REAL ESTATE OUTLOOK

DALLAS-FORT WORTHMULTIFAMILY MARKETFIRST QUARTER 2018

DALLAS-FORT WORTH

* Arrow indicators represent change from previous quarter

RATES

$1.24/SF

VACANCY

7.9%

12-MONTH NET ABSORPTION

15,759 UNITSRENTAL RATES/SF BY METRO LARGE METRO AREAS

SOURCE: AxioMetrics, Transwestern; March 2018

$0

$0.50

$1.00

$1.50

$2.00

$2.50

San DiegoMiamiDenverAustinDallasHoustonNashvilleFort WorthPhoenixAtlanta

EMPLOYMENT GROWTH LARGE METRO AREAS | 2010-2018 PERCENTAGE CHANGE

SOURCE: Bureau of Labor Statistics, Transwestern; March 2018

0 20 40 60 80 100 120

BOSTON

PHILADELPHIA

MIAMI

CHICAGO

WASHINGTON D.C.

SAN FRANCISCO

ATLANTA

PHOENIX

HOUSTON

LOS ANGELES

DALLAS-FORT WORTH

NEW YORK

OV E RV IE W

Population BoomingDallas-Fort Worth led the nation in population growth from 2010-2017 adding 973,431 residents. Over half of that was due to migration which contributed 555,586 (369,622 domestic/185,964 international) to that total. Economists are speculating that if the current trends continue, the area could catch up to Chicago sooner than previously expected. Dallas-Fort Worth added 101,200 jobs over the last year, a growth rate of 2.8% (277 jobs per day). The total population for the Dallas-Fort Worth metro is now 7.4 million, making it the 4th largest metro behind New York, Los Angeles, and Chicago.

2 DALLAS-FORT WORTH MULTIFAMILY MARKET WATCH Q1 2018

DALLAS-FORT WORTH MULTIFAMILY MARKET WATCHFIRST QUARTER 2018

RE NTA L R ATE S

Continued Growth Begins to StabilizeEffective rental rates in the Dallas-Fort Worth metro have seen significant increases year after year. Rental rates per square foot rose to $1.24 in the first quarter of 2018, a year-over-year increase of 1.6% for the average apartment unit of 894 SF. Effective rental rates have increased 37.4% since 2008. Asking rental rates per unit recorded $1,086 at the end of the first quarter, a 1.4% increase from the same period last year. Submarkets that reported the highest rental rates included Park Cities at $2,297/unit, Uptown at $1,937/unit, Downtown Dallas at $1,529/unit, and Grapevine at $1,308/unit.

SU PPLY A N D DE V E LOPM E NT

Construction Is Keeping Up With DemandDuring the previous 12 months, there have been 93 buildings with 23,579 units delivered across the DFW metro. Fifteen of those buildings and 3,444 units were produced in the first quarter. Currently, there are 154 buildings and 39,865 units under construction. Submarkets recording the highest level of construction activity include the Frisco/Prosper submarket with 4,091 units underway, Northwest Fort Worth with 3,389 units, Plano with 3,200 units, and Allen/McKinney with 2,765 units under construction.

OU TLOOK

Investment Activity Remains Strong, Despite Increasing Capital CostsFor the first time since 2014, the 10-year Treasury yield hit the 3% level and has brought increased attention to its effect on capital markets, specifically real estate. However, if we look back at November 2016 through 1Q 2017 when the treasury rose by 100 basis points, multifamily valuations still grew 2% nationally. Fast growing, secondary markets (Dallas-Fort Worth, and Phoenix) stand to maintain increased level of investment activity, despite the increased cost of lending, due to their historically low valuations when compared to primary markets (New York and San Francisco). Additionally, despite rising treasury rates since 2014 the cost of debt has not moved in unison with the upticks. The 10-year yield has risen 40 basis points over the past 12 months, compared to the average cost of debt originated by government sponsored enterprises increasing about 25 basis points (PGIM). This is partially attributed to intense competition in the debt space for multifamily assets, as a hedge against the risk of a late cycle down term by assuming first-lien risk.

Apartment Rents / SF

SOURCE CoStar, Transwestern

Apartment Rents / Unit

Comparative Multifamily Investment Sales Volume

SOURCE CoStar, Transwestern

SOURCE Real Capital Analytics, Transwestern *Year-to-date

*Year-to-date

*Year-to-date

10 -Ye a r A n n u a l Ave r a g e = $1.02 /S F

$0.50

$0.75

$1.00

$1.25

$1.50

18*17161514131211100908

10 -Ye a r A n n u a l Ave r a g e = $8 89/ U n i t

$600

$800

$1,000

$1,200

18*17161514131211100908

$0

$2

$4

$6

$8

$10

HoustonDallasAtlanta

17161514131211100908

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DALLAS-FORT WORTH MULTIFAMILY MARKET WATCH Q1 2018 3

Dallas Multifamily Market Indicators – All Space

SUBMARKET# OF

APARTMENT BUILDINGS

AVERAGE UNIT SF

AVERAGE OCCUPANCY

EFFECTIVE RENT/MONTH

EFFECTIVE RENT/SF

UNITS UNDER CONSTRUCTION

UNITS ABSORBED

Q1 2018

12 MONTH NET

ABSORPTION

Allen/McKinney 79 930 91.8% $1,177 $1.26 2,765 177 1,635

Arlington 266 827 93.2% $956 $1.15 1,552 (36) 50

Denton 105 867 92.3% $930 $1.07 916 (50) 450

Downtown Dallas 30 977 90.1% $1,529 $1.56 1,388 69 635

East Dallas 214 813 90.8% $1,076 $1.32 2,658 444 1,736

East Fort Worth 62 837 92.6% $836 $1.00 - (27) (165)

Farmers Branch/Addison/Carrollton 281 871 93.3% $1,118 $1.28 2,287 (140) 562

Frisco/Prosper 61 969 85.7% $1,264 $1.30 4,091 530 2,440

Garland/Rowlett 101 871 92.4% $988 $1.12 1,765 169 530

Grand Prairie 37 820 95.4% $932 $1.14 - (11) (110)

Grapevine 32 902 93.9% $1,308 $1.43 1,006 18 (39)

Hurst/Euless/Bedford 99 866 94.7% $1,036 $1.20 658 (35) (118)

Irving 144 802 94.1% $907 $1.13 - (52) (473)

Las Colinas 81 917 92.3% $1,256 $1.36 1,438 113 687

Lewisville/Flower Mound 90 902 93.4% $1,144 $1.27 762 77 544

Mesquite 154 827 94.6% $857 $1.04 743 35 199

North Dallas 30 881 87.6% $1,306 $1.46 582 63 100

North Fort Worth 59 950 91.7% $1,188 $1.25 858 (41) 142

North Richland Hills/Haltom City 60 859 93.8% $947 $1.10 593 (1) (154)

Northwest Dallas 115 808 93.6% $1,037 $1.29 940 20 224

Northwest Fort Worth 102 917 89.6% $1,069 $1.17 3,389 144 837

Oak Cliff 94 852 93.7% $909 $1.07 786 94 (128)

Park Cities 2 1,254 92.0% $2,297 $1.83 - (1) (12)

Plano 137 928 90.9% $1,249 $1.34 3,200 315 1,545

Richardson 98 836 91.7% $946 $1.13 153 5 (125)

Rockwall/Wylie 20 963 91.2% $1,255 $1.30 913 44 394

South Dallas 72 876 94.0% $953 $1.09 110 (2) (182)

Southeast Dallas 111 883 90.7% $878 $0.99 980 40 (11)

Southeast Fort Worth 61 902 90.4% $981 $1.09 983 44 381

Southwest Fort Worth 168 864 92.8% $962 $1.11 1,391 16 408

Uptown 94 964 86.8% $1,937 $2.00 2,256 250 1,549

West Dallas 25 885 86.1% $1,250 $1.43 702 232 1,142

TOTAL – Dallas-Fort Worth 3,084 894 91.8% $1,086 $1.24 39,865 2,503 15,759

SOURCE: CoStar, Transwestern

Copyright © 2018 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from CoStar and other primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.

DALLAS-FORT WORTH MULTIFAMILY MARKET WATCHFIRST QUARTER 2018

MULTIFAMILY CONTACTS:

Dallas-Fort Worth Multifamily Submarkets

Submarkets

Taylor Snoddy Managing Director972.774.2555 taylor.snoddy@transwestern.com

James Roberts Vice President214.446.4569 james.roberts@transwestern.com

METHODOLOGY

The information in this report is the result of a compilation of information on multifamily properties located in the

Dallas-Fort Worth metropolitan area. This report includes existing and under construction multi-tenant apartment

properties for class A, B, and C buildings, with a minimum of 50 units.

1. Downtown Dallas 2. Uptown3. Park Cities4. North Dallas5. East Dallas6. Southeast Dallas7. Mesquite

14. South Dallas15. Grand Prairie16. Irving17. Las Colinas18. Rochwal/Wylie19. Allen/McKinney20. Plano

8. Garland/Rowlett9. Richardson10. Farmers Branch/

Addison/Carrollton11. Northwest Dallas12. West Dallas13. Oak Cliff

21. Frisco/Prosper22. Denton23. Lewisville/Flower

Mound24. Grapevine25. North Fort Worth26. Northwest Fort Worth

27. North Richland Hills/Haltom City

28. Hurst/Euless/Bedford29. Arlington30. East Fort Worth31. Southeast Fort Worth32. Southwest Fort Worth

Philip Wiegand Vice President214.446.4569 philip.wiegand@transwestern.com

175

380

380

287

175

380

80

75

67

360

183

161

161

161

DNT

DNT

DNT183

121

75

75

35E

35W

35W

35W

820

820

35E

635

635

35E

35E

635

20

20

30

20

30

45

20

20

20

30

12

3

4

5

67

8

910

11

12

13

14

15

16

17

1819

20

2122

23

2425

26

2728

29

30

31

32