One of our professionals, David Kilgo, went to the Dallas Crittenden conference recently and saw how the hot multifamily market is not losing steam. He is optimistic that it will remain that way. Also, he spoke with colleagues about the DFW market’s future in this commercial real estate sector.
What was the mood like at the conference? Is multifamily still a really hot sector?
Everyone there was still saying that apartments are the big driver in the market, and it could go out another 10 years, or at least five to seven.
So is there any trepidation about things getting overheated or a housing-market recovery that could negatively impact the apartment sector?
We heard that a little bit of that. It was a concern, but people didn’t seem like it’s going to have a large enough impact to slow down new construction–especially in this market.
The Dallas-Fort Worth area is growing leaps and bounds. The national mood was that it will continue to grow, but they might have to tap the breaks just a little bit. On the local level, though, there are new apartments going up everywhere in this area.
Then there are no worries about overbuilding in the Dallas Metro market?
It’s a bit of a concern, but we see a lot of new apartment and housing growth happening at the same time. There is a tremendous amount of growth in both sectors. Obviously, most people would opt to get into a new house before a new apartment, but right now both are doing really well.
Texas is probably considered a gateway market now for a lot of investors wanting to buy. Does it seem like a lot of those firms and buyers are looking toward more secondary locales to get a higher return?
It is absolutely yield driven. That was one of the main messages during the conference. The reason for this is that cap rates could go up starting this year and could go up more during the next 10 years. But yield is a big play right now in the secondary markets because there is more construction taking place in the hotter areas right now.
As far as the singular assets go, it seems like developers are trying to attract tenants more and more with new amenities. Was that discussed very much?
There was a lot of talk about that. Modern conveniences were discussed, like free wifi, and a brand-new startup company was there promoting an app that you can access in the immediate area too see what kinds of amenities are around the location. It’s like staying at a Courtyard Marriott. You can walk into the common area of the apartment complex, push a button on the TV, and see all of the restaurants, entertainment and necessities nearby. They’re making it more user-friendly and attractive to the market they are trying to cater to, which are middle-income families that want to live in an apartment and also don’t want to have to give up anything. They want to walk down the street and be able to walk to the dry cleaners or the grocery store and find out about food delivery.
Were there any interactions or experiences with clients that were significant for you at the show?
There is one in Austin who has taken advantage of our cost-segregation services. One of the things that he his doing is going out in the community, within a five-to-seven-mile radius of an apartment complex he recently purchased, and looking for partners. He is seeking to partner with services like dry cleaner and put their flyers in the lobby, and in turn, residents could get a percentage off of delivery or other services.
We do a lot of both the environmental and property condition assessments. We often bundle those two services. We also provide appraisal work and even title insurance. In addition, our financial advisory company, GRS | Centaur offers cost segregation, like we did for our Austin client. Most people might acquire an apartment building and write it off with a 39.5-year depreciation. But our cost-segregation service will help you take that apartment complex and figure out what most property managers can’t predict within 40 years. Our client in Austin will have about $100,000 in savings that we will be able to pull forward as a result using our services.
It goes without saying that people are looking for the greatest amount of return in the shortest amount of time.
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