2019: Industry Performance So Far

by Jordan Brooks, ALN Apartment Data

The 2018 Economic Outlook for the Multifamily Industry is strong.

Schools are out, NAA Apartmentalize is over and the temperatures are in the triple digits. Summer is here, and this makes for a good time to pause and look back at how the industry has performed in the first half of 2019. All numbers refer to conventional properties with at least 50 units and cover the first two quarters of the year for the Greater Fort Worth area unless stated otherwise.

New Supply and Net Absorption

The volume of new units to hit the market is about the same as in the same period last year, at about 2,900 new units. The difference from the opening of 2018 to the opening of 2019 is an increase in demand. Nearly 3,500 vacant units were newly rented, enough to push average occupancy up by about 50 basis points to just under 91% overall.

The new deliveries were mostly in three submarkets. The Central Fort Worth and Grapevine – Roanoke – Keller areas added more than 900 new units each and the Denton – Corinth submarket added more than 800 units. While the new construction was concentrated in just a few areas, net absorption* was spread throughout the market. The result was that none of those three submarkets managed to rent more new units than were brought to market. Central Fort Worth managed to rent a little more than 800 previously vacant units, but average occupancy remains below 80% thanks to the flood of new units in recent years. No other submarket absorbed more than the 450 units in the Grapevine – Roanoke – Keller region.

Average Effective Rent and Concessions

As with much of the country, average effective rent growth has continued to slow compared to recent years. The national average for the first half of the year was 2.9%, and the Greater Fort Worth area realized a 2.8% gain. That’s in line with the national average, but as recently as 2017 rent growth was approaching 5% in the first six months of the year.

That’s not to say there weren’t some strong performers at the submarket level. The Grapevine – Roanoke – Keller submarket shows up again here with 4% rent appreciation to lead all submarkets. The North Fort Worth, South Arlington and West Fort Worth areas all realized an average effective rent gain around 3.5%. The highest average rents continue to be in Central Fort Worth, Grapevine – Roanoke – Keller shows and Lewisville – Coppell, where the average unit rents for more than $1,3000 per month.

Part of the headwind facing rents is the continued proliferation of lease concessions. About 20% of properties in Greater Fort Worth are now offering some discount. Additionally, the average value of the discount, amongst those properties offering one, has increased. The average concession package is now valued at about 2.5 weeks off a 12-month lease. The standout here is Central Fort Worth. After a deluge of new units over the last few years, 47% of properties in that area are offering a discount.

Takeaways

The pace of new supply hasn’t slowed down, but demand continues to be up to the challenge and then some. Rent growth has slowed, but that is the case for most markets around the country. Looking ahead to the second half of 2019, short of a major macroeconomic change, this should be another healthy year for the industry, though not as strong as earlier in the cycle.

*Net absorption refers to the net number of newly rented units