Vigorous Third Quarter for Greater Fort Worth Multifamily
2024 has played out generally along expectations for the multifamily industry nationally. Further improvement in apartment demand from its bottom in 2022 has materialized but has not been enough to offset an historic new construction pipeline output. As a result, average occupancy has faced headwinds and rent growth has not rebounded to the extent that net absorption has.
Greater Fort Worth performance has been robust relative to many of the Sunbelt markets that have experienced substantial growth in stock over the last few years. The third quarter was another step in the right direction, though it was not all sunshine.
All numbers will refer to conventional properties of at least fifty units.
New Supply and Net Absorption
Just more than 1,600 new units were delivered across Greater Fort Worth in the third quarter. This brought the 2024 total through September to nearly 8,300 new units. Unlike many Sunbelt markets, although third-quarter deliveries were substantial, the total was right about the average for the period over the last five years.
Only five of twelve ALN submarkets in the region saw any new supply in the quarter. About 400 new units in the Denton – Corinth area led the way, followed by the Central Arlington submarket with just under 400 new units. Both the South Fort Worth and North Fort Worth submarkets saw new units introduced, but they combined for less than 500 units.
The most encouraging metric for the quarter was net absorption. Nearly 4,900 net units were absorbed across the market. This was more than the same portion of 2022 and 2023 combined and was second-most for the third quarter in recent years behind only 2021. Not since the opening quarter of 2022 has quarterly net absorption exceeded new supply.
Even better, the improvement in demand was broad-based. Class A net absorption quintupled last year’s paltry total and was slightly higher than even the same portion of 2021. Net absorption for Class C properties in the period more than tripled the total from last year. For the Class D subset, last year’s net loss of almost 500 leased units in the third quarter was followed by a net gain of more than 600 leased units this year. Class B properties did not see a similar surge in demand, but absorption held steady year-over-year.
After quarterly average occupancy declines in ten of the last eleven quarters, average occupancy rose by 180 basis points in the period to close September just above 87%. For properties that entered the year already stabilized, the average to end the quarter was around 91%.
Average Effective Rent and Lease Concessions
Ideally for owners and operators, apartment demand would have rebounded and sent both average occupancy and average effective rent upward. Instead, the vigorous improvement in demand came alongside softening rent performance.
A 1.1% decline in the average effective rent for new leases was nearly double the decrease from the same portion of 2023 and made this year only the second in the last decade in which rent growth failed to materialize in the third quarter.
Notably, only the Class A sector managed positive rent growth in the period – to the tune of a 1.3% gain. The Class B decline was marginal at 0.4%. For the bottom two price tiers, the declines were more substantial at just more than 2% for each.
Part of the downward pressure on rent growth came from lease concessions. 40% of conventional properties ended September offering a discount for new residents. That level of availability surpassed the pandemic-era peak and was last seen in early 2014 as lease concessions were still receding from the Great Recession era. The average concession value ended the quarter at approximately 3.7 weeks off an annual lease – the highest since the close of 2009.
Takeaways
Everything considered, the third quarter was a positive one for Greater Fort Worth multifamily. New supply remained high, but apartment demand roared back to such an extent that the quarter nearly exceeded net absorption from the same portion of 2021.
However, challenges remain. The strong bounce back in demand came as operators continued to pull the lease concession lever and to cede ground on rent growth. Additionally, although average occupancy managed to gain ground in the period, much remains to be made up on that front. Given that the softer portion of the calendar for the industry now lies ahead, that will be a heavy lift in the coming months.
Nevertheless, the supply glut is a short-term headwind for a market that appears to have turned the corner. As the end of 2024 rounds into view, Greater Fort Worth is better situated than many Sunbelt markets around the country.
Jordan Brooks
Senior Market Analyst – ALN Apartment Data
Jordan@alndata.com
www.alndata.com
Jordan Brooks is a Senior Market Analyst at ALN Apartment Data. In addition to speaking at affiliates around the country, Jordan writes ALN’s monthly newsletter analyzing various aspects of industry performance and contributes monthly to multiple multifamily publications. He earned a master’s degree from the University of Texas at Dallas in Business Analytics.
