Industry Market Update - April 2023

Checking in on the Construction Pipeline

While 2022 apartment demand took a nosedive, Greater Fort Worth's new supply also slowed last year – though far less so. About 6,500 new units delivered were slightly below the previous three-year average and were roughly 1,000 units less than were introduced in 2021. Even with the total new supply decreasing last year, the monthly data reflect new supply increased in the back half of last year as apartment demand was slumping post-summer. With net absorption expected to be somewhat muted again this year, the new construction pipeline is set up to wield particular influence over market-level multifamily performance in 2023.

Recent Deliveries

In the last six months, a period from September through February at the time of this writing, about 4,600 new units have been delivered across Greater Fort Worth. This was within the range for this portion of the calendar established over the last five years but also marked a notable increase from the roughly 2,700 new units delivered from September 2021 through February 2022.

Eight of twelve ALN submarkets for Greater Fort Worth have had some level of new supply in the last six months. The Grapevine – Roanoke – Keller region led the way with almost 900 new units in the period while both the North Fort Worth and Central Fort Worth submarkets were right behind with approximately 800 new units each. In general, the Arlington submarkets have had fewer recent deliveries than Fort Worth or the northern more outlying areas.

Units Under Construction

At the end of February, ALN was tracking more than 13,000 units currently under construction but not yet leasing. Central Fort Worth, with more than 3,100 units under construction, was the submarket with the most current construction activity. Just behind were the North Fort Wort and Denton – Corinth areas with right around 2,500 units each. South Arlington was the only other region to reach the 2,000-unit threshold.

With ten of the twelve Greater Fort Worth submarkets having some level of current construction activity, upcoming deliveries will be more widely spread across the market than recent new supply has been. The average multifamily construction duration for Dallas – Fort Worth stands at around 14 months, so the vast majority of the units in this phase of the pipeline are expected to enter the market in 2023.

Pre-Construction

Projects in this group are those that are somewhere in the development process but haven’t broken ground. Because it’s possible to postpone or cancel these projects based on market conditions, they aren’t as relevant in the short term from a supply perspective. However, they can provide some insight into the general expectations for a market. About 32,000 units were in this phase of the pipeline to close in February – almost 60% of the total pipeline.

Eleven of twelve Greater Fort Worth submarkets had at least one project in a pre-construction phase to end the period, indicating that the wider geographic range of future deliveries will not just be a temporary dynamic applying only to the next year or so for projects already under construction.

Familiar submarkets populate the top of the list for pre-construction pipeline units. North Fort Worth led the way with roughly 7,700 units, followed by around 5,800 units in the Denton – Corinth area and about 5,500 pre-construction units in the Central Fort Worth region. The East Fort Worth and North Richland Hills submarkets closed the period with the fewest pre-construction units – each with less than 1,000.

Takeaways

Last year’s poor apartment demand outweighed a slight decline in new supply and Greater Fort Worth's average occupancy was dramatically impacted. The next few months should provide some useful answers around the extent of any seasonal bounce in apartment demand, the shake-out of Federal Reserve policy versus the unemployment rate, and some of the other macroeconomic sources of uncertainty.

In general, it is reasonable to expect apartment demand to remain fairly tepid in the near term, and with new deliveries set to ramp up – Greater Fort Worth's average occupancy could be in for more pressure.

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.