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Occupancy & Rent Trends

Metro Occupancy Overview
Overall occupancy increased for the third consecutive quarter, gaining 0.28 points to 90.32%.  The Class B, C, & D markets all reported quarterly occupancy gains, while the Class A market was the lone class to post declining figures.  Despite the overall quarterly increase in occupancy, occupancy remains 0.10 points below last year’s level.  Class A occupancy fell 0.41 points over the quarter, and is down 1.41 points over the year to 91.80%. The Class B market recorded the largest quarterly gain in occupancy, increasing 0.87 points to 92.49%.  Class B occupancy is up 0.63 points since this time last year.  Class C market reported a 0.16-point quarterly gain to 87.63%, which is 0.12 points above last year’s figure. Class D occupancy was up 0.13 points over the quarter to 85.71%, but is down 0.57 points over the last twelve months. 

Occupancy

Quarter	Class A	Class B	Class C	Class D	Overall
3Q/06	93.21%	91.86%	87.51%	86.28%	90.42%
2Q/07	92.21%	91.62%	87.47%	85.58%	90.04%
3Q/07	91.80%	92.49%	87.63%	85.71%	90.32%

Metro Rent Overview
Overall rental rates climbed $0.003 per square foot (psf) during the third quarter to $0.880 psf.  Quarterly rental rate gains were recorded in all four markets, with Class B enjoying the largest increase. Overall rents are up $0.009 psf since this time last year. At $1.081 psf, Class A rents were up $0.002 psf over the quarter and $0.013 psf over the year.  Class B rents reported the largest quarterly increase, gaining $0.004 psf to $0.861 psf.  Class B rents are $0.002 psf higher than they were one year ago. Class C rents rose $0.002 over the quarter to $0.776 psf, and are up $0.006 psf over the year. Class D rents also increased $0.002 psf over the quarter.  At $0.715 psf, Class D rents are $0.013 psf above last year’s level. 

Rental Rates

Quarter	Class A	Class B	Class C	Class D	Overall
3Q/06	$1.068	$0.859	$0.770	$0.702	$0.871
2Q/07	$1.079	$0.857	$0.774	$0.713	$0.877
3Q/07	$1.081	$0.861	$0.776	$0.715	$0.880

Submarket Performance
Of the 51 D/FW submarkets, overall occupancy was highest in Granbury, which is near full, followed by Midlothian at 96.73%. The lowest occupancy was found in Farmers Branch at 81.29%.  The highest overall rental rates were found in the Uptown/Knox/Henderson submarket at $1.420 psf, followed by Downtown Dallas at $1.282 psf. The lowest rents were found in Azle at $0.680 psf.

Of the submarkets with more than one property, Denton reported the highest Class A occupancy at 98.48%, while the lowest Class A occupancy was reported in Tyler at 42.61%. In the Class B market, Midlothian, which was near full, reported the highest occupancy, while Benbrook posted the lowest occupancy at 86.87%. In the Class C market, Tyler recorded the highest occupancy at 97.77%, while Greenville Avenue/Lake Highlands reported the lowest occupancy at 79.10%. In the Class D market, East Plano/Sachse reported the highest occupancy at 97.46%, while Farmers Branch posted the lowest occupancy at 41.41%. 

Submarket Performance
Of the 51 D/FW submarkets, South Arlington reported the highest absorption over the quarter with 393 units absorbed, followed by Fort Worth, where 334 units were absorbed over the quarter.  Demand was weakest in South Dallas, where        -282 units were absorbed, followed by Hurst/Euless/Bedford, which recorded absorption of -249 units. 

Within each of the classes, Allen/McKinney reported the highest Class A absorption over the quarter with 272 units absorbed, while Far North Dallas reported the weakest absorption with -80 units absorbed.   Absorption in the Class B market over the quarter was highest in Denton at 198 units and lowest in the Benbrook submarket at -45 units.  In the Class C market, Fort Worth posted the highest absorption, as 177 units were absorbed over the quarter.  The weakest Class C absorption was posted by the Hurst/Euless/Bedford submarket, with -228 units absorbed.  Class D absorption was strongest in Greenville Avenue/Lake Highlands, with 67 units absorbed, and weakest in South Dallas, with -127 units absorbed. 

Apartment Inventory
There are a total of 2,570 operating or under-construction projects in the Dallas/Ft. Worth metro market (greater than 25 units) with a total of 575,728 units. Approximately 29% of the total units are Class A, 35% are Class B, 28% are Class C, and 8% are Class D. The chart below displays market inventory by class.

The civilian labor force unemployment rate in the eight-county Dallas-Plano-Irving Metropolitan District increased to 4.0%, while the total number of nonagricultural wage and salary jobs increased to 2,093,000 in August 2007, according to the Texas Workforce Commission. This month’s total is 58,900 jobs more than at this time last year.  Of the nonagricultural employers, Professional & Business services gained 14,700 jobs over the previous 12 months; Leisure & Hospitality gained 9,900 jobs; Education & Health Services employment is up 9,300 jobs; Financial Activities added 7,500 jobs; Mining & Construction gained 5,600 jobs over the year; Trade, Transportation, & Utilities added 4,300 jobs; Government employment is up 3,500 jobs; Other Services employment increased by 2,700 jobs; Information added 900 jobs; and Manufacturing gained 500 jobs over the year.

Interest Rates
The yield on the 10-year Treasury note rose to 4.58% in September 2007, which is down 0.05 points from its 4.63% yield one year ago.

The 30-year fixed-rate mortgage (FRM) averaged 6.38% in September 2007.  One year ago, the 30-year FRM was at 6.40%.  The average for the 15-year FRM in September was 6.05%, up 0.02 points from a year ago.

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Dallas/Fort Worth Market Map

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Methodology

Data Collection
Our in-house research team continuously updates over 100 fields of data for nearly 6,000 apartment complexes in our database. We update at least 90% of properties on a monthly basis to generate accurate market trend reports on rents, concessions, occupancy, etc. Our monthly surveys also update other property-specific data such as fees, policies, management, and owner information. On a less-frequent basis we update amenities, schools, and other data fields that change rarely. We perform current and historical data audit after we close each month's survey to identify any data inconsistencies or incorrectly keyed values.

Research
We monitor various news media, press releases, marketing materials, web-sites, CAD records, permit issuance, and other sources to capture new construction, planned projects, financing, and sales. Our researchers conduct phone interviews with relevant developers, brokers, or lenders to gather information on new construction and sales. We add properties to our database on a regular basis to ensure we offer the most up-to-date and complete apartment database.

Market Coverage
Our online apartment database covers all four major Texas metro markets - Austin, Dallas-Fort Worth, Houston, and San Antonio. The Austin market includes Caldwell, Hays, Travis, Bastrop, and Williamson counties. The DFW market covers Dallas, Tarrant, Wise, Denton, Collin, Hunt, Rockwall, Kaufman, Ellis, Johnson, Parker, and Erath counties. The Houston market includes Harris, Montgomery, Fort Bed, Brazoria, and Galveston counties (Brazos county is also included in the database but excluded from the trend reports). San Antonio includes Bexar, Comal, Guadalupe, Kendall, and Kerr counties.

We subdivide each market into submarkets (see map above): Austin has 23 submarkets, DFW has 50 submarkets, Houston has 53 submarkets, and San Antonio has 26 submarkets. The submarkets are based on neighborhood-style areas with defining boundaries such as major roads and other factors that establish a neighborhood. This approach allows the user to view distinct areas of properties that have evolved into their own sections of town and can be identified together.

Glossary
Absorption = Change of Occupied Units, including new construction. Absorption is a proxy for demand.

Occupancy = Percentage of physically occupied units on property.

Pre-leased = Net of percentage of units that have been pre-leased but not yet occupied and units on notice to be vacated.

Rents = Market rents (excluding concessions).

Class = Properties are classified as A, B, C, D, or Unclassified (U) based on various factors, such as age, location, amenities, curb appeal, overall condition, rents, etc. Class A properties are generally less than 10 years old, have excellent amenities, prime location, and great appeal, thus they tend to have the highest rents. Older properties built in early 1900s that were converted from warehouses or office buildings, or older apartment projects that have had major renovations may also be classified as A. Class B properties are generally 10 to 20 years old, have good locations, good level of amenities, are somewhat less appealing than Class A projects, and are in overall good condition. New affordable projects are also classified as B. Class C projects are usually 20 to 30 years old, have few amenities, are in poor locations, and are not well maintained. Class D projects are generally more than 30 years old, in poor condition, have no or limited amenities, are in poor locations, and have poor curb appeal. They tend to have the lowest rents per unit (although per-square-foot rents may be high since the units are usually small). Unclassified or Class U projects are senior housing, student housing, or other properties that have unusual lease terms, include meals with the rent, or other services, so their rents and occupancies are not representative of the actual market. We exclude these from our statistical reports as they skew the averages for the other classes.

Reporting
Occupancy, Rent, and Absorption trend data is based on Operating, Under-construction, and Under-renovation projects, Classes A, B, C, and D (excluding Class U).

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