2020 has been an unpredictable and challenging year, to say the least. In many ways the multifamily industry has been right in the middle of the social and economic disruption brought on by the pandemic and the various response measures taken. All of this has taken a toll on industry performance, and nowhere is this more apparent than the dramatic 40% downturn in nationwide apartment demand through the first eight months of the year compared to 2019. This reduction in national demand eliminated effective rent growth and brought rent change almost exactly to 0% for the year so far.
One market that has not fit neatly into this new paradigm is Greater Fort Worth. Demand has actually increased substantially this year compared to last year with net absorption approaching 5,500 units. This was needed because new supply has also increased this year. The net result has been 2% average effective rent growth through August for Greater Fort Worth. This is certainly a lower rate of growth than the area has grown accustomed to seeing in recent years and falls short of the 3% rate from the same time last year, but nonetheless represents a respectable mark — all things considered. Using conventional properties of at least 50 units, let’s go below the market-level numbers to evaluate the best and worst-performing areas through August of 2020.
Two submarkets, Central Fort Worth and Central Arlington, managed 3% average effective rent growth but under different circumstances. In Central Fort Worth about 1,600 new units were delivered in an area that has experienced a deluge of new units in the last few years. As a result, even after leasing an impressive 1,100 previously unoccupied units, average occupancy fell almost 2% to below 83%. After factoring in occupancy, net rent per unit only gained 1.3%. In Central Arlington, no new supply led to an average occupancy gain to end August above 94% and net rent increased by 3.5%. The only other submarket to beat the market average was North Arlington. As with Central Arlington, the area took advantage of a lack of new units and realized an average effective rent gain of 2.5%. Net rent per unit increased by 6% thanks to a robust average occupancy increase as well.
The good news is that no submarket entered negative territory for effective rent growth. Unfortunately, three areas failed to touch even 1% growth. In the Denton – Corinth area rent growth was an anemic 0.1% and just avoided a retraction. Net rent growth, which is effective rent combined with occupancy, was a healthy 5.6% thanks to a jump in average occupancy of more than 5%. The Grapevine – Roanoke – Keller submarket saw average effective rent climb 0.9% but average occupancy remains below 84%. In South Fort Worth average rent also increased by 0.9%, but an average occupancy decrease of more than 2% made this the only submarket to suffer a net rent loss.
Effective rent growth in the Greater Fort Worth area has declined compared to previous years through August. But in an environment in which many markets have seen flat or negative growth, the context of that 2% matters. Not only did effective rent not move negative for the market, but no submarket experienced a loss either.
It’s clear that new construction will continue to cause some issues for areas with an active construction pipeline, but the silver lining is that local demand remains strong. Given that the two areas with the most new deliveries this year each have an average occupancy below 85%, and two other submarkets sit below 90%, a continuation of the recent shift toward rent concessions is likely as we move toward the end of the year.