Market Update: Feb 2022
A Final Look at a Year For the Ages
2021 will be a year discussed and referenced in multifamily circles well into the future. Nationally, historic apartment demand sent average occupancy higher, lease concession availability lower, and rent growth into the stratosphere. The Dallas – Fort Worth metroplex was at the forefront of the activity, and the Greater Fort Worth side of the market posted some truly spectacular numbers.
All numbers below will refer to conventional properties of at least 50 units.
New Supply and Net Absorption
About 6,300 new units were introduced across Greater Fort Worth in 2021, a decline from around 8,000 in 2020 but right at the annual average established from 2018 through 2020. Below the market level, the Denton – Corinth and South Arlington submarkets led the way in new supply with just over 1,200 new units each. Other notable areas were Central Fort Worth and South Fort Worth, which added approximately 900 and 750 units respectively. In total, all but two of the 12 ALN submarkets for Greater Fort Worth saw some level of new supply during the year.
As new supply decreased compared to 2020, apartment demand surged. Net absorption of more than 11,000 units was more than 70% higher than in 2020 and drove average occupancy up by just more than 3% to close December at 93%. That level of apartment demand was enough to put just the Greater Fort Worth side of the DFW metroplex in the top 20 markets nationally for 2021 net absorption. The Central Fort Worth submarket led the way with about 2,600 net absorbed units, but areas like Grapevine – Roanoke - Keller and North Fort Worth exhibited significant demand as well – each added more than 1,600 net leased units during the year. Encouragingly, no submarket suffered a net loss in rented units.
On a percentage basis, the largest increases in annual net absorption from the previous year were in price classes B and D. For Class B, absorption of about 3,900 units was more than 80% higher than in 2020. Absorption of around 700 net units in the Class D subset was more than double the 2020 total. In terms of total units, more than 4,700 previously unoccupied units were leased in 2021 in Class A properties – the most across the four price classes.
Average Effective Rent and Lease Concessions
The explosion in apartment demand fueled rent growth unlike anything seen in the last decade or beyond. Average effective rent growth finished 2021 at 17% - triple that of the previous high-water mark of the last five years from 2017. None of the dozen ALN submarkets for the area failed to reach 10% annual average rent growth with Central Arlington being the closest at a hair over 10%. Effective rent growth was strongest in North Fort Worth, a submarket that managed a gain of just over 20%. Two other regions, Grapevine – Roanoke – Keller and Mid-Cities each added 20% at the average.
Rent gains were most concentrated in the top two price tiers, with annual increases of 23% and 22% for Class A and Class B respectively. Even in the Class C space, average effective rent appreciation touched 15% for the year. Only Class D, with a 6% gain, finished the year below 10%.
A major component of the rent growth was the retreat of lease concessions. A decline in availability of nearly 70% from the start of 2021 resulted in only 10% of conventional properties offering a new lease discount by the end of the year – the lowest level of availability for any December of the last five years. No submarket saw an increase in discount availability in 2021. A handful of areas experienced declines of more than 85%, taking them to around or below 5% of properties offering by the end of the year. These areas included Denton – Corinth, Grapevine – Roanoke – Keller, Mid-Cities, and North Fort Worth.
The dramatic decline in lease concession availability was also observed across the price classes. Class C ended the year with the lowest rate of availability with only about 8% of properties offering a package for new leases. Class A, the segment with the bulk of new supply, ended the year with less than 15% of properties offering a discount.
After a challenging 2020, 2021 brought its own difficulties but the year also saw record apartment demand and generational rent growth. Greater Fort Worth was a perfect example of national trends at the market level.
Net absorption for the year totaled more than in 2019 and 2020 combined, and paired with a slowdown in new deliveries, occupancies and rents soared. An encouraging development was the broad-based nature of the results. There were no real laggards at the submarket level in terms of demand or rent growth, and positive results were achieved across the price classes.
One area that does bear watching is the magnitude of rent growth, particularly in the Class C space. Gains like the ones achieved in 2021 do not alleviate affordability concerns and have fueled renewed energy around counterproductive measures like rent control and source-of-income ordinances in markets around the country.
Looking ahead through 2022, many of the factors leading to strong multifamily performance in Greater Fort Worth appear poised to remain in place. However, the industry will not benefit from artificially stifled demand from the previous year as was the case in 2021. It seems reasonable to expect a strong year in the vein of 2017 or 2018, but not necessarily another historic year.
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.