Fort Worth Multifamily Market is Worth a Look

The Fort Worth-Arlington MSA is experiencing positive job growth, and is listed as one of the best performing metros in the nation. The MSA added 36,700 jobs, an expansion of 4.2 percent year-over-year ending February 2013. The MSA also experienced an unemployment improvement of 0.8 percent. This was the largest year-over-year percentage increase in employment among all metropolitan divisions and good enough to be ranked 13th nationally in job addition.

Many of these jobs have come from the numerous road construction projects that the area has undertaken, such as the North Tarrant Express, which has more than 1,100 employees working on the corridor. The $2.5 billion project just passed the three-year mark and is currently ahead of its estimated completion date of June 2015. When complete, the North Tarrant Express will run from Interstate 35 West in Fort Worth to Industrial Boulevard in Euless, relieving congestion, improving safety and providing for anticipated traffic growth for one of the country’s fastest developing regions.

Another billion dollar infrastructure project is also underway — the Chisholm Trail Parkway, a 28-mile toll road that will connect the Fort Worth CBD at Interstate 30 to U.S. Highway 67 in Cleburne. This will relieve traffic on I-35 West as well as some of the north and south corridors in southwest Fort Worth. Both of these completions will have a significant impact on their surrounding areas and will exponentially improve travel time.

Construction in Fort Worth doesn’t just stop with the roadways. Increased raw material costs haven’t slowed down new construction. The Fort Worth market added 1,278 multifamily units in the past year and multifamily building permits for the metro are increasing and nearing pre-recession levels. As of the end of February 2013, permits for more than 3,400 apartments had been submitted. This amount of annual authorization volume nearly doubled the number of apartments approved last year and ranked 24th nationally. Currently, there are approximately 3,880 units under construction in the Fort Worth market.

One of the areas seeing a number of these projects is north Fort Worth, specifically the AllianceTexas area. During the next year, three projects totaling 740 units are expected to be delivered, the largest annual delivery for Fort Worth’s submarkets. These deliveries will expand the submarket’s inventory base by 7.2 percent. Two of the three projects, Sagestone Village and Monterra Village II, are being developed by Hillwood, the most active developer in Tarrant County. They are part of a master-planned project that is one of the nation’s largest private developments, with a planned land mass 15 percent larger than Manhattan. AllianceTexas is not just receiving local attention, either. High profile tenants like Amazon, who recently announced that Alliance would be one of three new distribution center locations, have a keen interest in the area, citing strong demographics and tremendous support from city leaders.

Another area seeing a spike in development is Fort Worth’s West 7th area, the stretch of Seventh Street between the Trinity River and University Drive. West 7th, with its urban finish-out and unique personality, has become one of the area’s premier shopping, dining, and entertainment destinations. This area has seen a rise in activity from local residents, Texas Christian University students and employees of the CBD and medical center. In other words, the area provides the kind of demographic profile that developers love.

Two multifamily projects, The Lancaster North and Lofts at West 7th III, were recently completed and added 159 units to the West 7th area. Another three projects totaling 701 units are currently being built in the immediate neighborhood. Chesapeake recently sold the last remaining piece in the West 7th corridor, a 30-acre plot, to Centergy Retail LLC. This piece stretches from West Seventh Street on the south to Kansas Street on the north and from the river on the east to the railroad tracks on the west. The project will be consistent with the current corridor’s focus of mixed-use development. Construction should begin during the first quarter of 2014.

Our recent experience in the Fort Worth market has been very positive. Two North Fort Worth assets that just closed saw a total of 44 property tours — a marked improvement of investors willing to “cross the Trinity”. In the past 12 months, 16 Class A transactions totaling over 4,850 units have taken place in the Fort Worth market. These deals sold for between $75,000 and $100,000 per unit and traded in the mid-5 percent to low-6 percent capitalization rate range. With the ongoing activity in the Fort Worth market, continued job growth and the attractive lending environment, the metro should continue to experience positive growth, as well as garner attention from the investment community. Look for the Fort Worth multifamily market to pick up steam in the coming quarters and thrive in the next few years.

— Brian Murphy, principal with ARA Dallas, and Steve Hahn, analyst with ARA Dallas