-to- 6.00% while Class C properties also stayed flat quarter and totaled $49.6 billion in transactions in between 6.00% to 7.00%. Q4 2015; year-to-date, $148.0 billion has traded over the past 12 months, a 32% increase from In suburban areas, average stabilized cap rates 2014. ranged from 4.75% to 5.75% for Class A properties, 5.50% to 6.50% for Class B properties, and 7.00% Sales volume in DFW totaled $2.3 billion in Q4 to 7.80% for Class C properties; unchanged from 2015, and reported average price per unit was last quarter. $103,732, a 13% increase from Q3 2015. Most sales continue to occur in the suburbs while urban areas such as Downtown Dallas/West End/

Figure 8: Q4 2015 Major Recent Transactions

Units Property Address City

586 Parks at Treepoint 6601 Treepoint Dr Arlington

430 Sonsrena 9425 Rolater Rd Frisco

380 Creekside Homes in Legacy 6300 Windcrest Dr Plano

372 St Laurent 2825 N State Hwy 360 Grand Prairie

360 Edentree 1721 E Frankford Rd Carrollton

302 Lakeshore at Preston 3700 Preston Rd Plano

269 Ventana 5555 Spring Valley Rd Dallas

264 Windsong 177717 Vail Dr Dallas

160 Gardens on Walnut 4301 W Walnut St Garland

160 La Lolla on Meadowbrook 8901 Meadowbrook Blvd Garland

160 Landmark at Lake Village East 4358 Point Blvd Fort Worth

100 5850 Highland Hills Dr 5850 Highland Hills Dr Dallas

90 Sunset Heights 4701 Wellesley Ave Fort Worth

60 Sycamore Trace Apartment Homes 2920 Sycamore School Rd Fort Worth

56 University House TCU 3201 S University Dr Fort Worth

Source: Real Capital Analytics, Q4 2015. CBRE Research, Q4 2015.

CONTACTS

Robert C. Kramp Director, Research & Analysis [email protected]

E. Michelle Miller Research Operations Manager [email protected]

Lauren Paris Senior Research Analyst +1 214 979 6587 [email protected]

Brian Ashton Research Coordinator +1 214 979 6589 [email protected]

CBRE OFFICES

CBRE Dallas 2100 McKinney Ave, Suite 700 Dallas, TX 75201

To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway.

Dallas / Fort Worth Multifamily, Q3 2015 Neck and neck: disciplined deliveries and new demand spike DFW occupancy

Vacancy Rate Under Construction Completions Net Absorption 6.2% 18,854 Units 989 Units 4,780 Units

*Arrows indicate change from previous quarter. Figure 1: Net Absorption DELIVERY NUMBERS BOOST OCCUPANCY In Q3 2015, there was a large drop in the delivery of Units new units. This directly influenced the occupancy rate as 4,950 it increased 160 basis points (bps) to the highest level in 4,450 Q3 the last five years. The robust increase in occupancy is attributed to steady employment growth, in-migration 3,950 Q2 and the competitive single family market. 3,450 Q1

2,950 NEW UNITS GOING UP: METROPLEX 2015 YTD Total Units Absorbed APARTMENT CONSTRUCTION SWELLS 2,450 Over 4,700 more units were added to the under 1,950 construction pipeline this quarter, up from the last quarter’s two year low and four straight quarters of 1,450 contraction. 950

COMPETITIVE SINGLE FAMILY CONTRIBUTES 450 TO HIGH APARTMENT OCCUPANCY (50) With the dearth of affordable single family homes due to strong employment growth and in-migration, would-be East Dallas North Dallas North South Dallas South Central Dallas Central

buyers are pushed into the rental market as they wait for Worth Ft. East West Ft. Worth South Ft. Worth Northeast Dallas Northeast Southeast Dallas Northwest Dallas Central Ft. Worth Southwest Dallas Southwest

the right house in the right area. Northeast Ft. Worth Northwest Ft. Worth Southwest Ft. Worth Source: CBRE Research, Q3 2015. STABLE ECONOMY SUSTAINS MULTIFAMILY MARKET POSITION Additionally, employment grew by 3.2% over the last 12 The overall market for multifamily real estate in months in DFW compared to a growth rate of 2.1% Dallas/Fort Worth remained strong in Q3 2015. Market nationally; it is forecast that DFW will remain one of the fundamentals once again are trending positively across best markets for job growth in 2015. Furthermore, all classes and are expected to continue for the DFW’s population exceeds 6.9 million people and is foreseeable future. considered young, with an average age of 35, and affluent, with most of the population (51%) in their prime earning years of 20-54.

Figure 2: Market Overview

Net Under New Construction

Property Unit Mthly Rent Occupancy Absorption Construction Delivered Submarket Count Count ($/SF) (%) Units Units Units DALLAS MARKETS CENTRAL Downtown Dallas/ West End/ Deep Ellum 46 9,289 1.10 87.0 376 1,615 499 Uptown/ Oaklawn/ Highland Park 128 26,788 1.66 91.2 630 3,912 - East Central Dallas/ Lower Greenville Ave 57 7,134 1.46 92.4 85 180 180 White Rock Lake/ Tenison Park 58 11,920 0.93 92.8 76 - - North Central Dallas/ Upper Greenville Ave 95 25,820 1.12 90.6 144 685 - Skillman St/ I-635 94 25,820 0.95 93.8 105 - - Central Total 478 106,432 1.25 91.5 1,282 6,392 679 EAST Far East Dallas 19 2,380 1.00 96.9 15 - - East Total 19 2,380 1.00 96.9 15 - - NORTHEAST Garland 107 19,074 0.98 96.9 28 326 - Northeast Total 107 19.074 0.98 96.9 28 326 - NORTH North Dallas/ Addison 107 29,459 1.13 94.5 231 683 - Far North Dallas/ Collin County 81 25,314 1.17 96.0 - - - East Plano/ Richardson 77 20,532 1.21 92.3 566 1,549 - West Plano/ Frisco 135 42,380 1.24 91.9 676 1,654 - Allen/ McKinney 63 16.011 1.15 92.1 232 109 - North Total 466 134,860 1.20 93.9 1,862 5,578 - NORTHWEST East Irving 57 8,020 0.91 95.3 19 - - West Irving 81 18,288 1.02 95.2 (64) - - Las Colinas/ Valley Ranch/ Coppell 76 26,838 1.27 94.1 225 1,497 - Northwest Dallas/ Bachman Lake 61 11,419 0.94 94.9 16 - - Carrollton/ Farmers Branch 105 24,728 1.13 95.4 182 215 - Lewisville 82 23,783 1.15 94.1 96 1,022 - Denton 56 11,042 1.14 96.3 96 300 - Northwest Total 518 124,118 1.12 94.9 608 3,034 - SOUTHEAST Southeast Dallas/ Mesquite 101 21,785 0.89 94.1 (6) - - Southeast Total 101 21,785 0.89 94.1 (6) - - SOUTH South Dallas/ Oak Cliff 98 18,735 0.88 92.3 224 566 - Duncanville/ DeSoto/ Cedar Hill/ Lancaster 89 19,794 0.91 94.0 (64) - - Far South Dallas/ Waxahachie 24 3,007 0.95 96.9 26 - - South Total 211 41,536 0.90 93.4 186 - - SOUTHWEST Grand Prairie 42 9,079 0.99 95.9 13 310 - Southwest Total 42 9,079 0.99 95.9 13 310 - FORT WORTH MARKETS CENTRAL Downtown Ft Worth/ TCU 53 9,541 1.39 90. 231 227 310 Central Total 53 9,541 1.39 90.5 231 227 310 EAST East Ft Worth/ Woodhaven/ I-30E 68 12,536 0.81 89.2 (10) 272 - North Arlington 97 21,534 0.99 94.1 186 - - South Arlington 140 29,133 0.91 95.0 135 657 - East Total 305 63,206 0.92 93.5 311 929 - NORTHEAST Haltom City/ Richland Hills/ Fossil Creek 75 18,885 1.02 95.5 (89) - - Hurst/ Euless/ Bedford 129 29,720 1.04 94.4 42 300 - Grapevine/ Roanoke/ Keller 54 13,231 1.22 95.3 312 - - Northeast Total 258 61,806 1.07 94.9 265 300 - NORTHWEST Northwest Ft Worth/ Saginaw/ Eagle Mtn 26 4,187 0.85 95.9 33 302 - Northwest Total 26 4,187 0.85 95.9 33 302 - SOUTH South Ft Worth 60 10,692 0.85 93.1 (45) 124 - South Total 60 10,692 0.85 93.1 (45) 124 - SOUTHWEST Southwest Ft Worth/ Benbrook 44 12,920 1.02 95.7 (19) 766 - Far Southwest Ft Worth 24 2,810 0.92 94.8 40 - - Southwest Total 68 15,100 1.00 95.5 21 - - WEST Western Hills/ Ridgmar/ Ridglea 76 13,054 0.85 90.7 (24) - - West Total 76 13,054 0.85 90.7 (24) - - DALLAS TOTAL 1,942 460,164 1.13 93.7 3,988 16,206 679

FORT WORTH TOTAL 846 177,586 0.99 92.9 792 2,648 310

DALLAS/FORT WORTH TOTAL 2,788 637,750 1.11 93.8 4,780 18,854 989

Source: Apartment Data Service, Q3 2015. CBRE Research, Q3 2015.

MULTIFAMILY RENTS Figure 3: Rent, Avg. Monthly by Class $/SF For the sixth consecutive quarter, average monthly 1.70 rents remained over $1.00 per sq. ft. for DFW 1.50 overall. Year-over-year average rent increased by 1.30 $0.08 per sq. ft. or a 7.3% annual increase. The 1.10 highest retail rents were quoted in 0.90 Uptown/Oaklawn/Highland Park at $1.66 per sq. 0.70 ft., while the lowest rents were reported in East Fort Worth/Woodhaven/I-35E at $0.81 per sq. ft. At the 0.50 end of Q3 2015, 17 of the 37 submarkets reported

above-market rental averages (higher than $1.11 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 per sq. ft.). Class A Class B Class C Class D Overall Both Class A and Class B properties saw average rental rates increase by $0.02 per sq. ft. from Q2 Source: Apartment Data Service, Q3 2015. 2015 to Q3 2015. Additionally, Class C and D CBRE Research, Q3 2015. properties also saw an increase of $0.02 per sq. ft. over the same time period.

MULTIFAMILY OCCUPANCY Figure 4: Occupancy Rate by Class Occupancy (%) Overall, occupancy increased by 120 bps to 93.8% at the end of Q3 2015. Class A occupancy reached 97 a 12-quarter high across DFW (93.7%), a year- 95 over-year increase of 470 bps and a quarter-over- 93 quarter increase of 360 bps. For Class B, 91 occupancy increased by 20 bps from 95.6% to 95.8%. Class C properties remained flat and Class 89 D occupancy increased 30 bps. The highest 87 occupancy rates in the market were reported in the 85 Far South Dallas/Waxahachie submarket, Far East

Dallas, and Duncanville/Desoto/Cedar Hill/ Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Lancaster at 96.9%. Class A Class B Class C Class D Overall

Source: Apartment Data Service, Q3 2015. CBRE Research, Q3 2015.

Source: CBRE Research, Q3 2015.

MULTIFAMILY CONSTRUCTION

Demand for space in the multifamily market continues to remain strong as vacancy decreased 160 bps over the quarter. New units have and will continue to be absorbed steadily in 2015. Year-to-date as of Q3 2015, the U.S. Census Bureau reports that 16,712 multifamily housing permits have been issued in DFW from January through September 2015, an increase of approximately 2,000 permits from the same time period last year.

The number of proposed units in the pipeline compressed slightly over last quarter. There was a decrease of 1,732 units in Q3 2015, yielding a total proposed count of 22,261units. In addition, there were 5,775 new unit starts in Q3 2015, adjusting the total number of units under construction to 18,854 units. More than 1/5th of DFW’s under construction activity is concentrated within the Uptown/Oaklawn/Highland Park submarket with 3,912 units currently under construction, however, no units delivered in Q3 2015. Downtown Dallas/West End/Deep Ellum had the highest amount of deliveries, at 499 units, leaving 1,615 units currently under construction. The Far Southwest Fort Worth submarket has the most units under construction of the Fort Worth markets with 766 units, yet no units delivered over the quarter.

Figure 5: Construction Activity and Net Absorption Under Construction Delivered Net Absorption Unit Count (K) 22 20 18 16 14 12 10 8 6 4 2 0 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Source: Apartment Data Service, Q3 2015. CBRE Research, Q3 2015.

EMPLOYMENT AND DEMOGRAPHICS Figure 6: Unemployment Rate Unemployment Rate % In Q3 2015, DFW created 104,100 jobs year-over- 10 year, translating to a 3.2% annual growth rate. The 9 unemployment rate fell from 4.0% at the end of Q2 8 2015 to the current level of 3.9% this quarter. Dallas/Fort Worth’s unemployment rate for Q3 7 2015 was 50 bps lower than Texas (4.4%) and130 6 bps lower than the U.S. (5.2%). An ample supply of 5 well-educated workers and strong population 4 growth contribute to the area's healthy economy. 3 With a current estimated population of 6.9 million, 2 the DFW metropolitan area is the fourth-largest 1 MSA in the United States. The area’s population has grown by 8.2% since 2010, and additional growth 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q3 2015 of 7.1% is projected for 2015 to 2020, according to U.S. Texas Dallas/Fort Worth MSA Nielsen. Source: Bureau of Labor Statistics, September 2015.

CAPITAL MARKETS

Market conditions at the national level remain Deep Ellum/Uptown and Downtown Ft. Worth/ TCU strong. In Q3 2015, national multifamily continue to experience extensive construction occupancy has increased 18 bps to 95.1%, and activity. annual rent growth was 5.2%, an increase of 10 bps quarter-over-quarter and a 109 bps year-over- At the three quarter mark of 2015, average year. Overall, rent growth reached a nine-year infill/urban stabilized cap rates in DFW remained high, as reported by Axiometrics. According to Real stable between the ranges of 4.25% to 4.75% for Capital Analytics, national sales volume decreased Class A properties. Class B properties remained 4% and totaled $29.6 billion in transactions this stable at 5.00% to 6.00% while Class C properties quarter and $128.5 billion over the past 12 months, also stayed flat between 6.00% to 7.00%. an 18% increase. In suburban areas, average stabilized cap rates ranged from 4.75% to 5.25% for Class A properties, Multifamily sales volume in DFW totaled $1.8 billion 5.50% to 6.00% for Class B properties, and 6.75% in Q3 2015, per Real Capital Analytics. DFW's to 7.50% for Class C properties; unchanged from reported average price per unit in Q3 2015 was last quarter. $83,574 a 4% increase from Q2 2015. Most sales continue to occur in the suburbs while urban areas such as Downtown Dallas/West End/

Figure 7: Q3 2015 Major Transactions

Units Property Address City

524 Broadstone Valley Ranch 10201 N Macarthur Blvd Irving

396 Handover Cityplace – Dallas 4030 N Central Expy Dallas

376 Thornbury at Chase Oaks 7101 Chase Oaks Plano

372 Villlas of Vista 351 State Highway 121 Lewisville

372 Broadstone Vista Ridge 160 E Vista Ridge Coppell

364 The Madision 12800 Jupiter Rd Dallas

354 Monticello by the Vineyard 2500 State Highway 121 Euless

340 Sontera Palms 9505 Royal Ln Dallas

334 The Avenues at Craig Ranch 8700 Stacy Rd Dallas

360 Century Legacy Village 606 W Gran

336 Landmark on Lovers Urban Apartment Homes 5201 Amesbury Dr Dallas

324 Meadows at Ferguson 11760 Ferguson Dallas

320 Meadow Wood 1826 Esters Rd Irving

310 Venue at Greenville 5769 Pineland Dr Dallas

300 Resort at Central Park 2300 Central Park Bedford

Source: Real Capital Analytics, Q3 2015. CBRE Research, Q3 2015.

CONTACTS CBRE OFFICES

E. Michelle Miller CBRE Dallas Research Operations Manager 2100 McKinney Ave, Suite 700 [email protected] Dallas, TX 75201

Lauren Paris To learn more about CBRE Research, Senior Research Analyst or to access additional research reports, +1 214 979 6587 please visit the Global Research Gateway [email protected] at www.cbre.com/researchgateway.

Brian Ashton Research Coordinator +1 214 979 6589 [email protected]

Dallas / Fort Worth Multifamily, Q2 2015 Demand lives up to seasonally strong expectations

Vacancy Rate Under Construction Completions Net Absorption 7.4% 14,068 Units 2,784 Units 6,383 Units

*Arrows indicate change from previous quarter. Figure 1: Net Absorption HIGHEST QUARTER NET ABSORPTION IN THE LAST FIVE YEARS Units In Q2 2015, over 6,700 units were absorbed, an 3,450 Q2 increase of almost 1,000 units from Q1 2015. This robust absorption is and continues to be supported by 2,950 Q1 strong employment growth and development activity in Dallas/Fort Worth. The Uptown/Oaklawn/Highland Park 2,450 submarket continued to outpace all other submarkets by 2015 YTD Total Units Absorbed absorbing over 1,400 units year-to-date, over 380 more 1,950 units than the next highest-performing submarket, West Plano/Frisco. 1,450

CONTINUED INFLUX OF NEW UNITS 950 The first half of 2015 recorded over 5,200 new unit completions, an increase of approximately 21% or 915 450 more new units compared to the first half of 2014. Par for the course, new units continue to be absorbed as (50) they are delivered. East Dallas North Dallas South Dallas Central Dallas

MULTIFAMILY LANDSCAPE CHANGING IN THE East Ft. Worth West Ft. Worth West South Ft. Worth South Ft. Northeast Dallas Southeast Dallas Northwest Dallas Central Ft. Worth Southwest Dallas

URBAN CORE OF DALLAS. Worth Ft. Northeast Northwest Ft. Worth Northwest Southwest Ft. Worth Southwest Ft. Almost all of the planned developments in the Greater Source: CBRE Research, Q2 2015. Downtown area, which includes Uptown, are high-rises. Currently, Uptown has a relatively limited set of existing in Q2 2015. Overall market fundamentals are trending high-rise space, and the landscape is going to positively across all multifamily classes and sustained completely change. There are over 5,000 units under demand indicates continued growth for the remainder of construction in the urban core submarkets. Notably, The 2015. Additionally, employment grew by 3.4% over the Jordan Uptown, a high-rise community located near last 12 months in DFW compared to a growth rate of McKinney Ave at the Maple/Routh Connection, recently 2.3% nationally; it is forecasted DFW will remain one of topped off this quarter at 23 stories. the best markets for job growth in 2015. Furthermore, DFW’s population exceeds 6.9 million people and is

ECONOMY SUSTAINS MARKET CONDITIONS considered young, with an average age of 35, and The overall market for multifamily real estate in affluent, with most of the population (51%) in their prime Dallas/Fort Worth once again fired on all cylinders earning years of 20-54.

Figure 2: Market Overview

New Occupanc Net Under Construction Property Unit Mthly Rent y Absorption Constructi Delivered Submarket Count Count ($/SF) (%) Units on Units Units DALLAS MARKETS CENTRAL Downtown Dallas/ West End/ Deep Ellum 43 8,436 1.42 90.3 131 1,944 Uptown/ Oaklawn/ Highland Park 127 26,609 1.67 88.9 747 3,104 710 East Central Dallas/ Lower Greenville Ave 56 6,954 1.47 93.5 329 360 - White Rock Lake/ Tenison Park 58 11,920 0.93 92.8 76 - - North Central Dallas/ Upper Greenville Ave 95 25,820 1.12 90.6 144 685 - Skillman St/ I-635 94 25,820 0.95 92.8 165 - - Central Total 473 105,220 1.26 91.1 1,592 6,093 710 EAST Far East Dallas 19 2,380 1.00 94.4 24 - - East Total 19 2,380 1.00 94.4 24 - - NORTHEAST Garland 107 19,074 0.95 94.6 164 - 148 Northeast Total 107 19.074 0.95 94.6 164 - 148 NORTH North Dallas/ Addison 107 29,459 1.13 94.4 207 400 - Far North Dallas/ Collin County 81 25,314 1.29 96.0 126 - - East Plano/ Richardson 78 21,005 1.16 89.5 347 532 660 West Plano/ Frisco 135 42,380 1.24 91.9 676 1,654 318 Allen/ McKinney 63 16.011 1.15 92.1 232 109 164 North Total 464 134,169 1.20 92.9 1,588 2,695 1,142 NORTHWEST East Irving 57 8,020 0.89 95.3 53 - - West Irving 81 18,288 1.00 95.6 51 - - Las Colinas/ Valley Ranch/ Coppell 75 26,452 1.26 94.2 240 1,394 - Northwest Dallas/ Bachman Lake 62 11,510 0.93 94.8 135 - - Carrollton/ Farmers Branch 105 24,728 1.10 94.7 172 - 256 Lewisville 82 23,783 1.13 93.4 295 780 - Denton 56 10,958 1.12 95.8 40 384 - Northwest Total 518 123,739 1.07 94.6 986 2,558 256 SOUTHEAST Southeast Dallas/ Mesquite 101 21,785 0.88 94.1 56 - - Southeast Total 101 21,785 0.88 94.1 56 -- SOUTH South Dallas/ Oak Cliff 99 18,990 0.89 90.3 141 - - Duncanville/ DeSoto/ Cedar Hill/ Lancaster 89 19,794 0.90 94.0 149 - - Far South Dallas/ Waxahachie 24 3,007 0.95 96.1 10 - - South Total 212 41,791 0.90 92.5 300 -- SOUTHWEST Grand Prairie 41 8,949 0.96 95.9 79 - - Southwest Total 41 8,949 0.96 95.9 79 -- FORT WORTH MARKETS CENTRAL Downtown Ft Worth/ TCU 52 9,231 1.39 90.8 219 929 374 Central Total 52 9,230 1.39 90.8 219 929 374 EAST East Ft Worth/ Woodhaven/ I-30E 68 12,536 0.79 89.3 194 - - North Arlington 97 21,534 0.97 93.3 100 - - South Arlington 140 29,133 0.96 84.5 99 353 154 East Total 305 63,203 0.93 88.5 393 353 154 NORTHEAST Haltom City/ Richland Hills/ Fossil Creek 75 18,885 1.01 96.0 340 - - Hurst/ Euless/ Bedford 130 29,720 1.01 95.0 56 300 - Grapevine/ Roanoke/ Keller 54 13,231 1.19 92.9 458 322 - Northeast Total 259 61,806 1.05 94.9 754 622 - NORTHWEST Northwest Ft Worth/ Saginaw/ Eagle Mtn 27 4,323 0.84 95.3 3 302 - Northwest Total 27 4,323 0.84 95.3 3 302 - SOUTH South Ft Worth 60 10,692 0.84 93.5 28 124 - South Total 60 10,692 0.84 93.5 28 124 - SOUTHWEST Southwest Ft Worth/ Benbrook 44 12,920 1.01 95.9 105 392 - Far Southwest Ft Worth 24 2,810 0.91 94.0 (28) - - Southwest Total 68 15,100 0.99 95.5 77 392 - WEST Western Hills/ Ridgmar/ Ridglea 76 13,054 0.84 81.1 120 - - West Total 76 13,054 0.84 81.1 120 -- DALLAS 1,935 458,007 1.13 93.1 4,789 11,346 2,256 TOTAL FORT WORTH TOTAL 847 177,409 0.98 92.1 1,594 2,722 528

DALLAS/FORT WORTH TOTAL 2,782 635,416 1.09 92.6 6,383 14,068 2,784

Source: Apartment Data Service, Q2 2015. CBRE Research, Q2 2015.

MULTIFAMILY RENTS Figure 3: Rent, Avg. Monthly by Class $/SF For the fifth consecutive quarter, average monthly 1.70 rents remained over $1.00 per sq. ft. for DFW 1.50 overall. Year-over-year average rent increased by 1.30 $0.08 per sq. ft. or a 7.4% annual increase. The 1.10 highest retail rents were quoted in 0.90 Uptown/Oaklawn/Highland Park at $1.67 per sq. 0.70 ft., while the lowest rents were reported in East Fort Worth/Woodhaven/I-35E at $0.79 per sq. ft. At 0.50 the end of Q2 2015, 13 of the 37 submarkets

reported above-market rental averages (higher than Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 $1.09 per sq. ft.). Class A Class B Class C Class D Overall Both Class A and Class B properties saw average rental rates increase by $0.03 per sq. ft. from Q1 Source: Apartment Data Service, Q2 2015. 2015 to Q2 2015. Additionally, Class C and D CBRE Research, Q2 2015. properties saw an increase of $0.03 per sq. ft. and $0.02 per sq. ft. over the same time period, respectively.

Figure 4: Occupancy Rate by Class MULTIFAMILY OCCUPANCY Occupancy (%)

Overall, occupancy compressed slightly by 10 bps 97 to 92.6% at the end of Q2 2015. Class A occupancy 95 reached an 11 quarter high across DFW (90.1%), a 93 year-over-year increase of 280 bps and a quarter- 91 over-quarter increase of 150 bps. For Class B, occupancy increased by 30 bps from 95.3% to 89 95.6%. Occupancy for Class C properties increased 87 by 60 bps while Class D occupancy increased by 10 85 bps. The highest occupancy rate in DFW, for a second consecutive quarter, was reported in the Far Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 South Dallas/Waxahachie submarket at 96.1%, a Class A Class B Class C quarter-over-quarter increase of 40 bps. Class D Overall

Source: Apartment Data Service, Q2 2015. CBRE Research, Q2 2015.

Source: CBRE Research, Q2 2015.

MULTIFAMILY CONSTRUCTION

Demand for space in the multifamily market continues to remain strained despite a vacancy increase of 10 bps over the quarter. New units have and will continue to be absorbed steadily in 2015. Year-to-date as of May 2015, the U.S. Census Bureau reports that 7,136 multifamily housing permits have been issued in DFW from January through May 2015, a decrease of approximately 2,000 permits from the same time period last year.

The number of proposed units in the pipeline rebounded slightly over last quarter. There was an increase of 540 units in Q2 2015, yielding a total proposed count of 23,933 units. In addition, there were 223 new unit starts in Q2 2015, adjusting the total number of units under construction to 14,068 units. More than 1/5th of DFW’s under construction activity is concentrated within the Uptown/Oaklawn/Highland Park submarket with 3,104 units currently under construction and 710 units delivered for the quarter. East Plano/Richardson also had a notable amount of deliveries, at 660 units, leaving 532 units currently under construction. The Downtown Fort Worth/TCU submarket has the most units under construction of the Fort Worth markets with 929 units, and 374 units delivered this quarter.

Figure 5: Construction Activity and Net Absorption Under Construction Delivered Net Absorption Unit Count (K) 22 20 18 16 14 12 10 8 6 4 2 0 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Source: Apartment Data Service, Q2 2015. CBRE Research, Q2 2015.

EMPLOYMENT AND DEMOGRAPHICS Figure 6: Unemployment Rate Unemployment Rate % In Q2 2015, DFW created 121,600 jobs year-over- 10 year, translating to a 3.7% annual growth rate. The 9 unemployment rate fell from 4.6% at the end of Q1 8 2015 to the current level of 4.0% this quarter. Dallas/Fort Worth’s unemployment rate for Q2 7 2015 was 30 bps lower than Texas (4.3%) and100 6 bps lower than the U.S. (5.5%). An ample supply of 5 well-educated workers and strong population 4 growth contribute to the area's healthy economy. 3 With a current estimated population of 6.9 million, 2 the DFW metropolitan area is the fourth-largest 1 MSA in the United States. The area’s population

has grown by 8.2% since 2010, and additional 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 U.S. Texas Dallas/Fort Worth MSA growth of 7.1% is projected for 2015 to 2020, Q2 2015 according to Nielsen. Source: Bureau of Labor Statistics, December 2014.

CAPITAL MARKETS

Market conditions at the national level remain End/Deep Ellum, Uptown/Oaklawn/Highland Park strong. In Q2 2015, national multifamily and Downtown Ft. Worth/TCU continue to occupancy increased 30 bps to 95.2%, with annual experience extensive construction activity. rent growth at 5.0%, an increase of 4 bps quarter- over-quarter and 142 bps year-over- year. Overall, At the midpoint of 2015, the average infill/urban rent growth reached a four year high, as reported stabilized cap rates increased 25 bps to a new range by Axiometrics. According to Real Capital of 4.25% to 4.75% for Class A properties. Class B Analytics, national sales volume decreased 15% properties remained stable at 5.00% to 6.00% and totaled $28.23 billion in transactions this while class C properties decreased 50 bps to 6.00% quarter, a 30% increase from $128.03 billion over to 7.00%. the past 12 months. In suburban areas, average stabilized cap rates Multifamily sales volume in DFW totaled $1.04 ranged from4 .75% to 5.25% for Class A properties, billion in Q2 2015, per Real Capital Analytics. 5.50% to 6.00% for Class B properties, and 6.75% DFW's reported average price per unit in Q2 2015 to 7.50% for Class C properties. was $92,381 a 19% increase from Q1 2015. Most sales continue to occur in the suburbs while the more urban submarkets of Downtown Dallas/West

Figure 7: Q2 2015 Major Transactions

Units Property Address City

656 Sierra Park 11611 Ferguson Rd Dallas

512 Camelot Village 4200 US Hwy 80 E Mesquite

444 Jefferson Creekside 1300 N Custer Rd Allen

404 Madison at Round Grove 201 E Round Grove Rd Lewisville

400 Sheffield Square 2770 Bardin Rd Grand Prairie

395 Amalfi Stonebriar 5275 Town And Country Blvd Frisco

384 Palo Alto 3808 Post Oak Blvd Euless

376 Madison on the Parkway 19002 Dallas Pkwy Dallas

372 Wimberly Apartment Homes 4141 Horizon North Pkwy Dallas

360 Derby Park 606 W Palace Pky Grand Prairie

336 Landmark on Lovers Urban Apartment Homes 5201 Amesbury Dr Dallas

324 Meadows at Ferguson 11760 Ferguson Dallas

320 Meadow Wood 1826 Esters Rd Irving

310 Venue at Greenville 5769 Pineland Dr Dallas

300 Resort at Central Park 2300 Central Park Bedford

Source: Real Capital Analytics, Q2 2015. CBRE Research, Q2 2015.

CONTACTS CBRE OFFICES

E. Michelle Miller CBRE Dallas Research Operations Manager 2100 McKinney Ave, Suite 700 [email protected] Dallas, TX 75201

Brian Ashton Research Coordinator +1 214 979 6589 [email protected]

Dallas / Fort Worth Multifamily, Q1 2015 2014’s strong momentum continues into 2015 for DFW’s multifamily market

Vacancy Rate Under Construction Completions Net Absorption 7.3% 16,581 Units 2,479 Units 5,765 Units

*Arrows indicate change from previous quarter. Figure 1: Net Absorption HIGHEST Q1 NET ABSORPTION IN THE LAST FIVE YEARS Units In Q1 2015 over 5,700 units were absorbed, an 1,750 increase of over 5,000 units from Q4 2014. This healthy Q1 absorption activity is and continues to be supported by 1,550 strong employment growth and development activity in 1,350 2015 YTD Total Units Absorbed Dallas/Fort Worth. The Uptown/Oaklawn/Highland Park submarket continued to outpace all other submarkets by 1,150 absorbing 716 units in Q1 2015, over 200 more units 950 than the next highest preforming submarket, Skillman St/ I-635. 750

550 DFW OCCUPANCY HAS BEEN OVER 90% FOR THE PAST FIVE YEARS 350 The last time the overall occupancy was under 90% was 150 in Q1 2010 (89.3%) since then occupancy has remained in the low 90% range. Par for the course, new units (50) continue to be absorbed as they are delivered. East Dallas North Dallas South Dallas Central Dallas East Ft. Worth

NUMBER OF UNITS UNDER CONSTRUCTION West Ft. Worth South Ft. Worth Northeast Dallas Southeast Dallas Northwest Dallas Central Ft. Worth Southwest Dallas Northeast Ft. Worth Northwest Ft. Worth DECLINED IN Q1 2015 Southwest Ft. Worth Quarter–over–quarter, the number of new units in Q1 Source: CBRE Research, Q1 2015. 2015 decreased by 1,058 units from Q4 2014. In Dallas, the Uptown/Oaklawn/Highland Park submarket had the highest number of units under construction, with across all classes of multifamily properties and sustained 3,446 units, while the Downtown Ft Worth/ TCU demand indicates continued growth for the remainder of submarket has 929 units under construction for the Fort 2015. Additionally, DFW’s central location, friendly Worth side of the Metroplex. business environment, and strong employment growth (fueled by corporate relocations and general in- WINTER WEATHER DID NOT COOL DOWN EXCELLENT migration) should help elevate apartment demand. MARKET CONDITIONS The overall market for multifamily real estate in Dallas/ In addition, DFW’s population is over 6.9 million people Fort Worth continued to fire on all cylinders in Q1 2015. and is considered young, with an average age of 35, Market fundamentals trended positively and affluent, with most of the population (51%) in their prime earning years of 20-54.

Figure 2: Market Overview

New Net Under Construction Property Unit Mthly Rent Occupancy Absorption Construction Delivered Submarket Count Count ($/SF) (%) Units Units Units DALLAS MARKETS CENTRAL Downtown Dallas/ West End/ Deep Ellum 42 8,123 1.38 91.9 59 2,257 - Uptown/ Oaklawn/ Highland Park 125 26,200 1.63 87.7 716 3,446 684 East Central Dallas/ Lower Greenville Ave 56 6,954 1.41 88.8 43 360 - White Rock Lake/ Tenison Park 58 11,920 0.92 92.1 239 - - North Central Dallas/ Upper Greenville Ave 95 25,820 1.12 90.5 102 496 - Skillman St/ I-635 94 25,820 0.91 92.1 497 - - Central Total 470 104,498 1.21 90.4 1,656 6,559 684 EAST Far East Dallas 19 2,380 1.00 95.7 (10) - - East Total 19 2,380 1.00 96.7 (10) - - NORTHEAST Garland 106 18,926 0.92 94.6 240 148 - Northeast Total 106 18,926 0.92 94.6 240 148 - NORTH North Dallas/ Addison 106 29,136 1.09 94.9 174 722 - Far North Dallas/ Collin County 80 29,312 1.10 95.5 (22) - - East Plano/ Richardson 76 20,525 1.15 88.3 161 892 403 West Plano/ Frisco 133 41,762 1.20 91.6 411 2,272 790 Allen/ McKinney 61 15,499 1.11 93.6 107 620 - North Total 456 132,234 1.14 92.8 831 4,506 1,193 NORTHWEST East Irving 57 8,020 0.86 94.9 56 - - West Irving 81 18,288 0.97 95.4 8 - - Las Colinas/ Valley Ranch/ Coppell 75 26,449 1.23 93.3 103 1,394 482 Northwest Dallas/ Bachman Lake 62 11,514 0.91 93.6 47 - - Carrollton/ Farmers Branch 105 24,728 1.23 93.9 35 - - Lewisville 82 23,787 1.10 92.9 393 780 - Denton 56 10,958 1.10 95.3 61 384 - Northwest Total 518 123,684 1.07 94.0 128 2,558 482 SOUTHEAST Southeast Dallas/ Mesquite 100 21,745 0.85 94.1 128 - - Southeast Total 100 21,745 0.85 94.1 128 - - SOUTH South Dallas/ Oak Cliff 99 18,990 0.87 89.5 402 - - Duncanville/ DeSoto/ Cedar Hill/ Lancaster 89 19,794 0.88 93.3 333 - - Far South Dallas/ Waxahachie 84 8,949 0.93 95.7 (28) - - South Total 272 41,791 0.88 91.7 707 - - SOUTHWEST Grand Prairie 41 8,949 0.94 94.9 92 - - Southwest Total 41 8,949 0.94 94.9 92 - - FORT WORTH MARKETS CENTRAL Downtown Ft Worth/ TCU 52 9,230 1.35 88.4 89 929 - Central Total 52 9,230 1.35 88.4 89 929 - EAST East Ft Worth/ Woodhaven/ I-30E 68 12,659 0.77 87.4 118 - - North Arlington 99 21,534 0.95 93.1 151 - - South Arlington 139 28,884 0.93 92.5 255 254 - East Total 306 63,077 0.90 91.7 524 254 - NORTHEAST Haltom City/ Richland Hills/ Fossil Creek 75 18,885 0.98 94.8 345 - 120 Hurst/ Euless/ Bedford 131 29,720 0.98 94.9 77 300 - Grapevine/ Roanoke/ Keller 52 12,876 1.15 91.5 57 509 - Northeast Total 258 61,481 1.02 94.2 479 809 120 NORTHWEST Northwest Ft Worth/ Saginaw/ Eagle Mtn 27 4,323 0.82 95.0 (25) 302 - Northwest Total 27 4,323 0.82 95.6 (25) 302 - SOUTH South Ft Worth 60 10,692 0.84 93.3 71 124 - South Total 60 10,692 0.84 93.3 71 124 - SOUTHWEST Southwest Ft Worth/ Benbrook 44 12,920 0.98 95.0 151 392 - Far Southwest Ft Worth 24 2,810 0.90 94.9 (3) - - Southwest Total 68 15,100 0.90 94.9 148 392 - WEST Western Hills/ Ridgmar/ Ridglea 75 12,961 0.81 89.9 132 - - West Total 75 12,961 .81 89.9 132 - - DALLAS TOTAL 1,982 455,107 1.08 92.7 4,347 13,771 2,359

FORT WORTH TOTAL 846 176,864 0.96 92.7 1,418 2,810 120

DALLAS/FORT WORTH TOTAL 2,828 631,971 1.06 92.7 5,765 16,581 2,479

Source: Apartment Data Service, Q1 2015. CBRE Research, Q1 2015.

MULTIFAMILY RENTS Figure 3: Rent, Avg. Monthly by Class

$/SF For the fourth consecutive quarter, average 1.50 monthly rents remained over $1.00 per. sq. f. for DFW. The quarter-over-quarter average rent rose by 1.30 $0.02 per sq. f., a 1.7% increase. The highest 1.10 rental rate average was quoted in the submarket of 0.90 Uptown/Oaklawn/Highland Park ($1.63 per sq. f.) while the lowest rent average was reported in East 0.70 Fort Worth/Woodhaven/I-35E ($0.77 per sq. f.). At 0.50 the end of Q1 2015, 14 of the 23 submarkets reported above-market rental averages (higher than Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

$1.06 per sq. f.). Class A Class B Class C Class D Overall Both Class A and Class B properties saw average rental rates increase in Q1 2015, by $0.03 per sq. f. Source: Apartment Data Service, Q1 2015. and $0.02 per sq. f., respectively. Additionally, CBRE Research, Q1 2015. Class C and D properties saw the same increase of $0.02 per sq. f. over the same time period.

MULTIFAMILY OCCUPANCY Figure 4: Occupancy Rate by Class

Across the Dallas/ Fort Worth Market, occupancy Occupany (%) increased by 20 basis points (bps) to 92.7% at the 95 end of Q1 2015, bouncing back from seasonal 93 decline in leasing activity during the fourth quarter. Although winter weather caused a decline 91 in new unit deliveries in Q1 2015, it is forecasted 89 that demand will remain strong as supply struggles to keep up. Class C and D properties experienced 87 the largest increase in occupancy quarter-over- quarter, at 90 bps, to now sit at 94.2% and 90.7%, 85 respectively. There was an increase of 40 bps in Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Class B properties from 94.9.% to 95.3%. Class A Class A Class B Class C occupancy decreased by 70 basis points to 88.6%. Class D Overall The Far South Dallas / Waxahachie and Far East submarkets reported the highest occupancies in Source: Apartment Data Service, Q1 2015. DFW at 95.7%. CBRE Research, Q1 2015.

Source: CBRE Research, Q1 2015.

MULTIFAMILY CONSTRUCTION

Demand for space in the multifamily market continues to remain strong as vacancy decreased 20 bps over the quarter. New units have and will continue to be absorbed rapidly in 2015. Year-to-date as of February 2015, the U.S. Census Bureau reports that 3,488 multifamily housing permits have been issued in DFW from January to February 2015, an increase of over 100 more permits than the same time period last year.

The number of proposed units in DFW saw its ﬁrst decrease in over four quarters. There was a contraction of 410 units, equating to 23,393 proposed units in Q1 2015. In addition, there was a decrease of 1,058 new unit starts in Q1 2015, adjusting the total number of units under construction to 16,581 units. The most activity remained in the Uptown/Oaklawn/Highland Park submarket with 3,446 units currently under construction and 684 units delivered for the quarter. The most deliveries occurred in West Plano with 790 units, leaving 2,272 units currently under construction. The Downtown Fort Worth/TCU submarket has the most units under construction on the Fort Worth side with 929 units.

Figure 5: Construction Activity and Net Absorption

Unit Count (000’s) Under Construction Delivered Net Absorption 22 20 18 16 14 12 10 8 6 4 2 0 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

Source: Apartment Data Service, Q1 2015. CBRE Research, Q1 2015.

EMPLOYMENT AND DEMOGRAPHICS Figure 6: Unemployment Rate Unemployment Rate % In Q1 2015, DFW created 49,699 jobs year-over- 10 year, translating to a 3.7% annual growth rate. The 9 unemployment rate fell from 4.8% at the end of 8 2014 to the current level of 4.6% as of March 2015. Dallas/Fort Worth’s unemployment rate posted an 7 identical unemployment rate for the quarter as 6 Texas (4.6%) but 100 bps lower than the U.S. (5.6%) 5 in Q1 2015. An ample supply of well-educated 4 workers and strong population growth contribute 3 to the area's healthy economy. With a current 2 estimated population of 6.9 million, the DFW 1 metropolitan area is the fourth-largest MSA in the 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

United States. The area’s population has grown by Q1 2015 8.2% since 2010, and growth of 7.1% is projected U.S. Texas Dallas/Fort Worth for 2015 to 2020, according to Claritas. MSA Source: Bureau of Labor Statistics, December 2014.

CAPITAL MARKETS Downtown Ft. Worth/TCU continue to experience extensive construction activity. Multifamily continues to perform well at a national level. In March, national multifamily occupancy At the start of 2015 in the Dallas/Fort Worth region, had increased 21 bps to 94.9% with annual rent the average inﬁll/urban stabilized cap rates growth of 5.0%; this is ﬁrst time rent growth had compressed 25 bps at the 4.0% to 4.5% range for been at or over 5.0% for two consecutive months Class A properties. The Class B range remained since June/July 2011, as reported by Axiometrics. stable at 5.0% to 5.5% in addition to a stable Class According to Real Capital Analytics, national sales C range of 6.5% to 7.0%. volume decreased by 12%, totaling $30.2 billion in transactions in Q1 2015 and $122.16 billion over In suburban areas, average stabilized cap rates the past 12 months, a 35% increase. decreased 25 bps to 4 .7% to 5.2% for Class A properties, while Class B and C properties Multifamily sales volume in DFW totaled $1.5 remained stable at 5.2% to 5.7%, and 6.7% to billion in Q1 2015, based on data from Real Capital 7.5%, respectively. Analytics. DFW's reported average price per unit in Q1 2015 was $84,747 a 20% decrease from Q4 2014. Most sales continue to occur in the suburban markets while urban areas such as Downtown Dallas/West End/Deep Ellum/Uptown and

Figure 7: Q1 2015 Major Transactions

Units Property Address City

712 Emory & Ashmore at Horizon North 4300 N Horizon Pkwy Dallas

616 Sutter Creek 2216 Plum Ln Arlington

464 Retreat at Stonebridge Ranch 1920 Grassmere Ln McKinney

436 Surrey Row 7272 Marvin D Love Dallas

400 Copper Crossing 4644 Riverwalk Dr Fort Worth

388 Versailles 4900 Pear Ridge Dr Dallas

362 Hidden Creek 1200 College Pkwy Lewisville

362 Advenir at Frankford 3702 Frankford Rd Dallas

304 Pecan Way 5821 Bonnie View Dallas

304 Mandalay Palms 7550 Cliff Creek Dallas

303 Broadstone Waterbridge 600 Woodbridge Pkwy Wylie

301 Stonebridge Ranch 2305 S Custer Rd McKinney

300 Camino Del Sol 1030 Dallas Dr Denton

296 Mandalay Palms 7501 Chesterfield Dr Dallas

288 Arioso 3030 Claremont Dr Dallas

Source: Real Capital Analytics, Q1 2015. CBRE Research, Q1 2015.

CONTACTS CBRE OFFICES

Lynn Cirillo CBRE Dallas Research Operations Manager 2100 McKinney Ave, Suite 700 [email protected] Dallas, TX 75201

Brian Ashton Research Coordinator +1 214 979 6589 [email protected]

Dallas / Fort Worth Multifamily, Q4 2014 The slow leasing season did not affect the performance of DFW’s multifamily market

Vacancy Rate Under Construction Completions Net Absorption 7.6% 20,118 SF 2,892 Units 754 Units

*Arrows indicate change from previous quarter. Figure 1: Net Absorption TOTAL ANNUAL ABSORPTION REACHES TWO YEAR HIGH Units Absorption in 2014 exceeded 13,800 units, an increase 4,000 Q1 of over 830 units from 2013 and 1,640 units from 3,500 Q2 2012. This healthy absorption activity is supported by Q3 strong employment growth and development activity in 3,000 DFW. The Uptown/Oaklawn/Highland Park submarket 2,500 Q4 outpaced all other submarkets by absorbing 1,974 units 2014 Total Units Absorbed 2,000 in 2014. 1,500 DFW’S OCCUPANCY RATE REMAINS ABOVE 1,000 92.0% FOR THE SEVENTH CONSECUTIVE 500 QUARTER The overall occupancy rate decreased slightly in the 0 fourth quarter, but remains higher than it was in 2013. (500) The seasonal softness in net absorption caused a drop of 20 basis points (bps) from 92.7% in the third quarter East Dallas North Dallas North South Dallas South Central Dallas Central to 92.5% at the end of the year. Class A & B properties Worth Ft. East West Ft. Worth South Ft. Worth Northeast Dallas Northeast Southeast Dallas Northwest Dallas Central Ft. Worth Southwest Dallas Southwest Northeast Ft. Worth

performed best, posting occupancy increases of 30 and Northwest Ft. Worth Southwest Ft. Worth 80 bps, respectfully. Source: CBRE Research, Q4 2014.

2013 AND 2014 HAVE DELIVERED THE MOST at Texas A&M University and the North Texas Real Estate COMPLETIONS SINCE 2009 Information System. With the low supply, single family In the previous two years (2013-14) total new units home prices have increased at a pace more than double delivered reached 24,277 units, a difference of 8,655 the national average in DFW. In turn, this makes it less more units than then the three years (2010-12)prior, affordable to become a homeowner. Additionally, which totaled of 15,572 units. The overall demand for strong employment growth in DFW fueled by corporate new units remained strong in 2014 and is forecasted to relocations and net in-migration has and will continue to continue the trend into 2015. keep demand high for apartments.

Employment grew by 3.7% over the last 12 months in DEMAND IS EXPECTED TO CONTINUE DFW, compared to a growth rate of 2.0% nationally and EXCEED SUPPLY IN 2015 it is forecasted DFW will remain one of the best markets DFW single family homes for sale are at their lowest for job growth in 2015. level in a decade as reported by the Real Estate Center

MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY

Figure 2: Market Overview

New Net Under Construction

Property Unit Mthly Rent Occupancy Absorption Construction Delivered Submarket Count Count ($/SF) (%) Units Units Units DALLAS MARKETS CENTRAL Downtown Dallas/ West End/ Deep Ellum 42 8,123 1.37 91.0 42 2,257 - Uptown/ Oaklawn/ Highland Park 122 25,235 1.63 87.4 392 4,397 408 East Central Dallas/ Lower Greenville Ave 56 6,954 1.41 87.7 (34) 360 368 White Rock Lake/ Tenison Park 58 11,920 0.89 90.1 (94) - - North Central Dallas/ Upper Greenville Ave 94 25,285 1.12 90.6 (44) 894 - Skillman St/ I-635 94 25,820 0.89 90.2 210 - - Central Total 466 103,337 1.20 89.5 472 7,908 776 EAST Far East Dallas 19 2,380 1.01 96.0 9 - - East Total 19 2,380 1.01 96.0 9 - - NORTHEAST Garland 106 18,926 0.91 93.3 32 158 147 Northeast Total 106 18,926 0.91 93.3 32 158 147 NORTH North Dallas/ Addison 106 29,136 1.08 94.1 74 722 - Far North Dallas/ Collin County 80 25,312 1.09 95.6 (92 - - East Plano/ Richardson 73 19,462 1.12 92.1 (140) 1,955 278 West Plano/ Frisco 130 40,620 1.17 92.9 (144) 3,096 384 Allen/ McKinney 61 15,499 1.08 93.0 133 620 211 North Total 450 130,029 1.12 93.6 (169) 6,393 873 NORTHWEST East Irving 57 8,020 0.84 94.5 (44) - - West Irving 81 18,288 0.94 93.7 39 - - Las Colinas/ Valley Ranch/ Coppell 75 26,449 1.20 92.9 61 1,394 - Northwest Dallas/ Bachman Lake 62 11,514 0.90 93.2 (134) - - Carrollton/ Farmers Branch 105 24,728 1.07 93.7 23 - - Lewisville 81 23,463 1.08 92.3 384 681 425 Denton 55 10,837 1.08 95.3 (8) 505 - Northwest Total 516 123,299 1.05 93.4 321 2,580 425 SOUTHEAST Southeast Dallas/ Mesquite 100 21,745 0.83 93.5 204 209 - Southeast Total 100 21,745 0.83 93.5 204 209 - SOUTH South Dallas/ Oak Cliff 98 18,738 0.84 88.2 11 252 - Duncanville/ DeSoto/ Cedar Hill/ Lancaster 89 19,794 0.87 91.6 111 - - Far South Dallas/ Waxahachie 24 3,007 0.91 96.7 22 - - South Total 211 41,539 0.86 90.4 144 252 - SOUTHWEST Grand Prairie 41 8,949 0.92 93.8 (78) - 72 Southwest Total 41 8,949 0.92 93.8 (78) - 72 FORT WORTH MARKETS CENTRAL Downtown Ft Worth/ TCU 50 8,616 1.29 93.3 20 1,316 - Central Total 50 8,616 1.29 93.3 20 1,316 - EAST East Ft Worth/ Woodhaven/ I-30E 68 12,659 0.76 87.4 (73) - - North Arlington 99 21,534 0.93 92.4 (193) - - South Arlington 139 28,884 0.91 93.9 (126) 254 - East Total 306 63,077 0.89 92.1 (392) 254 - NORTHEAST Haltom City/ Richland Hills/ Fossil Creek 74 18,704 0.97 93.0 56 - 281 Hurst/ Euless/ Bedford 131 29,720 0.97 94.7 (58) 300 - Grapevine/ Roanoke/ Keller 52 12,876 1.15 91.1 18 322 318 Northeast Total 257 61,300 1.01 93.4 16 622 599 NORTHWEST Northwest Ft Worth/ Saginaw/ Eagle Mtn 27 4,323 0.82 95.6 27 302 - Northwest Total 27 4,323 0.82 95.6 27 302 - SOUTH South Ft Worth 60 10,692 0.82 92.7 66 124 - South Total 60 10,692 0.82 92.7 66 124 - SOUTHWEST Southwest Ft Worth/ Benbrook 44 12,920 0.96 93.8 13 - - Far Southwest Ft Worth 24 2,810 0.90 95.1 12 - - Southwest Total 68 15,730 0.95 94.0 25 - - WEST Western Hills/ Ridgmar/ Ridglea 74 12,965 0.79 88.8 57 - - West Total 74 12,965 0.79 88.8 57 - - DALLAS TOTAL 1,909 450,204 1.07 92.3 935 17,500 2,293

FORT WORTH TOTAL 842 176,703 0.94 92.6 (181) 2,618 599

DALLAS/FORT WORTH TOTAL 2,751 626,907 1.04 92.5 754 20,118 2,892

Source: Apartment Data Service, Q4 2014. CBRE Research, Q4 2014.

MULTIFAMILY RENTS Figure 3: Rent, Avg. Monthly by Class

$/SF As 2014 concludes, average monthly rents 1.50 remained above the dollar per sq. ft. mark for the 1.30 third quarter in a row. Quarter-over- quarter average rent increased $ 0.01 per sq. ft., or 0.9%. 1.10 The highest retail rents were quoted in the 0.90 submarket of Uptown/Oaklawn/ Highland Park ($1.63 per sq. ft) and the lowest rents were reported 0.70 in East Fort Worth/Woodhaven/ I-35E ($0.76 per sq. 0.50 ft). There are 15 submarkets above the market

average of $1.03 and 22 submarket below market Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 average. Class A Class B Class C Class D Overall Class A and B properties saw the same quarter- Source: Apartment Data Service, Q4 2014. over-quarter decrease of $0.06 in the average rent CBRE Research, Q4 2014. per sq. ft. in Q4 2014. Additionally, Class C properties decreased $0.03 per Sq. Ft. to $0.85 per sq. ft. and C properties rents held at $0.70 per sq. ft. over the same time period. Figure 4: Occupancy Rate by Class

Occupancy (%) MULTIFAMILY OCCUPANCY 95

Across the Dallas/Ft. Worth market, occupancy 93 decreased 20 bps to 92.5%. Occupancy seasonally decreased as leasing activity slowed over the 91 quarter. Although, as more new units continue to 89 deliver, demand remains strong. Class B properties experienced the largest increase in occupancy over- 87 over-quarter, a 80 bps increase, to 94.9%. There 85 was an increase of 30 bps in Class A properties from 89.0% to 89.3%. Class C properties decreased Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 50 bps to 93.3% and Class D occupancy decreased Class A Class B Class C 20 bps to 89.8%. The Far South Dallas/Waxahachie Class D Overall submarket reported the highest occupancy in DFW Source: Apartment Data Service, Q4 2014. at 96.7%. CBRE Research, Q4 2014.

Source: CBRE Research, Q4 2014.

MULTIFAMILY CONSTRUCTION

Forecasts are suggesting multifamily market conditions will remain tight, as new units will continue to be absorbed rapidly in 2015, along with the expectation for job growth and net in-migration to DFW. Year- to-date through November 2014, the U.S. Census Bureau reports that 15,183 multi-family housing permits were issued in DFW. Thus, development activity will likely keep its momentum into 2015.

The number of units proposed saw an increase for a third quarter in a row in DFW. There was an addition of 57 units in Q4 2014, for a total of 23,803 proposed units, indicating that market fundamentals continue to remain strong. In addition, there were a total of 1,608 new units started in Q4 2014, bringing the total number of units under construction to 20,118 units. The most activity remains to be in the Uptown/Oaklawn/Highland Park submarket with 4,397 units currently under construction and 408 units delivered for the quarter. The most deliveries occurred in Lewisville with 425 leaving 681 units currently under construction. Overall, this is the second quarter in a row that the total number of units under construction is over the 20,000 unit level; Q3 2014 reported the most units under construction in CBRE’s recorded history.

Figure 5: Construction Activity and Net Absorption Unit Count (000's) Under Construction Delivered Net Absorption 22 20 18 16 14 12 10 8 6 4 2 0 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014

Source: Apartment Data Service, Q4 2014. CBRE Research, Q4 2014.

EMPLOYMENT AND DEMOGRAPHICS Figure 6: Unemployment Rate Unemployment Rate % In October 2014, DFW created 115,800 jobs year- 10 over-year, translating to a 3.7% annual growth rate. The unemployment rate fell from 5.8% in the first 9 quarter 2014 to the current level of 4.8% this 8 quarter. Dallas/Ft. Worth’s unemployment rate 7 posted 30 bps lower than Texas (5.1%) and over 100 6 bps lower than United States (5.8%) in Q4 2014. An 5 ample supply of well-educated workers and strong 4 population growth contribute to the area's healthy economy. With a current estimated population of 3 6.8 million, the DFW metropolitan area is the 2 fourth-largest MSA in the United States. The area’s 1 population has grown 30% since 2000, and growth 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 of 8.6% is projected for 2015 to 2019, according to US Texas Dallas/Fort Worth MSA Claritas. Source: Bureau of Labor Statistics, December 2014.

MARKETVIEW DALLAS / FORT WORTH MULTIFAMILY

CAPITAL MARKETS continue to experience extensive construction activity. Nationally, the multifamily market outperformed forecasts in 2014. National multifamily occupancy At the close of 2014 in the Dallas/Ft. Worth region, has decreased 28 bps to 94.8%, and rent growth the average infill/urban stabilized cap rates was 4.5%, the first time rent growth has been over decreased 50 bps between the ranges of 4.25%-to- 4.0% since May 2012, as reported by Axiometrics. 4.75% for Class A properties. Class B properties According Real Capital Analytics, national sales remained stable at 5.0%-to-5.5%, while class C volume increased 1% or approximately $31.0 properties increased 25 bps to 6.5%-to-7.0%. billion over last quarter and $107.1 billion over the past 12 months. In suburban areas, average stabilized cap rates ranged from 5.0%-to-5.5% for Class A properties, Multifamily sales volume in DFW totaled $1.5 5.25%-to-5.75% for Class B properties, and 6.75%- billion in Q4 2014, per Real Capital Analytics. to-7.50% for Class C properties. DFW's reported average price per unit in Q4 2014 was $108,346, a 40% increase from Q3 2014. Most The multifamily market experienced one of 2014 sales occurred in the suburbs while urban the best growth years in past decade as areas such as Downtown Dallas/ West End/ Deep sales volume totaled over $263.2 million in Ellum/Uptown and Downtown Ft. Worth/ TCU DFW.

Figure 7: Q4 2014 Major Transactions

Units Property Address City

576 Fairways at Wilson Creek 3191 Medical Center Drive McKinney

535 Gramercy On The Park 4755 Gramercy Oaks Drive Dallas

520 Parkside at Legacy Phase III and IV 5765 Bozeman Drive Plano

492 Northside At Legacy Phase II 5725-5781 Hathaway Pkwy Plano

436 Hunter’s Hill 18081 Midway Rd Dallas

410 Brighton Apartments 5426 Meadowcreek Drive Dallas

404 Plaza on Harvest Hill 5535 Harvest Hill Dallas

370 Northside at Legacy Phase I 7560 Bishop Rd Plano

360 Orion At Oak Hill 2450 Oak Hill Cir Fort Worth

357 Villas at Montierra 1603-1615 John West Rd Dallas

330 Elan City Centre 13301 Galleria Pl Dallas

325 Berkshire Medical District 4725 Fairmount St Dallas

311 Union at Carrollton Square 1111 S Main St Carrollton

293 Parkside At Legacy Phase V 5765 Bozeman Drive Plano

292 View at Lake Highlands 9855 Shadow Way Dallas

Source: Real Capital Analytics, Q4 2014. CBRE Research, Q4 2014.

CONTACTS CBRE OFFICES

Lynn Cirillo CBRE Dallas Research Operations Manager 2100 McKinney Ave, Suite 700 [email protected] Dallas, TX 75201

Lauren Paris To learn more about CBRE Research, Senior Research Analyst or to access additional research reports, +1 214 9796587 please visit the Global Research Gateway [email protected] at www.cbre.com/researchgateway.

Brian Ashton Research Coordinator +1 214 9796589 [email protected]

Q3 2014 CBRE Global Research and Consulting TOTAL OCCUPANCY AVG RENT PER SQ. FT./MTH NET ABSORPTION CONSTRUCTION DELIVERIES PROPOSED 92.7% $1.03 4,201 Units 21,402 Units 4,330 Units 23,746 Units

Directional arrows based on change from the previous quarter. Data reflects market totals.

MULTIFAMILY OUTPERFORMS EXPECTATIONS AS MARKET FUNDAMENTALS CONTINUE TO STRENGTHEN.

Net Absorption decreases but Figure 1: Market Net Absorption occupancy increases. Unit Count

3,400 Occupancy has increased for the third 3,100 consecutive quarter in DFW, although the 2,800 market saw a decrease in the number of units 2,500 absorbed. Third quarter occupancy increased 2,200 20 basis points (bps) to 92.7%. Net absorption 1,900 totaled 4,201 units, a 603 unit decrease from 1,600 Q2 2014, and year-to-date net absorption 1,300 totaled 12,868 units. 1,000 700 Permit activity for the multifamily 400 market exceeds 2013 totals in Q3 2014. 100 (200) As of July 2014, Dallas/Fort Worth single and East Dallas North Dallas multifamily permits totaled 21,266 and 41,165 South Dallas Central Dallas East Ft. Worth East Ft. Worth West Ft. Worth Ft. Worth West South Ft. Worth South Ft. Worth Northeast Dallas Northwest Dallas Southeast Dallas Central Ft. Worth Central Ft. Worth Southwest Dallas

for the year, respectfully. Multifamily permits Northeast Ft. Worth Northwest Ft. Worth Northwest Ft. Worth Southwest Ft. Worth Southwest Ft. Worth to-date in 2014 are up 10.6% from the same Q1 Q2 Q3 2014 YTD Total Units Absorbed period in 2013, according to the Census Bureau. Source: Apartment Data Services, Q3 2014. CBRE Research, Q3 2014. Fort Worth outperforms all major Texas MSA’s. Key demographic supports multifamily demand. According to Axiometrics, Fort Worth ranks The ongoing strength of the multifamily market in Dallas/Fort 11th out of the 50 top markets nationally. One Worth is due to the strong demand by one key demographic group. contibuting factor is due to the effective rent Known as Generation Y or Millennials, who are in their 20s to growth. Rent increased 56 basis points from July early 30s, are driving the rental demand because they are delaying and 187 bps from August 2013. Fort Worth has marriage, embracing the live, work, play lifestyle, and experiencing surpassed Austin and Houston to the top of the restrictive mortgage requirements. charts in Texas. DFW’s population is considerably young, with an average age of 39, and affluent, with most of the population (51%) in their prime earning years of 20-54. This population make up is directly effecting why the multifamily market is continuing to perform better than expected. Another contributing factor to the strength of the DFW market is residents tend to earn more than the national average, supporting an estimated median household income of $56,065 as of Q3 2014, versus $53,352 in the U.S.

© 2014, CBRE, Inc. 0 0 0 0 0 0 0 0 0 164 630 362 381 555 201 354 294 200 494 555 555 294 200 1,189 3,836 4,330 1,156 1,570 Units Delivered Delivered Construction © 2014, CBRE, Inc. 0 0 0 0 0 0 728 894 158 722 623 782 548 209 252 254 300 640 302 158 209 252 254 940 302 2,533 4,214 1,955 3,096 1,876 1,316 2,812 8,369 6,396 3,206 1,316 Units 18,590 21,402 Under Construction

3 2 2 2 2 (6) (7) (2) 66 66 29 35 55 99 80 57 84 (2) (17) (17) (16) 846 116 215 122 122 261 320 393 115 189 369 220 194 215 128 150 101 891 940 252 215 220 331 141 (17) (16) (198) (190) (198) (190) Net 3,310 4,201 1,303 1,218 Units Absorption 92.3 87.3 93.1 90.6 90.7 89.4 95.7 93.1 93.9 96.0 92.8 93.2 92.1 95.0 95.1 94.4 94.5 93.6 92.0 95.0 92.6 88.2 91.3 95.9 94.6 92.7 89.0 93.3 94.3 92.8 94.9 93.2 95.0 92.0 93.7 94.6 88.4 92.9 92.8 92.7 89.8 95.7 93.1 93.7 94.0 92.6 90.2 94.6 92.7 92.9 93.9 95.0 92.0 93.9 88.4 % Occupancy 1.35 1.62 1.41 0.88 1.16 0.89 1.00 0.90 1.08 1.09 1.11 1.19 1.09 0.84 1.19 0.89 0.93 1.05 1.08 1.09 0.83 0.83 0.85 0.91 0.93 1.28 0.75 0.93 0.91 0.96 0.96 1.15 0.81 0.82 0.91 0.95 0.80 1.06 0.94 1.03 1.20 1.00 0.90 1.12 1.04 0.83 0.85 0.93 1.28 0.88 1.00 0.81 0.82 0.94 0.80 Rent Monthly $/Sq. Ft. $/Sq.

7,847 6,586 3,280 8,020 3,007 9,849 8,753 4,323 2,810 3,280 9,849 8,753 4,323 Unit 24,827 11,920 25,285 25,820 18,926 29,136 25,312 19,462 40,882 15,495 25,967 11,514 18,228 24,728 23,038 10,794 21,745 18,738 19,748 12,659 21,462 28,884 18,704 29,720 12,558 10,424 12,290 12,965 Count 18,926 21,745 41,493 63,005 60,982 10,424 15,100 12,965 450,154 175,552 625,706 102,285 130,287 122,289

41 55 58 94 94 19 80 73 61 57 74 81 62 80 54 98 89 24 41 51 68 99 75 51 27 58 44 24 74 19 41 51 27 56 68 74 120 106 107 131 105 100 139 131 841 462 106 452 513 100 211 306 257 Count 1,904 2,745 Property Denton Garland Lewisville East Irving West Irving West East Totals West Totals West South Total North Total South Totals Grand Prairie Central Total Central Total South Ft Worth Far East Dallas Far Garland Total South Arlington North Arlington Southest Totals Allen/ McKinney Northwest Total Northeast Totals Southwest Totals Southwest Totals Skillman St/ I-635 Northwest Totals West Plano/ Frisco West Far East Dallas Total Hurst/ Euless/ Bedford North Dallas/ Addison Far Southwest Ft Worth Southwest Far East Plano/ Richardson South Dallas/ Oak Cliff Downtown Ft Worth/ TCU Downtown Ft Worth/ Submarket Southeast Dallas/ Mesquite Carrollton/ Farmers Branch Carrollton/ Farmers Grapevine/ Roanoke/ Keller Grapevine/ Roanoke/ Southwest Ft Worth/ Benbrook Southwest Ft Worth/ Far South Dallas/ Waxahachie Far White Rock Lake/ Tenison Park Tenison Lake/ White Rock Western Hills/ Ridgmar/ Ridglea Western Far North Dallas/ Collin County Far Northwest Dallas/ Bachman Lake East Ft Worth/ Woodhaven/ I-30E Woodhaven/ East Ft Worth/ Uptown/ Oaklawn/ Highland Park Uptown/ Oaklawn/ Highland Las Colinas/ Valley Ranch/ Coppell Ranch/ Colinas/ Valley Las Haltom City/ Richland Hills/ Fossil Creek Haltom City/ Richland Hills/ Fossil Northwest Ft Worth/ Saginaw/ Eagle Mtn Northwest Ft Worth/ Downtown Dallas/ West End/ Deep Ellum End/ Deep Downtown Dallas/ West East Central Dallas/ Lower Greenville Ave Lower East Central Dallas/ Duncanville/ DeSoto/ Cedar Hill/ Lancaster North Central Dallas/ Upper Greenville Ave North Central Dallas/

Figure 2: Market Overview by Submarket Market Overview Figure 2: CENTRAL NORTHWEST NORTHEAST NORTH EAST SOUTHEAST SOUTH SOUTHWEST FORT WORTH MARKETS EAST CENTRAL NORTHEAST NORTHWEST SOUTH SOUTHWEST WEST DALLAS/FORT WORTH TOTAL DALLAS/FORT DALLAS TOTAL TOTAL DALLAS FORT WORTH TOTAL

Source: Apartment Data Services, Q3 2014. CBRE Research , Q3 2014.

MULTIFAMILY THIRD QUARTER THIRD MULTIFAMILY MARKETVIEW

Q3 2014 Dallas/Fort Worth Multifamily | MarketView 2

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22 20 18 16 12 10 14 000's 000's Units Figure 5: Construction Activity and Net Absorption Figure 5: Construction Activity and Figure 6: Unemployment Rate Figure 3: Average Monthly Rent Rates per Sq. Ft. Rates Rent Monthly Average Figure 3: By Class Rate Figure 4: Occupancy $1.50 $1.30 $1.10 $0.90 $0.70 $0.50 85% 95% 93% 91% 89% 87% 7% 6% 5% 4% 3% 9% 8% Unit Count 10% Source: U.S. Bureau of Labor Statistics, September 2014. Source: CBRE Research, Q3 2014. Apartment Data Services, Q3 2014. Source: CBRE Research, Q3 2014. Apartment Data Services, Q3 2014. Source: CBRE Research, Q3 2014. Apartment Data Services, Q3 2014.

million, the DFWmillion, metropolitan area is the fourth-largest MSA the in United States. population The area’s has grown 30% since 2000, and growth of 8.6% is projected according to Claritas. to 2018, for 2013 (6.2%). An(6.2%). ample supply of well-educated workers and strong population growth contribute healthy to the area’s Witheconomy. a current estimated population of 6.7 unemployment rate fell from 5.2% the in first quarter this quarter. DFW to the current level of 5.1% 2014 posted once again an identical unemployment rate for the but still lower then Unitedquarter States (5.1%), as Texas Employment and DemographicsEmployment and DFWOver created the year-ending 115,500 July 2014, jobs, which translates annual to a 3.7% growth rate. The TCU hadTCU the most units under construction Fort in Worth units. with 1,316 with 4,214 units currently under constructionwith 4,214 and 630 units delivered for the quarter. The most deliveries leaving 3,096 occurred West in Plano/Frisco with 1,189, units currently under construction. Downtown Fort Worth/ starts in Q3 2014, bringstarts the total number of units under Q3 in 2014, construction units. The most activity to 21,402 continues to be the in Uptown/Oaklawn/Highland Park submarket secondquarter a row in DFW. in There was an addition unitsof 2,406 equating units proposed unites to 23,746 indicating that market fundamentals have remained strong. new In unit addition, there were a total of 5,748 Construction The number of units proposed saw an increase for a There was a decrease of 20 bps Class in B properties Class C properties held to 94.1%. at93.8% from 94.3% and Class D occupancy bps to 90.0%. rose 10 increased 20 bps to 92.7%. Occupancy continues to rise despite that fact that more new units continue to deliver. properties in A Class experienced largest increase the bps, rising to 89.0%. occupancy at 170 over-over-quarter, Occupancy Across the Dallas/Fort Worth Market, occupancy Class A and B properties sawthe same quarter-over- quarter increase of$0.02 the in average price per sq. ft. in Additionally, Class B and C propertiesQ32014. rents grew this over period.$0.01 Worth/Woodhaven/ There per I-35E sq. ft.). are 15 ($0.75 submarkets are above the overall market average of$1.03 and 22 submarkets below market average. increase. The highest retail rents were reported were the rents in retail highest The increase. submarket of Uptown/Oaklawn/ Highland Park ($1.62 per and sq. ft.) the lowest rentswere reported East in Fort Rents theFor second quarter a row in the average monthly quarter Quarter-over- mark. dollar the over were rents the average rent increased $0.02 per sq. ft. or a 1.9%

MULTIFAMILY THIRD QUARTER THIRD MULTIFAMILY MARKETVIEW © 2014, CBRE, Inc. © 2014, CBRE, Inc. City North Richland Hills Dallas Irving Dallas Irving Euless Little Elm Irving Arlington Dallas Grapevine Irving Irving Worth Fort Euless 5.00%-to-5.50%, and 6.25%-to- and 5.00%-to-5.50%, 6.75%, respectfully. In suburban areas, average stabilized cap rates ranged from 5.50%- to-6.00% for Class A properties, 5.50%-to-6.00% for Class B for properties, and 7.00%-to-7.50% Class C properties. OCCUPANCY NATIONAL DESPITE 95.2% ROSE TO AN INCREASE IN SUPPLY. Address 8435 Thousand Oaks Drive Rd 19251 Preston 10201 N Macarthur Blvd 10843 N Central Expy 1127 Hidden Ridge 2800 Brazos Blvd 2050 FM 423 5301 N Macarthur 2007 Springcrest Drive Pkwy 3939 Rosemeade Drive 2400 Timberline Lane 625 E Royal Rd 4299 Pleasant Run 807 The Heights Drive Oak 3875 Post the average infill/urban stabilized cap rates remained stable between forthe ranges 4.75%-to-5.25% of Class A properties. Both Class B and C properties decreased 50 bps to average price per unit in Q3 2014 average price per Q3 in 2014 unit decrease from a 21% was $77,717, Most sales over-the- Q2 2014. quarter occurred the in the suburbs while urban areas as such Downtown Dallas/ West End/ Deep Ellum/ Uptown and Downtown Worth/ Ft. continue experaince to TCU exrensive actvity.conscuction Though three quarters the of year thein Dallas/Fort Worth region,

Property Mission at La Villita Mission at La Vineyard Estates Fairway Hollow Wood The Mansions by the Lake at Jefferson Ridge The Resort Vineyards at Arlington Sage Creek Ranch Ridge at Timberline Lincoln Crossing Ranch at Valley Resort Aberdeen at Bellmar at Jefferson Park Resort Suite 2801 Equestrian Pointe

Real Capital Analytics, Q3 2014.

Figure 7: Major Transactions Units 346 353 352 390 376 360 410 396 417 416 524 495 420 836 532 Multifamily sales DFW in volume per Q3 in 2014, billion totaled $1.1 Real Capital Analytics. DFW’s reported a total of $99.3 billion over the past 12 the over billion past 12 $99.3 of a total months. According Real Capital Analytics, national sales decreased volume 9%, the over billion last quarter $23.5 to for growth was 4.1%, the first time rent growth was 4.1%, growth has been since May 4% over as reportedAxiometrics. by 2012, continues outperform to expectations. National occupancy multifamily has climbed 22 bps, 95.2%, and to rent Capital Markets the market multifamily Nationally,

MULTIFAMILY THIRD QUARTER THIRD MULTIFAMILY MARKETVIEW Source: CBRE Research, Q3 2014.

Q3 2014 Dallas/Fort Worth Multifamily | MarketView 4 Q3 2014 Dallas/Fort Worth Multifamily | MarketView 5 , we .

TEXAS RESEARCH 2100 McKinney Ave, Suite 700 Dallas, TX 75201 +1 214 979 6589 [email protected] Lynn Cirillo Lynn Manager Operations Research CBRE Americas Research Oak, Suite 2300 2800 Post Houston, TX 77056 [email protected] Lauren Paris Analyst Senior Research CBRE Dallas Research Suite 700 2100 McKinney Ave, Dallas, TX 75201 +1 214 979 6587 [email protected] Brian Ashton Coordinator Research CBRE Dallas Research CONTACTS this information about For more MarketView, Worth Dallas/Ft please contact: www.cbre.us/research

completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be completeness. This information is presented exclusively for use by CBRE clients and professionals reproduced without prior written permission of CBRE. DISCLAIMER to be reliable. While we do not doubt its accuracy Information contained herein, including projections, has been obtained from sources believed to confirm independently its accuracy and have not verified it and make no guarantee, warranty or representation about it. It is your responsibility and Consulting can be found at research produced by Global Research Additional U.S. This report was prepared by the CBRE U.S. Research Team which forms part of CBRE Global Research and Consulting – a which forms part of CBRE Global Research Team Research This report was prepared by the CBRE U.S. real estate market research, econometric network of preeminent researchers and consultants who collaborate to provide the globe. forecasting and consulting solutions to real estate investors and occupiers around GLOBAL RESEARCH AND CONSULTING RESEARCH GLOBAL FOLLOW CBRE FOLLOW © 2014, CBRE, Inc. Dallas/Fort Worth Multifamily MarketView

Q2 2014 CBRE Global Research and Consulting TOTAL OCCUPANCY AVG RENT NET ABSOPORTION CONSTRUCTION DELIVERIES PROPOSED 92.5% $1.01 per Sq. Ft./Mth 4,571 Units 19,984 Units 2,514 Units 21,340 Units

Directional arrows based on change from the previous quarter. Data reflects market totals.

MULTIFAMILY REGISTERS ONE OF THE BEST QUARTERS IN A DECADE WITH NO INDICATION OF A SLOWDOWN ANYTIME SOON.

Occupancy continues to rise despite jump Figure 1: Market Net Absorption in deliveries. DFW saw another increase in deliveries this quarter, however, there were more new Units unit starts then deliveries. For the quarter, deliveries 2,200 were up about 37% over the previous quarter, 2,000 totaling 2,514 units. In Q2 2014, occupancy rose to 1,800 92.5%, for a 30 basis point (bps) increase, indicating 1,600 that demand remains strong enough to absorb new 1,400 1,200 supply. 1,000 800 Average rental rates break the $1 mark. 600 Rental rates increased $0.02 per sq. ft. in DFW, 400 bringing the market average rate $1.01 per sq. ft. 200 This is first time the average rental rate across all 0 class types has broken the dollar mark. (200)

Proposed construction increases over East Dallas North Dallas

the quarter. Proposed construction increased South Dallas Central Dallas East Ft. Worth East Ft. Worth West Ft. Worth Ft. Worth West South Ft. Worth South Ft. Worth

to 21,340 units in Q2 2014, illustrating that Northeast Dallas Northwest Dallas Southeast Dallas Central Ft. Worth Central Ft. Worth Southwest Dallas Northeast Ft. Worth Northeast Ft. Worth Northwest Ft. Worth Northwest Ft. Worth development will probably not slow down in the Southwest Ft. Worth near future. With strong demand driving continued Q1 Q2 2014 YTD Total Units Absorbed increases in occupancy, we expect many of the Source: Apartment Data Services, Q2 2014. proposed projects to break ground. CBRE Research, Q2 2014. The prosperous multifamily market is sustained by the flourishing DFW economy. an estimated 3% from the previous quarter, bringing the average median The DFW metro area was ranked number one for household income to more then $46,000. job growth and second in number of jobs added for the quarter by the Bureau of Labor Statistics. DFW’s population is young, with an average age of 35, and affluent, Also, the Dallas Business Journal reported that with most of the population (52.1%) in their prime earning years of 18- Manpower Group ranked DFW third best for its job 54. Of the population 25 years and over, 50% of the population has outlook out of all U.S. metro areas. These rankings some college, an associate or bachelor’s degree. The current estimated confirm that DFW’s economy is strong and healthy population of 6.8 million, the DFW metropolitan area is the fourth largest and explains why the multifamily housing market MSA in the United States. The area’s population has grown 7.2% since continues to thrive. Moody’s Analytics reports that 2010, and growth of 8.6% is projected for 2014 to 2019, according to personal income among DFW residents was grew Nielsen.

© 2014, CBRE, Inc. 0 0 0 0 0 0 0 0 0 154 120 485 167 123 757 508 200 759 485 154 120 508 167 1,755 2,514 1,080 Units Delivered Delivered Construction © 2014, CBRE, Inc. 0 0 0 0 0 0 0 0 300 640 167 252 728 714 299 425 740 158 940 252 158 1,076 2,533 4,733 1,843 1,032 1,423 2,921 2,016 1,076 5,543 3,307 8,708 Units 17,968 19,984 Under Construction

2 9 7 7 (7) 62 20 13 45 73 11 38 74 66 38 13 45 11 (7) (26) (34) (30) (40) 132 216 217 149 180 320 245 414 179 124 268 388 124 228 376 119 218 168 332 865 180 168 582 998 231 119 (109) (107) Net 3,706 4,571 1,226 1,067 Units Absorption 93.4% 93.9% 87.5% 92.5% 94.5% 94.6% 95.0% 89.9% 92.8% 92.2% 91.5% 91.1% 87.8% 96.0% 93.3% 95.4% 86.5% 91.4% 91.1% 90.6% 90.5% 88.3% 92.0% 94.9% 94.0% 94.8% 94.0% 94.7% 90.4% 92.9% 88.7% 26.2% 94.2% 94.4% 95.5% 93.3% 94.2% 91.9% 92.6% 92.5% 89.9% 92.4% 93.9% 92.7% 92.0% 95.0% 94.1% 93.5% 89.9% 93.3% 95.4% 89.2% 88.3% 94.2% 26.2% Occupancy $0.91 $0.89 $0.74 $0.95 $0.94 $0.79 $0.94 $0.95 $1.06 $0.85 $0.83 $0.90 $0.82 $0.92 $1.25 $1.58 $1.33 $1.38 $0.88 $1.15 $0.78 $0.81 $0.91 $1.17 $0.88 $1.02 $0.83 $1.06 $1.08 $0.86 $0.99 $0.89 $1.05 $1.05 $1.10 $1.15 $1.04 $0.92 $1.01 Rent $1.25 $0.86 $0.99 $0.95 $0.81 $0.79 $1.09 $1.02 $0.84 $0.82 $0.92 $1.18 $0.78 $0.89 $0.99 $1.1 5 Monthly Per Sq.Per Ft.

4,323 2,558 2,600 8,877 8,753 7,847 6,586 8,020 3,120 8,753 4,323 8,877 3,120 Unit 21,462 28,884 12,659 18,584 29,717 12,014 12,290 15,078 19,748 18,275 21,745 24,009 11,920 25,285 12,965 10,424 18,284 25,967 11,451 24,629 22,927 10,794 25,793 18,926 28,755 25,312 19,008 39,920 Count 63,005 60,315 14,848 10,424 40,623 21,745 12,965 18,926 444,876 174,633 619,509 128,073 122,072 101,440

99 68 74 49 27 22 44 89 20 95 40 51 41 55 58 94 74 58 57 81 74 61 79 54 18 94 80 71 60 51 66 27 56 40 74 18 139 131 100 119 105 106 105 128 836 306 254 444 204 511 100 461 105 Count 1,884 2,720 Property Denton Garland Lewisville East Irving West Irving West East Totals West Totals West South Total North Total South Totals Grand Prairie Central Total Central Total South Ft Worth Far East Dallas Far Garland Total South Arlington North Arlington Southest Totals Allen/ McKinney Northwest Total Northeast Totals Southwest Totals Southwest Totals Skillman St/ I-635 Northwest Totals West Plano/ Frisco West Far East Dallas Total Hurst/ Euless/ Bedford North Dallas/ Addison Far Southwest Ft Worth Southwest Far East Plano/ Richardson South Dallas/ Oak Cliff Downtown Ft Worth/ TCU Downtown Ft Worth/ Submarket Southeast Dallas/ Mesquite Carrollton/ Farmers Branch Carrollton/ Farmers Grapevine/ Roanoke/ Keller Grapevine/ Roanoke/ Southwest Ft Worth/ Benbrook Southwest Ft Worth/ Far South Dallas/ Waxahachie Far White Rock Lake/ Tenison Park Tenison Lake/ White Rock Western Hills/ Ridgmar/ Ridglea Western Far North Dallas/ Collin County Far Northwest Dallas/ Bachman Lake East Ft Worth/ Woodhaven/ I-30E Woodhaven/ East Ft Worth/ Uptown/ Oaklawn/ Highland Park Uptown/ Oaklawn/ Highland Las Colinas/ Valley Ranch/ Coppell Ranch/ Colinas/ Valley Las Haltom City/ Richland Hills/ Fossil Creek Haltom City/ Richland Hills/ Fossil Northwest Ft Worth/ Saginaw/ Eagle Mtn Northwest Ft Worth/ Downtown Dallas/ West End/ Deep Ellum End/ Deep Downtown Dallas/ West East Central Dallas/ Lower Greenville Ave Lower East Central Dallas/ Duncanville/ DeSoto/ Cedar Hill/ Lancaster North Central Dallas/ Upper Greenville Ave North Central Dallas/

CBRE Research , Q2 2014.

Figure 2: Market Overview by Submarket Market Overview Figure 2: EAST NORTHEAST NORTHWEST CENTRAL SOUTHWEST NORTHWEST SOUTHEAST SOUTH SOUTHWEST FORT WORTH MARKETS CENTRAL WEST SOUTH EAST NORTH NORTHEAST DALLAS TOTAL TOTAL DALLAS FORT WORTH TOTAL WORTH TOTAL DALLAS/FORT

Source: Apartment Data Services, Q2 2014.

MULTIFAMILY SECOND QUARTER SECOND MULTIFAMILY MARKETVIEW

Q2 2014 Dallas/Fort Worth Multifamily | MarketView 2

Q2 2014 Dallas/Fort Worth Multifamily | MarketView 3

Q2 2014 2014 Q2

Q1 2014 2014 Q1

Q2 2014 2014 Q2 2013 2013

Q4 2013 2013 Q4

Q1 2014 2014 Q1

2012 2012

Q3 2013 2013 Q3 Q1 2014 2014 Q1

Overall Overall

2011 2011 Q2 2013 2013 Q2 Q4 2013 2013 Q4

Net Absorption

Q4 2013 2013 Q4

Q1 2013 2013 Q1

2010 2010

Q3 2013 2013 Q3 Q4 2012 2012 Q4

Class D 2009 2009

Class D 2013 Q3 Q3 2012 2012 Q3

Dallas/Fort Worth MSA MSA Dallas/Fort Worth

2008 2008

Q2 2013 2013 Q2

Q2 2012 2012 Q2 Q2 2013 2013 Q2

Delivered

2007 2007

Class C 2012 Q1

Q1 2013 2013 Q1

Class C 2013 Q1

Q4 2011 2011 Q4 2006 2006

Q3 2011 2011 Q3 Texas 2005 2005 Q4 2012 2012 Q4 Q4 2012 2012 Q4

Class B Q2 2011 2011 Q2 2004 2004

Class B

Q3 2012 2012 Q3 Q1 2011 2011 Q1 Q3 2012 2012 Q3

2003 2003 Q4 2010 2010 Q4

Under Construction

Q2 2012 2012 Q2 Class A

Q2 2012 2012 Q2 2002 2002 Q3 2010 2010 Q3

Class A Class A

Q2 2010 2010 Q2 2001 2001

Q1 2012 2012 Q1

Q1 2011 2011 Q1 2000 2000 95% 93% 91% 89% 87% 85% 8 6 2 0 4

20 18 16 12 10 14 000's 000's 9% 8% 7% 6% 5% 4% 3% Units Figure 3: Average Rates Per Sq. Ft./Mth Average Rates Per Figure 3: Figure 5: Construction Activity and Net Absorption Figure 5: Construction Activity and Figure 6: Unemployment Figure 4: Occupancy Rate By Class Rate Figure 4: Occupancy $1.50 $1.30 $1.10 $0.90 $0.70 $0.50 10% Units Source: U.S. Bureau of Labor Statistics, June 2014. Source: CBRE Research, Q2 2014. Apartment Data Services, Q2 2014. Source: CBRE Research, Q2 2014. Apartment Data Services, Q2 2014. Source: CBRE Research, Q2 2014. Apartment Data Services, Q2 2014.

Multifamily Occupancy Multifamily Construction Employment Demographics and Across the Dallas/Fort Worth market, the average average the market, Dallas/Fort Worth the Across per monthly rent broke the one dollar mark, at $1.01 for first in time CBRE Research’s ft.sq. Q2 in 2014, recorded history. This increasean is $0.04 of per ft. sq. increase. or a 4.5% Class A propertiesyear-over-year had the biggest rental increase per $0.03 of ft. sq. over the quarter increase per or and 4.04%, a $0.06 ft., sq. Both Class B and C grew per $0.05 sq. from Q2 2013. growth, months,ft. for 5.0% and the 5.6% over past 12 respectfully. The highest average rental rates can be submarket Park Uptown/Oaklawn/Highland the in found per ft. sq. at $1.58 Occupancy hits a 4 year across high the DFW market, All 2010. or a differenceat 92.5% from Q1 4.9% of Classes saw increase an occupancy in for the quarter. Class B reported the highest occupancy at 94.3%, followed Class by C at 93.8%. Class A, however, bps, 90 at quarter jump largest quarter-over- the had saw a bringing Q2 Overall, 2014 occupancy 89.3%. to 30 bps increase the over previous quarter from 92.2%. bringing new units startsDFW had for Q2 2014, 4,312 the number total units of under construction 19,984 to units. New starts unit more units accounted for 1,798 units that delivered this quarter. Mostthan the 2,514 activity the in is Uptown/Oaklawn/Highland Park unitssubmarket currently with under 4,733 construction units delivered for the quarter. West and Plano/ 757 units currently under Frisco followswith 2,921 construction and Downtown Dallas/ West End/ Deep withEllum 2,533 units, rounding out the top three. The submarkets Lewisville of and Downtown Fort Worth/ had 508TCU and 485 units deliver this quarter, respectfully. Also, the number units of proposed rose to indicating there be will no slowdown anytime21,340 accordingsoon, Apartment to Data Services. DFW createdOver the year-ending April 2014, 106,800 which jobs, translates a 3.5% to annual growth rate. The unemployment rate fell from 5.8% in to thethecurrent first5.2%of level this quarter 2014 quarter. DFW posted identical an unemployment rate for the quarter butstill (5.2%), lower then as Texas United States An ample (6.3%). supply well-educated of workers and strong population growth contribute to With healthy a current economy. estimatedthe area’s between fall the ages population 52.1% 6.8 of million, 18-54of making DFW metropolitan area the fourth- largest MSA the in United States, according Nielsen. to

Multifamily Rents

MULTIFAMILY SECOND QUARTER SECOND MULTIFAMILY MARKETVIEW © 2014, CBRE, Inc. © 2014, CBRE, Inc. City Dallas The Colony Dallas Plano Dallas Dallas Arlington McKinney Dallas Worth Fort Frisco Lewisville Dallas Dallas Dallas NATIONAL OCCUPANCY OCCUPANCY NATIONAL THE ACROSS HITS 95% BOARD. ENTIRE Address 11611 Ferguson Road 11611 Ferguson Lane 650 N Leora 5930 Arapaho Road 3825 Mapleshade Lane 2222 Graycliff Drive Lane 3350 Lombardy Circle 711 Trinity Parkway 6653 McKinney Ranch 1707 N Hall Street 520 Samules Avenue 1801 McCord Way 351 State Highway 121 Bypass Lane 3339 Lombardy 9901 Burton Road 1955 Market Center Boulevard $99,149 a 26% increase from Q1 increase from a 26% Q1 $99,149 2014. In the Dallas/Fort Worth region, the average infill/urban stabilized cap rates rose the to ranges of for Class A 4.75%-to-5.25% properties.Both Class B and C properties within stable remained the rages 5.50%-to-6.00%, of and 6.50%-to-7.00%, respectfully. In suburban areas, average stabilized cap rates ranged from 5.50%- to-6.00% for Class A properties, 6.00%-to-6.50% for Class B for properties, and 7.25%-to-7.75% Class C properties. XIOMetrics. Property Honey Creek Bella Madera Enclave at Prestonwood Elan Maker Center Villas of White Rock Square Pecan at River Park Trails Soho Parkway Icon at Ross Bluff at Trinity Lincoln Park Estates of Frisco Villas of Vista Ridge Bayou Bend Mira Flores Avant arkets

Real Capital Analytics, Q2 2014.

Figure 7: Major Transactions Units 656 612 466 454 442 440 420 379 372 369 360 323 308 304 301 According Real Capital Analytics, According Real Capital grew 22% or national sales volume billion over last approximately $23.29 billion over the past quarter and $94.01 12 months. Across the nation, the market multifamily had one of best performing quarters since the turn the of millennium. National occupancy multifamily has rent growth was reached 95%, and by A 3.3%, as reported Capital M

Multifamily sales DFW in volume per totaled Q2 in 2014, $8.6 billion Real Capital Analytics. DFW’s reported was average price per Q2 in unit 2014

SECOND QUARTER SECOND FAMILY MULTI MARKETVIEW Source: CBRE Research, Q2 2014.

Q2 2014 Dallas/Fort Worth Multifamily | MarketView 4 Q2 2014 Dallas/Fort Worth Multifamily | MarketView 5 , we

. Worth

TEXAS RESEARCH Lynn Cirillo Lynn Manager Operations Research CBRE Americas Research Oak, Suite 2300 2800 Post Houston, TX 77056 [email protected] Lauren Paris Analyst Senior Research CBRE Dallas Research Suite 700 2100 McKinney Ave, Dallas, TX 75201 +1 214 979 6587 [email protected] Brian Ashton Coordinator Research CBRE Dallas Research 2100 McKinney Ave, Suite 700 Dallas, TX 75201 +1 214 979 6589 [email protected] For more information about information about For more this Dallas/Ft please contact: MarketView, CONTACTS firm independently its accuracy and .

have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to con and all rights to the material are reserved and cannot completeness. This information is presented exclusively for use by CBRE clients and professionals be reproduced without prior written permission of CBRE DISCLAIMER to be reliable. While we do not doubt its accuracy Information contained herein, including projections, has been obtained from sources believed . and Consulting can be found at www.cbre.us/research research produced by Global Research Additional U.S. AND CONSULTING RESEARCH GLOBAL and Consulting – a which forms part of CBRE Global Research Team Research This report was prepared by the CBRE U.S. real estate market research, econometric network of preeminent researchers and consultants who collaborate to provide the globe. forecasting and consulting solutions to real estate investors and occupiers around FOLLOW CBRE FOLLOW © 2014, CBRE, Inc. Dallas/Fort Worth Multi-Housing MarketView

Q1 2014 CBRE Global Research and Consulting TOTAL OCCUPANCY AVG RENT PER SQ. FT./MTH NET ABSOPORTION CONSTRUCTION DELIVERIES PROPOSED 92.2% $0.99 3,750 Units 18,186 Units 1,834 Units 19,684 Units

Directional arrows based on change from the previous quarter. Data reflects market totals.

OCCUPANCY AND CONSTRUCTION LEVELS ARE THE HIGHEST THEY HAVE BEEN IN DFW SINCE 2008.

Construction boom has not slowed yet. Figure 1: Market Net Absorption While construction on 1,834 units was completed 1,000 in Q1 2014 in Dallas/Fort Worth (DFW), another 900 3,272 units began construction during the quarter, 800 indicating another strong year for development 700 ahead in 2014. DFW placed third in the nation for 600 number of multifamily building permits issued in the 500 past 12 months. 400

Rent growth strong despite increase in new 300 supply. Rental rates in DFW grew across every 200 apartment property class over the quarter, with the 100 strongest growth occuring among Class B and C properties. The average overall rental rate increased 0 4.2% over the past 12 months. (100) Units Occupancy has risen 30 basis points in the

past 12 months. Occupancy across DFW, at East Dallas North Dallas South Dallas Central Dallas East Ft. Worth East Ft. Worth West Ft. Worth Ft. Worth West

92.2%, is at its highest level since Q3 2008. DFW South Ft. Worth Northeast Dallas Northwest Dallas Southeast Dallas Central Ft. Worth Central Ft. Worth Southwest Dallas

has the highest occupancy rate among the major Northeast Ft. Worth Northwest Ft. Worth Northwest Ft. Worth Southwest Ft. Worth Southwest Ft. Worth Texas markets. Q1 2014 Total Units Absorbed DFW’s thriving economy supports a strong Source: Apartment Data Services, Q1 2014. CBRE Research, Q1 2014. multifamily housing market. An expanding local job market, ample supply of well-educated workers and strong population growth contribute to DFW’s population is young, with an average age of 35, and affluent, with DFW’s healthy economy and growing multifamily most of the population (51%) in their prime earning years of 20-54. DFW housing market. With a current estimated population residents tend to earn more than the national average, supporting an of 6.8 million and labor force of 3.4 million people, estimated median household income of $56,065 as of Q1 2014. the DFW metropolitan area is the fourth-largest MSA in the United States. Employment experienced an annual growth rate of 3.0% from March 2013 to March 2014 in DFW, adding 92,700 jobs to the local economy, and the unemployment rate in DFW dropped to 5.3%. Moody’s predicts a net inward migration of 79,600 people to DFW for the year 2014.

© 2014, CBRE, Inc. 0 0 0 0 0 0 0 0 0 0 0 0 120 950 336 281 147 120 281 120 1,714 1,834 1,286 Units Delivered Delivered Construction © 2014, CBRE, Inc. 0 0 0 0 0 0 0 0 452 354 159 220 374 640 728 202 548 299 362 158 806 374 799 158 1,492 5,199 1,232 1,158 1,032 1,441 2,136 1,173 3,237 4,829 7,983 Units 17,013 18,186 Under Construction

(7) 41 80 11 98 83 37 28 92 63 90 35 14 89 22 13 61 13 20 53 80 90 92 37 39 35 (7) (22) (35) (52) 153 115 129 136 362 100 435 105 289 107 228 195 115 454 744 362 309 205 309 953 246 772 228 Net 3,006 3,750 Units Absorption 87.0% 92.9% 95.7% 93.5% 93.7% 87.7% 92.1% 93.7% 91.9% 90.5% 93.4% 89.9% 92.5% 87.4% 93.6% 93.4% 91.7% 95.2% 85.5% 93.9% 87.8% 89.6% 89.8% 93.2% 94.6% 92.6% 93.9% 92.8% 91.9% 93.5% 90.0% 95.7% 93.6% 93.7% 94.8% 94.7% 94.2% 92.4% 91.9% 92.2% 93.4% 90.4% 93.5% 92.0% 91.7% 87.4% 93.1% 93.8% 89.9% 93.5% 93.0% 95.2% 89.0% 93.6% 95.7% Occupancy $0.81 $0.84 $0.89 $0.87 $0.93 $0.72 $0.88 $0.87 $0.93 $1.04 $0.82 $0.77 $0.82 $1.23 $0.93 $1.14 $0.79 $0.78 $1.53 $1.33 $1.33 $0.86 $1.12 $1.07 $0.89 $1.16 $0.86 $1.00 $1.03 $0.81 $0.85 $0.97 $0.87 $1.04 $1.05 $1.08 $1.13 $1.01 $0.90 $0.99 Rent $0.82 $0.83 $0.87 $0.84 $0.79 $1.23 $1.00 $1.08 $0.77 $0.91 $0.97 $0.78 $1.15 $0.87 $0.97 Monthly Per Sq.Per Ft.

2,600 9,126 8,639 2,558 4,323 7,560 6,586 8,020 3,120 9,126 8,639 4,323 3,120 Unit 18,074 19,394 12,364 12,659 21,722 28,884 18,423 14,871 21,745 12,765 29,717 11,918 10,106 23,987 11,920 25,569 10,794 18,284 25,967 11,408 24,340 21,963 25,458 18,926 28,755 25,312 18,730 39,799 Count 21,745 40,068 63,265 10,106 12,765 14,922 60,058 18,926 442,308 174,078 616,386 120,776 127,467 101,080

94 88 20 42 50 45 68 73 59 73 22 48 27 56 39 55 58 94 54 57 81 74 60 76 18 93 80 70 42 46 56 72 67 27 18 101 139 100 131 120 104 106 105 128 833 100 202 308 506 442 252 459 105 Count 1,875 2,708 Property Denton Garland Lewisville East Irving West Irving West East Totals West Totals West South Total North Total South Totals Grand Prairie Central Total Central Total South Ft Worth Far East Dallas Far Garland Total South Arlington North Arlington Southest Totals Allen/ McKinney Northwest Total Northeast Totals Southwest Totals Southwest Totals Skillman St/ I-635 Northwest Totals West Plano/ Frisco West Far East Dallas Total Hurst/ Euless/ Bedford North Dallas/ Addison Far Southwest Ft Worth Far East Plano/ Richardson South Dallas/ Oak Cliff Downtown Ft Worth/ TCU Downtown Ft Worth/ Submarket Southeast Dallas/ Mesquite Carrollton/ Farmers Branch Carrollton/ Farmers Grapevine/ Roanoke/ Keller Grapevine/ Roanoke/ Southwest Ft Worth/ Benbrook Southwest Ft Worth/ Far South Dallas/ Waxahachie Far White Rock Lake/ Tenison Park Tenison Lake/ White Rock Western Hills/ Ridgmar/ Ridglea Western Far North Dallas/ Collin County Far Northwest Dallas/ Bachman Lake East Ft Worth/ Woodhaven/ I-30E Woodhaven/ East Ft Worth/ Uptown/ Oaklawn/ Highland Park Uptown/ Oaklawn/ Highland Las Colinas/ Valley Ranch/ Coppell Ranch/ Valley Colinas/ Las Haltom City/ Richland Hills/ Fossil Creek Haltom City/ Richland Hills/ Fossil Northwest Ft Worth/ Saginaw/ Eagle Mtn Northwest Ft Worth/ Downtown Dallas/ West End/ Deep Ellum End/ Downtown Dallas/ West East Central Dallas/ Lower Greenville Ave Greenville Lower East Central Dallas/ Duncanville/ DeSoto/ Cedar Hill/ Lancaster North Central Dallas/ Upper Greenville Ave North Central Dallas/

Figure 2: Market Overview by Submarket Market Overview Figure 2: SOUTH SOUTHWEST FORT WORTH MARKETS CENTRAL SOUTHWEST EAST NORTHEAST CENTRAL NORTHWEST SOUTHEAST WEST NORTHWEST SOUTH EAST NORTH NORTHEAST DALLAS TOTAL TOTAL DALLAS FORT WORTH TOTAL WORTH TOTAL DALLAS/FORT

Source: Apartment Data Services, Q1 2014. CBRE Research , Q1 2014.

MULTI-HOUSING FIRST QUARTER FIRST MULTI-HOUSING MARKETVIEW

Q1 2014 Dallas/Fort Worth Multi-Housing | MarketView 2

Q1 2014 Dallas/Fort Worth Multi-Housing | MarketView 3

Q1 2014 2014 Q1

2014 2014

Q4 2013 2013 Q4

2013 2013

Q3 2013 2013 Q3 2012 2012

Overall

Q2 2013 2013 Q2

Overall

2011 2011

Q1 2013 2013 Q1

Net Absorption

2010 2010 Q4 2012 2012 Q4

Class D

2009 2009 Class D 2012 Q3

Dallas/Fort Worth MSA MSA Dallas/Fort Worth Q2 2012 2012 Q2

2008 2008

Q1 2012 2012 Q1 Deliveries 2007 2007

Class C

Class C 2011 Q4

2006 2006 Q3 2011 2011 Q3

Texas Texas 2005 2005 Q2 2011 2011 Q2

Class B

2004 2004

Class B 2011 Q1

2003 2003 Q4 2010 2010 Q4

Under Construction

Q3 2010 2010 Q3 Class A Class A 2002

Class A Class A

Q2 2010 2010 Q2

2001 2001

Q1 2011 2011 Q1 Q1 2012 Q2 2012 Q3 2012 2012 Q4 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 2000 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 8 6 2 0 4

20 18 16 12 10 14 000's 000's Units Figure 5: Construction Activity and Net Absorption Figure 5: Construction Activity and Figure 6: Unemployment Figure 3: Average Rates Per Sq. Ft./Month Sq. Per Rates Average Figure 3: By Class Rate Figure 4: Occupancy $1.50 $1.30 $1.10 $0.90 $0.70 $0.50 95% 93% 91% 89% 87% 85% 9% 8% 7% 6% 5% 4% 3% 10% Source: U.S. Bureau of Labor Statistics, March 2014. Source: CBRE Research, Q1 2014. Apartment Data Services, Q1 2014. Source: CBRE Research, Q1 2014. 2014. Apartment Data Services, Q1 Source: CBRE Research, Q1 2014. Apartment Data Services, Q1 2014.

Annual employment growth DFW in was 3.0% from a net increase 92,700 of March to 2014; March 2013 jobs. The unemployment rate DFW in bps over fell 70 the quarter 5.3%, to a significantly lower rate than that DFW’s population theof U.S. (6.7%). has grown 32% since 2000 and nowstands Further at 6.8 million. 2019, to growth projected is 8.6% of from 2014 according market to research firm Nielsen. Employment Demographics and Multi-housing Occupancy Multi-housing Multi-housing Construction The highest concentration development of activity units remains the in Central Dallas where area, 5,199 are under construction Uptown/Oak Lawn/Highland in units are underway andPark another the in 1,492 Downtown Dallas/West End/Deep submarket. In Ellum the suburban West Plano/Frisco market, experiencing is units underway. This the most development with 2,136 area also has the highest concentration single-family of residential development DFW. in The average occupancy rate across DFW increased 10 basis points (bps) the over quarter reach to 92.2%.This theis highest the occupancy rate has been since Q3 2008. Class With properties B a rate 94.2%, of continue haveto the highest following historical occupancy, trends Class DFW. in C properties had the greatest annual bps occupancygrowth, with the rate increasing 110 by 2014. months reach Q1 the to in over past 93.6% 12 robustFollowing development Class the over past A year, properties experienced a decrease occupancy in 180 of months, andbps currently the in past average 86.4%. 12 The average occupancy rate across DFW increased basis points (bps)10 the over quarter reach to 92.2%. This the is highest the occupancy rate has been since Q3 2008. Class With B properties a rate 94.2%, of continue have to the highest following occupancy, historical trends Class DFW. in C properties had the greatest occupancy annual growth, with the rate months bps reach the to over past 12 increasing 110 by robust Following development 2014. Q1 in 93.6% Class theover past A properties year, experienced a decrease occupancy in bps the in past 180 of 12 months, and currently average 86.4%. strongFollowing employment growth DFW, in housingmultifamily construction has been rapidly increasingfor the past three years. There are 18,186 units under construction the which is highest DFW, in level since the last construction peak Q4 in 2008. DFW placed third the in nation for number (5+ multifamily of units) building permits issued months, the over past 12 after second-place Houston and top-ranked New York accordingCity, the to U.S. Census Bureau.

Multi-housing Rents

MULTI-HOUSING FOURTH QUARTER FOURTH MULTI-HOUSING MARKETVIEW © 2014, CBRE, Inc. © 2014, CBRE, Inc. City Lewisville Grand Prairie Dallas Irving Irving Dallas Garland Worth Fort Richardson Dallas Grand Prairie Grapevine Dallas McKinney Lewisville ANNUAL SALES VOLUME INCREASED YEAR- 35% IN DALLAS/OVER-YEAR WORTH. FORT Address 300 E Round Grove Road 300 E Round 2934 Alouette Drive 2777 N Buckner Boulevard 365 Northwest Highway 4013 W North Gate 9821 Summerwood Circle 241 E Interstate 30 5209 Bryant Irvin Road 851 Greenside Drive Road 7575 S Westmoreland 1450 North State Highway 360 3601 Grapevine Mills Parkway Lane 9505 Royal 8700 Stacy Road 350 Continental Drive Average infill/urban stabilized cap rates DFW in are within the range for Class A 4.25%-to-4.75% of properties, 5.50%-to-6.00% for Class B properties, and 6.5%-to- for Class C properties.7.0% Average suburban stabilized cap rates DFW in remain slightly higher, for ranging from 5.25%-to-5.75% Class A properties, 6.25%-to-6.75% for Class B properties, and 7.0%-to- 8.0% for Class C properties.

Property Chapel Hill Silverbrook I&II Rio Parque Colinas I Lincoln Las Eagle Crest Hunting Ridge Meadows Lakeway Cameron Creek Apartments Pradera Village Park The Fairways Mustang Ridge at Grapevine Ranch Sontera Palms The Avenues at Craig Ranch Mira Vista Ranch

Figure 7: Q1 2014 Major Transactions Units 1,183 642 523 510 495 468 460 446 360 350 348 348 340 334 302 National sales volume totaled $18.6 National sales totaled volume $18.6 billion and $89.6 2014 Q1 in billion months, according theover to past 12 Real Capital Analytics. Capital Markets Apartment sales totaled volume $1.1 according 2014, DFW in billion Q1 in Realto Capital Analytics. Sales volume months the totaledover past $5.68 12 increase a 35% the over billion, annual at Realtotal this time Capital last year. Analytics reports a current average price DFW. in per $75,148 of unit

MULTI-HOUSING FIRST QUARTER FIRST MULTI-HOUSING MARKETVIEW Source: CBRE Research, Q1 2014.

Q1 2014 Dallas/Fort Worth Multi-Housing | MarketView 4 Q1 2014 Dallas/Fort Worth Multi-Housing | MarketView 5 , we

TEXAS RESEARCH Houston, TX 77056 [email protected] Lauren Paris Analyst Senior Research CBRE Dallas Research Suite 700 2100 McKinney Ave, Dallas, TX 75201 +1 214 979 6587 [email protected] Mallary Jolly Coordinator Research CBRE Dallas Research 2100 McKinney Ave, Suite 700 Dallas, TX 75201 +1 214 979 6589 [email protected] Lynn Cirillo Lynn Operations Manager Research CBRE Americas Research Oak, Suite 2300 2800 Post CONTACTS this information about For more MarketView, Worth Dallas/Ft please contact:

have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and have not verified it and make no guarantee, warranty or representation about it. It is your responsibility and all rights to the material are reserved and cannot be completeness. This information is presented exclusively for use by CBRE clients and professionals reproduced without prior written permission of the CBRE Global Chief Economist. . and Consulting can be found at www.cbre.us/research research produced by Global Research Additional U.S. DISCLAIMER to be reliable. While we do not doubt its accuracy Information contained herein, including projections, has been obtained from sources believed RESEARCH AND CONSULTING GLOBAL and Consulting – a Global Research which forms part of CBRE Team Research This report was prepared by the CBRE U.S. real estate market research, econometric network of preeminent researchers and consultants who collaborate to provide the globe. forecasting and consulting solutions to real estate investors and occupiers around FOLLOW CBRE FOLLOW © 2014, CBRE, Inc. Dallas/Fort Worth Multi-Housing MarketView

Q4 2013 CBRE Global Research and Consulting TOTAL OCCUPANCY AVG RENT PER SQ. FT. NET ABSOPORTION CONSTRUCTION DELIVERIES PROPOSED 92.1% $0.98 428 Units 16,478 Units 2,694 Units 19,573Units

Directional arrows based on change from the previous quarter. Data reflects market totals.

THE DFW MULTI-HOUSING MARKET WAS DISTINGUISHED BY STRONG EMPLOYMENT GROWTH AND BOOMING DEVELOPMENT IN 2013.

Total net absorption in 2013 outperformed Figure 1: Market Net Absorption 2012. Quarterly total net absorption typically dives downward in the fourth quarter, and this remained 3,200 true for 2013. However, at positive 428 units, Q4 2,900 2013 net absorption was significantly stronger than 2,600 the Q4 2012 net total of negative 44 units. Net 2,300 absorption for the year outperformed 2012 as well. 2,000 Annual net absorption totaled 13,044 units in 2013, 1,700 besting the 2012 total by 1,941 units. Annual net 1,400 absorption was positive across every Dallas/Fort 1,100 Worth (DFW) submarket in 2013. North Dallas 800 posted the highest annual net total (3,045 units) in 500 response to continued rapid population growth in the 200 northern Dallas suburbs, such as Frisco, Plano, and (100) McKinney. Units

Nearly twice the amount of new units were East Dallas North Dallas South Dallas Central Dallas East Ft. Worth East Ft. Worth West Ft. Worth Ft. Worth West completed in 2013 than in 2012. In response South Ft. Worth Northeast Dallas Northwest Dallas Southeast Dallas Central Ft. Worth Central Ft. Worth Southwest Dallas

to economic and population growth in DFW, 2013 Northeast Ft. Worth Northwest Ft. Worth Northwest Ft. Worth Southwest Ft. Worth Southwest Ft. Worth was a year of robust multifamily development activity. Q1 Q2 Q3 Q4 2013 Total Units Absorbed 12,657 units were completed in 2013, nearly double Source: Apartment Data Services, Q4 2013. the amount of units constructed in 2012. Deliveries CBRE Research, Q4 2013. will remain strong through early 2014, as another 16,478 units are under construction, primarily concentrated in the Uptown and Oak Lawn areas of DFW employment growth continues to significantly outpace Central Dallas. the nation. DFW’s strong economy and growing multifamily housing market is fueled by the area’s ample supply of well-educated workers and Uptown/Oak Lawn/Highland Park has above-average population growth. DFW employment experienced an more development activity than any other annual growth rate of 3.1% from October 2012 to October 2013, more submarket in the state. The Uptown/Oak than doubling the 1.7% national growth rate during that same period. In Lawn/Highland Park submarket experienced the DFW, the largest industry component that contributed to this growth was biggest boom in multifamily housing development in the Professional & Business Services supersector, which grew by 6.4% over Texas this year. Following job growth in the area and the same 12-month period. a trend toward “live-work-play” neighborhoods, this submarket has grown to become a highly coveted The average age of DFW residents is 38, three years younger than the area among renters. As a result, 5,416 units are national average. This young and affluent population supports an average under construction in the submarket, more than any household income of $76,618, 10% greater than the national average of other submarket in Texas. $69, 6 37.

© 2014, CBRE, Inc. 0 0 0 0 0 0 0 0 0 0 0 775 336 147 290 334 506 306 306 624 506 306 2,388 2,694 1,111 Units Delivered Delivered Construction © 2014, CBRE, Inc. 0 0 0 0 0 0 0 0 978 368 202 562 158 632 220 868 715 492 366 354 603 159 121 646 158 720 603 926 5,416 1,042 1,419 1,157 1,529 7,526 3,313 3,232 Units 14,949 16,478 Under Construction

3 2 4 4 3 48 33 91 59 13 98 66 13 14 51 41 16 46 91 55 34 17 10 51 16 46 (6) (60) (71) (69) (22) (41) (52) (66) (41) (40) (29) (50) (21) (40) 145 187 418 428 273 166 106 (28) (22) (41) (29) (50) (17) (40) (101) Net Units Absorption 93.7% 89.0% 86.3% 88.9% 89.7% 90.1% 96.0% 92.4% 93.1% 94.6% 94.2% 93.0% 89.3% 93.2% 94.5% 91.7% 94.3% 94.0% 92.9% 95.2% 91.6% 87.1% 92.3% 93.4% 92.7% 91.5% 86.9% 91.9% 93.9% 91.6% 93.8% 92.2% 94.4% 90.9% 95.1% 93.6% 89.6% 92.0% 92.2% 92.1% 89.6% 96.0% 92.4% 93.1% 93.5% 91.6% 90.0% 92.7% 91.5% 91.8% 92.8% 94.4% 90.9% 93.8% 89.6% Occupancy

$1.31 $1.52 $1.32 $0.85 $1.10 $0.81 $0.97 $0.86 $1.03 $1.03 $1.06 $1.12 $1.03 $0.80 $0.88 $1.16 $0.84 $0.99 $1.02 $1.06 $0.80 $0.78 $0.83 $0.87 $0.86 $1.20 $0.71 $0.87 $0.85 $0.92 $0.92 $1.10 $0.77 $0.78 $0.83 $0.90 $0.76 $1.01 $0.89 $0.98 $1.12 $0.97 $0.86 $1.06 $0.99 $0.80 $0.81 $0.86 $1.20 $0.83 $0.96 $0.77 $0.78 $0.89 $0.76 Rents Month Per Sq.Per Ft./

7,560 6,586 3,120 8,020 2,600 9,126 8,154 4,323 2,350 3,120 9,126 8,154 4,323 Unit 22,424 11,920 25,724 25,258 18,926 28,755 25,311 18,803 39,799 14,977 18,335 25,969 11,202 23,927 21,482 10,602 21,745 17,907 19,394 12,659 21,980 28,730 17,857 29,597 11,918 10,106 12,364 12,636 Count 99,472 18,926 21,745 39,901 63,369 59,372 10,106 14,714 12,636 439,472 172,674 612,146 127,645 119,537

39 55 58 94 93 18 80 71 59 57 82 74 60 74 53 93 88 20 42 48 68 71 48 27 56 21 45 72 18 42 46 27 56 66 72 115 106 105 128 102 100 102 138 130 826 454 105 443 502 100 201 308 249 Count 1,866 2,692 Property Denton Garland Lewisville East Irving West Irving West East Totals West Totals West South Total North Total South Totals Grand Prairie Central Total Central Total South Ft Worth Far East Dallas Far Garland Total South Arlington North Arlington Southest Totals Allen/ McKinney Northwest Total Northeast Totals Southwest Totals Southwest Totals Skillman St/ I-635 Northwest Totals West Plano/ Frisco West Far East Dallas Total Hurst/ Euless/ Bedford North Dallas/ Addison Far Southwest Ft Worth Southwest Far East Plano/ Richardson South Dallas/ Oak Cliff Downtown Ft Worth/ TCU Downtown Ft Worth/ Submarket Southeast Dallas/ Mesquite Carrollton/ Farmers Branch Carrollton/ Farmers Grapevine/ Roanoke/ Keller Grapevine/ Roanoke/ Southwest Ft Worth/ Benbrook Southwest Ft Worth/ Far South Dallas/ Waxahachie Far White Rock Lake/ Tenison Park Tenison Lake/ White Rock Western Hills/ Ridgmar/ Ridglea Western Far North Dallas/ Collin County Far Northwest Dallas/ Bachman Lake East Ft Worth/ Woodhaven/ I-30E Woodhaven/ East Ft Worth/ Uptown/ Oaklawn/ Highland Park Uptown/ Oaklawn/ Highland Las Colinas/ Valley Ranch/ Coppell Ranch/ Colinas/ Valley Las Haltom City/ Richland Hills/ Fossil Creek Haltom City/ Richland Hills/ Fossil Northwest Ft Worth/ Saginaw/ Eagle Mtn Northwest Ft Worth/ Downtown Dallas/ West End/ Deep Ellum End/ Deep Downtown Dallas/ West East Central Dallas/ Lower Greenville Ave Lower East Central Dallas/ North Central Dallas/ Upper Greenville Ave North Central Dallas/ Duncanville/ DeSoto/ Cedar Hill/ Lancaster

CBRE Research , Q4 2013.

Figure 2: Market Overview by Submarket Market Overview Figure 2: CENTRAL EAST NORTHEAST NORTH NORTHWEST SOUTHEAST SOUTH SOUTHWEST FORT WORTH MARKETS CENTRAL EAST NORTHWEST NORTHEAST SOUTH SOUTHWEST WEST DALLAS/FORT WORTH TOTAL DALLAS/FORT DALLAS TOTAL TOTAL DALLAS FORT WORTH TOTAL

Source: Apartment Data Services, Q4 2013.

MULTI-HOUSING FOURTH QUARTER FOURTH MULTI-HOUSING MARKETVIEW

Q4 2013 Dallas/Fort Worth Multi-Housing | MarketView 2

Q4 2013 Dallas/Fort Worth Multi-Housing | MarketView 3

Q4 2013 2013 Q4

2013 2013

Q3 2013 2013 Q3

Q4 2013 2012

Q4 2013

Q2 2013 2013 Q2

Overall 2011 Q1 2013 2013 Q1

Q3 2013

Q3 2013 Overall 2010 2010

Net Absorption Q4 2012 2012 Q4

Q2 2013 2009 Q2 2013 2012 Q3

Class D

2008 2008 Class D 2012 Q2 Dallas/Fort Worth MSA MSA Dallas/Fort Worth

Q1 2013

Q1 2013 Q1 2012 2012 Q1 2007 2007

Deliveries

Q4 2011 2011 Q4 Class C 2006 Q4 2012

Q4 2012

Class C

Q3 2011 2011 Q3 2005 2005

Texas Texas Q2 2011 2011 Q2

Q3 2012

2004 2004 Q1 2011 2011 Q1

Class B

2003 2003 Q2 2012 2010 Q4 Q2 2012

Under Construction

2002 2002 Q3 2010 2010 Q3 Q1 2012

Q1 2012

Class A Class A 2010 Q2 Class A Class A 2001

Q1 2011 2011 Q1 2000 2000 Q4 2011 Q4 2011 Q4 2011 Q4 2011 8 6 2 0 4

18 16 12 10 14 000's 000's Units Figure 5: Construction Activity and Net Absorption Figure 5: Construction Activity and Figure 6: Unemployment Figure 3: Average Rates Per Sq. Ft./Month Sq. Per Rates Average Figure 3: By Class Rate Figure 4: Occupancy $1.50 $1.30 $1.10 $0.90 $0.70 $0.50 95% 93% 91% 89% 87% 85% 83% 9% 8% 7% 6% 5% 4% 3% 10% Source: U.S. Bureau of Labor Statistics, December 2013. Source: CBRE Research, Q4 2013. Apartment Data Services, Q4 2013. Source: CBRE Research, Q4 2013. Apartment Data Services, Q4 2013. Source: CBRE Research, Q4 2013. 2013. Apartment Data Services, Q4

population the million, of 6.7 DFW metropolitan area is the fourth-largest MSA in the United States. The area’s population has grown 30% since 2000, and growth of 8.6% according to Claritas.is projected to 2018, from 2013 posted a lower unemployment rate for the quarter than Texas (6.2%) and the United An ample States supply of well- (7.3%). growth strong contribute workers population and educated healthyto the area’s economy. With a current estimated Seasonally adjusted employment growth in DFW was 3.2% over the months, last for a net 12 increase jobs. of 97,000 The unemployment rate in DFW dropped to 6.0% in Q4 down from 6.3% last2013, quarter. Once again,DFW through November 2013. Thus,through development November activity 2013. will likely keep its momentum into 2014. Demographics and Employment in Texas. The U.S. Census Bureau multi-family reports that 15,125 housing permits have been issued in DFW from January quarter. Uptown/Oak Lawn/Highland Park has held the highest representation of this development activity, with 5,416 units currently underconstruction in that submarket. This area has the largest concentration of multi-housing development completed in the fourth quarter. The amount of units under construction increased each units in the andquarter fourth topped out at 16,748 in 2013 Employment growth and a strengthening economy fueled a large amount of development making it in the DFW in 2013, most active year for development units since 12,657 2009. of those units andwere 2,694 were completed in 2013, 210 bps to 87.5%. Class C occupancy bps to 87.5%. increased bps210 130 over the months, last reaching 12 93.2% in Q4 2013. Construction Multi-housing the most occupancy growth, with the rateincreasing by 170 Followingbpsto an 89.0%. influx Classof A development, occupancy among that property class by decreased in 2013 in Q4 2013. With a rate Class of 94.2%, B propertiesin Q4 2013. continue to have the highest occupancy, as has been true historically in DFW. The Class B occupancy rate remained unchanged versus one year ago. Class D properties had Multi-housing Occupancy Multi-housing The occupancy rate increased climbing 40 steadily in 2013, basis points (bps) over the months last to reach 12 92.1% per sq. ft. TheEast Central Dallas/Lower Greenville Ave submarket and Downtown Dallas/West End/Deep Ellum submarket had the next highest rates across the Metroplex, respectively. and $1.31 averaging $1.32 The average rental rate has increased from this time last year across every DFW submarket and the highest rates are clustered in Central Dallas. Within that area, the Uptown/ Oak Lawn/Highland Park submarket topped the list at $1.52 by 4.3%. This growthhas been evident across every class of property, but Class C properties have experienced the greatest increase with an annual growth rate of 5.0%. Class A rates increased and Class 2.9% B rates increased 4.0%. Multi-housing Rents Across the Dallas/Fort Worth market, average monthly rents remained unchanged in the fourth per quarter, sq.ft. at $0.98 In the months, past the average 12 rental rate has grown MULTI-HOUSING FOURTH QUARTER FOURTH MULTI-HOUSING MARKETVIEW © 2014, CBRE, Inc. © 2014, CBRE, Inc. City Plano Dallas North Richland Hills Irving Addison Denton Plano Mesquite DeSoto North Richland Hills Lewisville Mansfield Plano Dallas Dallas SALES VOLUME WAS HIGHER56% IN 2013 THAN IN WAS IT 2012 WHILEIN DFW, THE SAW UNITED STATES AN INCREASE OFONLY 17%. Address 4700 Tribeca Lane 4700 Tribeca Street 910 Texas 4401 Glenview Court 3424 W Country Club Drive 15777 Quorum Drive 1221 W Oak Street Boulevard 3400 W Park N 2200 N Belt Line Road Street 821 S Polk Drive 1601 Weyland 2241 S Business Highway 121 3251 Matlock Road Parkway 6301 Windhaven Road 3840 Frankford Mills Road 4280 Trinity Class A properties, 6.0%-to-6.75% for Class B properties, and 7.0%-to- 8.0% for Class C properties. Cap rates compressed slightly during DFW. in the second half 2013 of Average infill/urban stabilized cap rates DFW in are within the range for Class A 4.25%-to-4.75% of properties, for Class 5.75%-to-6.25% B properties, and 6.0%-to-6.5% for Class C properties. Average suburban stabilized cap rates DFW in remain slightly higher, for ranging from 5.25%-to-5.75% Property Advenir at Walnut Creek Advenir at Walnut at Collin Creek Landmark Village Apartments Vail Camden Gardens Landmark at Sutherland Park Landmark at Courtyard Villas Landmark Huntington Ridge Oaks Remington at Vista Ridge Westmount 910 Texas Street 910 Texas Oaks Town Benchmark 15777 Quorum Street U Centre at Fry The Encore

Figure 7: Q4 2013 Major Transactions Units 256 314 259 580 270 256 256 198 194 480 242 250 414 240 420 United States was 17% higher in 2013 higher 2013 in United States was 17% than the year before. National sales volume totaled $103.46 National sales totaled volume $103.46 according Real to 2013, in billion Capital Analytics. Sales the in volume representing almost an 80%increase billion. $1.07 of total theover Q4 2012 Sales volume in 2013 was 56.0% higher Sales 2013 in volume when the annual than it was 2012, in total billion. was Sales $3.51 volume billion, at $1.91 surged Q4in 2013 Apartment sales totaled volume $5.47 DFW in billion for the year 2013, according Real to Capital Analytics. Capital Markets

MULTI-HOUSING FOURTH QUARTER FOURTH MULTI-HOUSING MARKETVIEW Source: CBRE Research, Q4 2013.

Q4 2013 Dallas/Fort Worth Multi-Housing | MarketView 4 Q4 2013 Dallas/Fort Worth Multi-Housing | MarketView 5 , we TWITTER TEXAS RESEARCH +1 214 979 6589 [email protected] Lynn Cirillo Lynn TX Manager, Operations Research CBRE Americas Research Oak, Suite 2300 2800 Post Houston, TX 77056 [email protected] Lauren Paris Analyst Senior Research CBRE Dallas Research Suite 700 2100 McKinney Ave, Dallas, TX 75201 +1 214 979 6587 [email protected] Mallary Jolly Coordinator Research CBRE Dallas Research 2100 McKinney Ave, Suite 700 Dallas, TX 75201 CONTACTS this information about For more MarketView, Worth Dallas/Ft please contact: FACEBOOK

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