A new year and a new decade have arrived. 2019 is in the books and it was a strong year for multifamily nationally, and in DFW. In taking a closer look at 2019 performance in Greater Fort Worth, all numbers will reflect conventional properties of at least 50 units.
New Supply and Average Occupancy
As with the Greater Dallas side of the metroplex, new supply in 2019 for the Fort Worth region was less than the volume from 2018 and a little more than the volume from 2017. About 4,600 new units were introduced last year after around 6,700 units were delivered in 2018.
While new units have ebbed and flowed in recent years, demand has been on a steady upswing. Annual net absorption hit 4,800 units last year, managing to outpace annual new units for the first time in years. For some context, approximately 3,400 previously unoccupied units were rented during 2018, and less than 1,300 units were absorbed in 2017.
The healthy number of newly rented units led to a slight average occupancy increase to finish 2019 at 90.5%. As recently as early 2017 average occupancy for Greater Fort Worth was approaching 94%. But even after last year’s strong absorption, new units delivered in the last three years still outnumber absorbed units by 6,200 units.
Average Effective Rent and Concessions
Average effective rent growth shrank precipitously compared to previous years, with average rent gaining 2.7% to finish December at $1,090 per unit. The national average for effective rent growth last year was a hair under 4%, which the Greater Dallas side of the metroplex matched exactly. In both 2018 and 2017, the Greater Fort Worth area managed annual rent growth of more than 5%, so 2019 does represent a disappointing result.
A contributing factor to the paring of rent appreciation is the continued expansion of concessions. As of the end of December, a full 25% of conventional properties were offering rent discount of some kind, up from 19% to begin the year. Not only are discounts becoming more common, but the average value of the discount continues to increase. Three weeks off of a 12-month lease is now the average concession value for new leases amongst those properties offering one.
2019 was a bittersweet year for Greater Fort Worth multifamily. The positive news is that demand was strong, in fact, the 4,800 units absorbed is the highest number in more than five years. 2019 also marked the third consecutive year-over-year increase in net absorption.
However, the volume of new units continues to pressure rent growth and contribute to the increase in the availability and value of rent concessions. Effective rent and net rent growth below 3% is a lackluster result, and the new construction pipeline is going to be ramping up the volume for the next two to three years based on projects already in the pipeline that have broken ground. Demand will need to continue to increase if average occupancy is going to remain above 90% for the area and rent growth may continue to be harder to come by.