Industry Update - May 2024
Mixed Results for Multifamily in the First Quarter
After a tough couple of years for Greater Fort Worth multifamily, the opening quarter of 2024 brought with it both positive and negative indicators for the year ahead. On one hand, apartment demand showed moderate improvement. On the other hand, an imbalance between new units and net absorption continued to pressure other metrics like occupancy and rent growth.
All numbers will reflect conventional properties of at least 50 units.
New Supply and Net Absorption
Just more than 3,500 new units were delivered across Greater Fort Worth in the opening quarter of the year. This was higher than last year’s roughly 3,200 units and was well above the five-year average for the period of around 1,800 units.
A little more than half of ALN submarkets for Greater Fort Worth saw some level of new supply in the quarter. The North Fort Worth area led the way with nearly 1,300 new units and was followed by the Central Fort Worth region where deliveries totaled more than 800 units. The Denton- Corinth submarket was the other area with significant new supply with roughly 600 new units introduced.
Apartment demand improved relative to the opening quarter of 2023 but remained at the low end of the range established in recent years. Net absorption of less than 400 units bettered a net loss of more than 600 leased units a year ago but was lower than in any other recent year. Stabilized properties saw their worst first quarter in more than five years with a net loss of around 1,000 leased units.
Demand results were mixed at the price class level. Net absorption of more than 300 units in the Class A subset was more than last year’s total, but the result was about 25% below the five-year average for the first quarter. Class C suffered a net loss of more than 200 leased units, but this year’s loss was smaller than last year’s net loss of more than 350 leased units. The Class B group slightly underperformed relative to a year ago, but the almost 800 net absorbed units were well above the five-year average for the period. A net loss of approximately 600 leased units for Class D marked the worst result for an opening quarter in more than five years.
Average Effective Rent and Lease Concessions
Despite the imbalance between new supply and net absorption resulting in a 150-basis point decline in average occupancy in the first quarter, average effective rent growth for new leases managed to remain in positive territory. A 0.2% gain brought the average to $1,408 per month – down from a peak of $1,426 twelve months ago.
Positive rent growth was entirely a feature of the top of the market. A 3.7% gain for price Class A properties in the quarter was a dramatic turnaround from last year’ 0.4% decline and the largest gain in more than five years for the period. Class B (0.3%) and Class C (-0.2%) each saw small changes to start the year while a decline of more than 3% for Class D was the inverse of Class A.
Lease concessions continue to play a prominent, and growing, role in the market. Nearly 40% of conventional properties ended March offering a lease discount for new residents – up from just 20% of properties in March of last year. Availability has now surpassed the pandemic-era peak and ended March at its highest point since early 2014. Discount availability for Class C and Class D closed the period higher than at the top of the market with 43% and 37% of properties offering a concession package, respectively.
The average concession value declined very slightly in the quarter. At just over 6% off an annual lease, though, the value remained at the top of the range from the last few years. The average discount on an annual lease for a new resident was slightly higher in final quarter of 2023 and in the same portion of 2020. Aside from those brief periods, the average value finished the first quarter of 2024 higher than at any point since 2010.
Takeaways
The first quarter was far from a home run for Greater Fort Worth multifamily, but there were some encouraging developments. Net absorption improved some over the same period a year ago, and at least returned to positive territory. The step in the right direction was also fairly widespread. With the exception of price Class D properties, apartment demand either improved over last year as with Class A and Class C, or was at a level that compared favorably to the longer-term average as with Class B.
Ultimately, new supply will probably be the main component of industry performance once again this year. Even with further improvement in apartment demand, new supply is expected to be enough to continue pushing average occupancy downward this year.
Rent change in the quarter managed to remain above zero despite the sharp decline in average occupancy resulting from that imbalance between new supply and demand. In the coming months, with the more robust portion of the calendar ahead for apartment demand and rent growth, further short-term improvement may well be in the cards.
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.
