Market Update June 2024

Posted By: Jordan Brooks Dimensions Online,


Rent Growth Back to Normal at Top of Market

A deluge of new supply well in excess of net absorption continues to be the story for Greater Fort Worth multifamily. This sustained imbalance has sent average occupancy spiraling downward over the last two years and has pressured rent growth significantly. Even so, apartment demand to start 2024 improved moderately over last year and rent performance has improved along with it as well – albeit to a lesser degree. 

While demand and rent improvement has been fairly widespread across the price classes, the improvement has not been ubiquitous. 

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

Net Absorption

For Greater Fort Worth as a whole, net absorption in the first four months of 2024 totaled roughly 750 units. This was well below the typical pre-pandemic range for that portion of the calendar but compared favorably to a net loss of about 350 leased units in the same period of 2023. 

Robust improvement occurred for all price classes except for Class D. In the Class A space, net absorption of more than 700 units followed last year in which less than 200 net leased units were absorbed from January through April. For Class B, net absorption of almost 700 units was approximately 600 net units more than last year. Class C properties managed a net loss of only about 100 leased units to start this year after suffering a net loss of almost 600 leased units in the same portion of 2023. 

For Class D properties, a net loss of around 600 leased units to start 2024 followed last year’s positive net absorption of about 270 units. Class D was therefore the only price class in which 2024 apartment demand has underperformed 2023 through April. The lack of new supply pressure, such as is faced by the top of the market, mitigates the poor Class D demand somewhat.  However, the net loss of leased units in the workforce housing segments this year has been the difference between improved but still low absorption and absorption within the normal range for the overall market. 

Average Effective Rent

Average effective rent growth for new leases rose 0.5% from January through April, bringing the Greater Fort Worth average to $1,413 per month. The gain was more than double the 0.2% increase from the same period last year despite still being low relative to the pre-pandemic years. 

The largest year-over-year improvement was within the Class A subset – and by a wide margin. A 4.1% average effective rent jump was not only well above last year’s 1% decline but was also the strongest of the last five years. 

Class B properties managed an average effective rent gain of 1.1% to start 2024 after a gain of 0.9% in the opening four months of 2023. While this year’s increase has not surpassed recent years to the degree seen for Class A properties, this year’s total was squarely within the range established pre-pandemic before the wild swings of the last few years. 

Class C properties have also seen something of a turnaround in rent performance so far this year. A 0.7% average effective rent gain through April followed a 0.1% decline in the same period last year. This year’s gain was below that of the 2017 through 2019 period by a solid margin but rent growth has at least returned to positive territory.

As with apartment demand, Class D properties continue to struggle on the rent front. A 3.7% average effective rent decline this year through April was a much more significant loss than last year’s 0.3% decline through April. Furthermore, this year’s result was the worst for the Class D group this side of the Great Recession.  Class D average occupancy finished April at 86% - slightly lower than the average for Class B properties even without the same impact from new supply. The last time Class D average occupancy was this low to end April was in 2010.

Takeaways

Improvement in apartment demand and a seasonal boost have helped to moderately lift average effective rent performance in recent months. While both net absorption and effective rent growth have remained below the longer-term averages for those metrics, progress has been made.

The progress has also been reasonably broad-based with net absorption and average effective rent growth from January through April of this year improving year-over-year for each price class except for Class D. 

Unfortunately, Class D properties continue to struggle. Average occupancy closed April at Great Recession levels, net absorption so far this year has been negative, and average effective rent has declined dramatically. The point at which rent declines spur positive demand has yet to be reached for this group. 

The improvement at the top of the market has been a welcome sight, but a turnaround in the workforce housing segments remain elusive so far.


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.