4th Quarter Blues

Jordan Brooks, ALN Apartment Data

A Look Back at a Less Than Stellar 4th Quarter—Greater Ft. Worth

Even during the boom that the multifamily industry has experienced over the past decade; the 4th quarter is usually a time where we see a dip in expected gains. So, a 4th quarter drop becomes an expectation and, therefore, less relevant.  By comparing 4th quarters, year over year, you can gain a clearer picture of how the 4th quarter stacks up. To that aim, let’s look at the final quarter of 2017 for the 12 ALN Apartment Data submarkets of the Greater Fort Worth area, and how it compares to prior years.

Average Occupancy and Net Absorption

While most of the area’s submarkets suffered negative absorption in Q4 2017, none fell below the statistically significant range from the last handful of years. Both the Grapevine/Roanoke/Keller and North Richland Hills/Hurst/Haltom City submarkets had negative absorption of 100 units or more but delivered nearly 600 and more than 150 new construction units respectively in the quarter. Submarkets like North Arlington, South Arlington, and South Ft. Worth also experienced negative absorption of 100 or more units in Q4, but without delivering any new units. Luckily for these three submarkets, these absorption losses accounted for average occupancy decreases of only 1% or less.

Predictably, the hardest hit submarkets from the perspective of average occupancy were the aforementioned Grapevine/Roanoke/Keller and North Richland Hills/Hurst/Haltom City – with decreases of just over 4% and 2% respectively. Given that these losses were due to multiple properties coming online in Q4, this isn’t much of a concern. Of note, however, is the fact that the 4% occupancy loss by the Grapevine/Roanoke/Keller submarket was well below its typical range-even for the 4th quarter. The bright spot was West Ft. Worth, with an occupancy gain of nearly 2% for the quarter and absorption of close to 300 units.

Average Effective Rent

Average effective rent performance was below average for the area over the past handful of years. This wasn’t due to all submarkets losing ground. Instead, the top performers were less impressive than previous years, and the bottom performers were worse. Submarkets like Central Ft. Worth, Grapevine/Roanoke/Keller and South Arlington all realized effective rent losses of 2% or more. Of these, Grapevine/Roanoke/Keller stands out. After delivering almost 600 new units in the quarter, a decline of 2.5% points to very competitive conditions in the submarket.

On the top end, only North Richland Hills/Hurst/Haltom City topped 1% average effective rent growth.  Central Arlington and East Ft. Worth were the only other submarkets to see effective rent gains. While none of these gains or losses fell outside the statically significant range from the past four years, the losses suffered by Central Ft. Worth and Grapevine/Roanoke/Keller were extremely close.

Takeaways

The Greater Ft. Worth area experienced a moderately down 4th quarter, even by the standard of previous years. The average occupancy and absorption losses in many of the submarkets, paired with the declines in average effective rents were unlike those of recent years. Further exacerbating the issue is much of the decline was not due to an overabundance of new units. With nearly 10,000 units due to come online in 2018, conditions in the area are certainly worth monitoring.

Despite some negative signs, it’s possible we are simply seeing the beginning of a return to more historically normal conditions after being spoiled by more recent years.