Sept 2023 Market Report

New Supply Pressure Set to Continue

Last year through July, new units delivered across Greater Fort Worth had nearly doubled net absorbed units. Unfortunately, during the same period this year, deliveries have ramped up considerably as net absorption has cooled even further. With apartment demand not expected to materially improve in the coming months, the new construction pipeline is set to continue to be a challenge in the near term. 

Recent Deliveries

In the first seven months of 2023 more than 6,300 new units have been delivered across Greater Fort Worth. The average over the last five years for the same portion of the calendar was right around 3,500 units. Most recent years saw deliveries in a fairly tight range around that average figure. This year has obviously been a significant increase from the norm. 

75% of ALN submarkets in the area have seen some level of new supply so far this year. South Arlington and North Fort Worth have each added around 1,400 new units, while about 1,300 new units have been introduced in the Denton – Corinth region. These submarkets were the only three to cross the 1,000-unit threshold so far this year, but the North Richland Hills – Hurst – Haltom City region is close with approximately 700 new units.

Units Under Construction

At the end of July, ALN was tracking more than 13,000 units currently under construction but not yet leasing. This total was essentially unchanged from the opening months of this year –meaning that new projects are being started as quickly as others are completed. 

Around 3,300 units under construction in the North Fort Worth area led the way, but Central Fort Worth was right behind with close to 3,100 units in this phase of the pipeline. Right behind those two submarkets was the Denton – Corinth region with a little more than 2,800 units under construction. These three areas were in a category of their own at the close of July in terms of upcoming new supply. Other notable submarkets include South Arlington and South Fort Worth with around 1,200 and 1,100 units under construction, respectively.

In total, ten of the twelve Greater Fort Worth submarkets had at least one project under construction by the end of July. Upcoming deliveries will then be slightly more widespread than recent deliveries have been. The average time from a construction start to a lease start for properties that began leasing in 2023 was about seventeen months. Given this, the bulk of the 13,000 units that have already broken ground will have entered the market before the end of next year. New supply is going to remain elevated then at least through next year.

Pre-Construction

Projects in this group are those that are somewhere in the development process but haven’t broken ground. Because it’s possible to postpone or cancel these projects based on market conditions, they aren’t as relevant in the short-term from a supply perspective. However, they can provide some insight into the general expectations for a market. About 32,000 units were in this phase of the pipeline to close July – about 50% of the total pipeline. 

Some familiar areas populate the top of the list for pre-construction units. Denton – Corinth led the way with close to 6,100 units. North Fort Worth was not far behind with 5,800 units that have yet to break ground and South Fort Worth was the other submarket above the 5,000-unit threshold with 5,100 units. 

Eleven of twelve Greater Fort Worth submarkets had at least one project in a pre-construction phase to end the period. This indicates that the wider geographic range of future deliveries will not just be a temporary dynamic.

Takeaways

The new construction pipeline has considerably ramped up deliveries so far this year, and this surge is not yet over. Macroeconomic risks remain, along with the return of student loan payments and the approach of the softer portion of the calendar for apartment demand. As a result, it is unlikely that a significant improvement in net absorption is imminent. Because of this, although the new supply will ultimately be helpful, the new construction pipeline is likely to continue to pressure occupancy, and therefore rent growth, in the near term. 

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.