Market Update: May 2022
Greater Fort Worth Demand Continues to Prove Durable
Unlike in 2021, when both apartment demand and rent growth reached stratospheric levels, 2022 so far has largely seen a decoupling of rent growth and apartment demand nationally. Even as rents continue to rocket upward, net absorption has decreased considerably at the national level compared to previous years. Fortunately, for Greater Fort Worth this dynamic did not quite play out in the first quarter.
As a reminder, all numbers will refer to conventional properties of at least 50 units.
New Supply and Net Absorption
Just more than 800 new units were delivered in the opening quarter of 2022 around the Greater Fort Worth market. This level of new supply was a significant reduction from previous years. The average for the first quarters of 2018 through 2020 stood at about 1,400 new units and the total from last year was even higher at more than 1,500 new units delivered. Only two of the 12 ALN submarkets for the area saw any amount of new supply in the period – South Fort Worth with about 500 new units and Denton – Corinth with almost 350 new units.
Unlike at the national level, and in many markets around the country, apartment demand exceeded that of the opening quarter of 2021. While net absorption of just more than 900 units fell short of the totals from the same period in 2018 or 2019, this year’s total bettered 2020 as well as 2021.
It was in the Class B and Class D subsets that 2022 outperformed 2021, even as Class D net absorption was negative for the quarter. A net loss in that segment of about 100 net rented units was at least better than the net loss of more than 300 leased units in Q1 2021. For Class B, almost 350 net absorbed units was about 70 units more than last year. In terms of total units, around 750 net absorbed units in the Class A space led the way for the first quarter but was less than the nearly 1,100 net units from Q1 2021. Finally, the Class C portion of the market suffered a net loss of about 160 leased units, marking the second consecutive opening quarter to be in negative territory and an underperformance compared to last year.
Average Effective Rent and Lease Concessions
Greater Fort Worth may not have aligned with the broader national trend for apartment demand in the first quarter, but it certainly did with rent growth. Average effective rent for new leases rose by 3.5% in the period, just more than doubling the previous high mark of the last five years – a 1.7% gain in Q1 2021. What’s more, this phenomenon was broad-based across the market. Only one submarket, South Arlington, failed to surpass 2% growth in the quarter.
Similarly, though the 4.1% gain for Class A was the largest of the four price classes, even the smallest, in the Class D segment, was a 2.7% increase. The average Class A unit was leasing for about $1,700 per month by the end of March for new residents, up from around $1,360 per month just one year ago.
Predictably, lease concessions continued to pay less of a role in the market during the first quarter. After a 10% decline in the period, only about 9% of conventional properties were offering a new lease discount to end March. Central Fort Worth, a submarket with an active new construction pipeline last year, was the one outlier from a submarket perspective with about one-quarter of properties offering some sort of lease concession package for new residents.
After an incredible 2021 for Greater Fort Worth multifamily, apartment demand has continued to prove more durable for the market than in many areas of the country – even with the rent growth already achieved over the last 12 months. A slowdown in deliveries combined with resilient demand led to a slight average occupancy gain to close the quarter at 93% at a time when national average occupancy has begun to soften.
The positive results in the opening quarter of the year were not concentrated in one or two submarkets or within one price class. Rather, both robust apartment demand and rent growth were generally broadly observed. It is true that net absorption was negative for the Class C and Class D segments of the market, but at least for Class D, this year’s result was an improvement on last year. Class C is the one subset where is may be that price pressure is finally making an impact and causing some household consolidation.
2022 is shaping up to be a rockier year for the multifamily industry than 2021 was. This is partially due to policy changes such as stimulus payments that were still going out in 2021 and the expanded child tax credit that has been phased out. Also, double-digit rent growth over the last year macro forces outside of the multifamily industry are having an impact. Even so, Greater Fort Worth exhibits strong fundamentals and continues to prove itself a hardy market.
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.