Market Update - March 2024

New Supply Will Remain a Key Performance Driver in 2024

A major driver of multifamily performance last year was the impact of an extremely active new construction pipeline in an environment of prolonged tepid apartment demand. This was the case nationally, but Greater Fort Worth was certainly not immune to the broader trend. In 2024, new supply will continue to play a primary role in the performance outcomes of the industry.

Recent New Supply

More than 9,500 new units were delivered across Greater Fort Worth in 2023. This level of new supply was the most in more than a decade and represented a 55% increase from the 2022 total. In the ten years from 2023 through 2022, average annual deliveries for the market totaled only about 4,500 units. 2023 marked the fourth consecutive year Greater Fort Worth has been above that average, and the streak is unlikely to end before at least 2027.

Another way to contextualize new supply is on a size-adjusted basis. Taking new units delivered as a share of existing conventional stock allows for more accurate comparisons over time. Last year new units accounted for 4.4% of existing stock. That was well above the 2.5% annual average derived over the previous decade and was also the highest value this side of the Great Recession. This differentiates a market like Fort Worth from a market like San Antonio. In San Antonio, 2023 new supply was the highest in more than a decade but was only third highest once adjusted for multifamily stock. The pressure exerted by the construction pipeline has been even more acute for Greater Fort Worth. 

Below the market level, five submarkets have been the focus of recent deliveries. The North Fort Worth and Denton – Corinth submarkets added approximately 1,800 and 1,700 new units, respectively. The South Arlington area added just less than 1,700 new units while new supply in the Central Fort Worth submarket totaled around 1,600 units. The only other submarket with at least 1,000 new units introduced was the North Richland Hills – Hurst region with just over 1,000 units. 

Units Under Construction

More than 16,000 units are currently under construction across Greater Fort Worth. With a roughly nineteen-month average duration from construction start to lease start, these units are the reason new supply is unlikely to recede to the longer-term average any time soon. 2024 and 2025 new supply is virtually guaranteed to remain elevated with the bulk of these 16,000 units expected to begin leasing in that timeframe. 

The geographic spread of upcoming new supply looks very similar to that of recent deliveries. Just over 4,500 units currently under construction in the North Fort Worth submarket leads the way for the market. The Denton – Corinth region, with about 4,000 units under construction, is right behind. These two regions were also the top two for 2023 deliveries. Other areas like South Fort Worth with about 2,300 units, South Arlington with about 1,900 units and Central Fort Worth with about 1,700 units rounded out the top five. Of these submarkets, only South Fort Worth was not in the top five for deliveries last year. 

The similarity between the most active submarkets in 2023 and those due to lead the way in 2024 means that near term supply pressure for Greater Fort Worth is likely to be fairly concentrated. This is dissimilar from other markets where higher turnover at the top of the submarket rankings will help to diffuse the impact of the construction pipeline across the broader market. As a result, it will be of vital importance to see continued demand improvement in these most active submarkets this year. 

Takeaways

New supply played a prominent role in industry performance last year, and this will not be changing in 2024. New supply last year was at its highest point in more than a decade, and the deluge of new units entering the market remains in full swing. The timing has been less than ideal as it has corresponded with the worst two-year period for apartment demand since the Great Recession.

The combination of unusually high supply and unusually low demand has already taken a substantial toll on average occupancy and on rent growth. In order to somewhat mitigate further erosion this year, continued improvement in demand as was seen from 2022 to 2023 will be important. In particular, in those submarkets where last year’s heavy dose of new units will be followed by more of the same this year.

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.