Dimensions Online - Market Update

Rent Growth Differences Emerging at Floorplan Level

With change and heightened uncertainty in the air both for the multifamily industry specifically and the economy more broadly, it is of particular importance to be mindful of performance trends below the market level. With that in mind, using conventional properties of at least 50 units, let’s take a look at how rents have performed across Greater Fort Worth for different floorplan types through July of this year.

All numbers will refer to conventional properties of at least 50 units.

Efficiency Units

Average effective rent for new efficiency unit leases has gained about 9% through July of this year on a per square foot basis. This not only slightly outpaced last year’s blistering mark but was also well beyond any recent year prior to 2021. This performance relative to last year resembled both the Greater Dallas side of the metroplex and the nation as a whole at a time when demand for premium stock has been more resilient than for workforce housing. The average efficiency unit closed July leasing for $2.11 per square foot, or about $1,115 per unit.

Lease concession availability has remained fairly consistent so far this year after a slight decrease brought the share of units offering a discount for new leases to roughly 13%. The average discount value has held steady at slightly less than 3.5 weeks off an annual lease.

One-Bedroom and Two-bedroom Units

One-bedroom units have similarly outperformed last year in rent growth. An increase of just over 9% brought the average unit to $1.80 per square foot or approximately $1,265 per unit. For two-bedrooms, while rent growth through July failed to beat that from 2021, the gain was essentially equal at 8.5%. Needless to say, the associated average rent growth for both groups of units was well beyond anything prior to 2021. For one-bedroom units, the appreciation this year and last year were each more than double the previous five-year high.

Lease concessions have been as unchanged as with the efficiency units and were nearly exactly the same between one and two-bedroom units to end the period. About 10% of units were offering a discount for new leases to end July with an average concession value of just under 2.5 weeks off a 12-month lease.

Three Bedroom Units

It is a reminder of just how unusual our time remains that the approximately 7.5% average effective rent gain for three-bedroom units was the lowest of the floorplan types for Greater Fort Worth through July. This was also the only group of units that failed to meet or exceed last year’s gain thanks to a 2021 increase of 10% in the same portion of the calendar.

Three-bedroom units boast the lowest discount availability, but both availability and average discount value have crept up ever so slightly this year. Availability closed July with about 9% of three-bedroom units offering a concession package for new leases with an average value of around 2.5 weeks off an annual lease.

Takeaways

Greater Fort Worth multifamily has resembled the nation in many respects so far this year. Apartment demand has fallen considerably, bringing with it some reduction in average occupancy but no major change to the rent growth picture. Rent growth momentum has remained in part to a larger difference than normal between new leases and annual renewals, but largely because of the average occupancy build-up of last year.

From a floorplan perspective, that efficiency and one-bedroom units have been the most resilient also fits the national trend. These units are found in a higher concentration among new properties and Class A properties, two subsets with much overlap, and have therefore been more insulated than the two and three-bedroom units from the greater decline in demand in the workforce housing segment.

With average occupancy still comfortably above its pre-pandemic norm, it is almost certain that last year’s run-up in occupancy will not be fully unwound this year. With low vacancy due to keep pressure on rent growth, it is likely to early signs of a major change in trajectory will manifest first in the two and three-bedroom units.