The summer heat is breaking, and the holiday season is fast approaching. Now that another quarter is in the books, let’s have a look at how multifamily in the Greater Fort Worth area performed in the third quarter. All numbers below refer to conventional properties with at least 50 units.
New Supply and Net Absorption
There were just under 1,100 new units delivered in the third quarter, down from about 1,600 units in Q3 2018. This represents the third straight third-quarter decline in the volume of new units. Unfortunately, even with those declines, new supply has now outpaced demand in three straight third quarters as well. Net absorption1 totaled about 900 units in the period, a retraction from about 1,000 units in the same period last year, but a strong improvement from only about 300 newly rented units in Q3 2017. The combined result of the new units and net absorption was a 15-basis point loss in average occupancy to end September a little below 91%.
Only about one-third of Greater Fort Worth submarkets had any new units introduced in the period, and the new supply was fairly evenly distributed across the four submarkets that did see new supply. The area that stands out is the Mid-Cities submarket, where about 400 new units came online. Net absorption was strongest in the Central Fort Worth region. In fact, most of the newly rented units in the period were leased in Central Fort Worth. About a quarter of submarkets suffered losses in net rented units, led by the net loss of 200 rented units in South Fort Worth.
Average Effective Rent and Concessions
Average effective rent per unit rose by only about 10 basis points, by far the most tepid third-quarter gain in the last handful of years. The average unit in Greater Fort Worth ended September renting for about $1,090 per month. During the last five years, the best third quarter rent gain was approximately 3% in Q3 of 2014, while the worst, until this year, was the 1.4% gain in 2017.
Despite the challenge with regard to rent growth, there wasn’t much change in the availability, or average value, of concessions in the quarter. About 23% of properties were offering a rent discount as of the end of September. That’s a modest increase from July when about 20% of properties were offering a discount. However, compared to previous third quarters, the impact of all the new units in the last handful of years is apparent. Prior to 2019, no third quarter saw more than 16% of properties offering a discount in the past five years.
Interestingly, the average value of the discount offered, when considering only those properties offering one, didn’t change at all in the period and stands at just less than three weeks off a 12-month lease. That’s the highest value of any third quarter of the last five years but certainly isn’t an outlandish discount. The Central Fort Worth market stands out here, as about 40% of properties there are offering a lease concession and the average value of the discount for the area is almost five weeks off a 12-month lease.
The Greater Fort Worth market had a less than stellar third quarter. A continued imbalance in new units and demand led to a slight loss in average occupancy and lackluster rent growth. In fact, four submarkets out of 13 in the Greater Forth Worth area suffered a decline in average effective rent. Given that there are more than 8,500 units currently under construction in addition to more than 10,000 units in a lease-up phase, the area may be in some choppy waters over the next year or two. The situation would become more precarious were there to be any major macroeconomic disruptions.
1Net absorption refers to the net change in rented units