April Market Report

Greater Fort Worth Q1 2020 Review

With the first quarter in the rearview mirror it’s time to look back and see how the multifamily industry in the Greater Fort Worth area performed to open 2020. The headline event in the industry and beyond was, of course, COVID-19 and its far-reaching impact. At the time of this writing in early April, data is still being collected on the effects being seen at the property level in terms of rent payments being made, special arrangements being offered to residents that have been affected either medically or economically and the like. The second quarter is when these issues will come into sharper focus.

All numbers below will refer to conventional properties with at least 50 units.

Net Absorption and Average Occupancy

More new units were delivered in Greater Fort Worth to begin the year than in either Q1 of 2019 or 2018 – and by a wide margin. Just over 2,000 new units were introduced this year, easily surpassing the 1,300 new units from Q1 2019.

Net absorption failed to keep pace and declined precipitously when compared to the start of 2019 or 2018. Only about 650 previously unoccupied units were newly rented to begin the year, half the total from the same period in 2019. Almost two-thirds of net absorption in the quarter came in March. This fits the existing trend for the area in which total quarterly demand is mostly derived from March activity. It may be tempting to attribute the lackluster demand to difficulties arising from COVID-19 and the measures taken in response, but in fact, March absorption, when shelter-in-place and other measures were really beginning to have an economic impact, compares favorably to the combined January and February numbers based on previous years. In other words, the increase in demand this March versus January and February was larger than the same increase in previous years.

Average occupancy declined by 0.7% in the quarter to finish a hair under 90% at 89.7%. This is the largest first quarter decline in average occupancy of the last three years and marks the first time occupancy finished the opening quarter below 90% in that period as well, albeit barely. One factor that mitigates this decline somewhat is the timing of the new units. Of the 2,000 new units brought to market in the first three months of 2020, around 1,400 of them were delivered in March.

Average Effective Rent and Concessions

Average effective rent rose by 1.2% in the quarter, bettering the sub-1% result from the opening quarter of 2019 but falling just short of the 1.3% gain from the same period in 2018. This growth brought the average unit to $1,102 per month to end March.

Greater Fort Worth followed the national trend somewhat in that the availability of rent concessions rose in the first quarter, but the average value of the discount offered slightly declined. As of the end of March, just over 26% of conventional properties were offering a concession.  That is more than the 21% and 16% from March 2019 and 2018, respectively, but not much of a change from the 25% of properties to start the year. In fact, the main difference between this year and previous years is the relatively high availability of concessions to open the quarter. For some national context, the nationwide average at the end of the quarter was 16% of properties offering a rent concession.

The average rent concession, calculated amongst only those properties offering a discount, was just under three weeks off a 12-month lease. This constitutes a negligible decrease from the start of the year on a percentage basis, but in practice is essentially the same.

Submarket Highlights

Six of the 13 ALN submarkets in Greater Fort Worth had no new deliveries in the quarter. Of those that did, none had more new units than the nearly 600 in North Fort Worth. Other areas with relatively active construction pipelines were South Fort Worth and Central Fort Worth – each with almost 350 new units.

The Central and North Fort Worth areas each closed the quarter at around 85% average occupancy. For Central Fort Worth, that was actually a slight improvement from the start of the year. Four of the 13 submarkets lost at least 2% in average occupancy during the period, with none losing more than the 3.3% retraction in West Fort Worth. On the high side, the Lewisville – Coppell and Mid-Cities areas each ended the quarter with average occupancy around 93%.

Average effective rent growth was strongest in the North Richland Hills and Mid-Cities regions of the market, at 2.5% and 2% respectively. Average rent retracted in three submarkets with the Denton – Corinth area leading the way with a 0.6% decrease in rents.

Takeaways

The level of new supply for the quarter was the highest of the last three years, accompanied by the lowest absorption of the last three years. The result was an average occupancy loss in the market of almost 1%. Average effective rent growth was higher in the first three months of this year than in the same period last year but fell short of the mark from 2018. Concessions, while more widely available, actually went down slightly in average value.

There is no doubt that the full impact of COVID-19 will begin to be seen and felt as the halfway point of 2020 approaches, but the first quarter results were a product of largely regular market forces. The road ahead for the remainder of 2020 is likely to be anything but smooth, and with rising vacancies, slumping demand and more than 8,500 new units having already broken ground, the Greater Fort Worth area enters a challenging period without the strong starting position of some other areas of the country.