May Market Report

by Jordan Brooks, ALN Apartment Data

Taking Advantage of a Break in New Deliveries

Compared to the previous few years, the Greater Fort Worth area experienced a subpar final quarter in 2017. Much of this was due to intensifying pressure from the new construction pipeline glut. As deliveries continue in 2018, the extent to which the area can continue absorbing units will determine market performance. Now that the first quarter numbers are in, let’s have a look.

Average Occupancy and Net Absorption

While most submarkets ended March with lower average occupancy than at the same point in 2017, several are already in a rebound. Much of the hole faced by the area at the start of 2018 was due to four times as many new units being delivered in 2017 compared to 2016. Only three of the 12 ALN Greater Fort Worth submarkets delivered new units in 2018 Q1– Central Fort Worth, North Fort Worth and West Fort Worth. This pause in new supply gave many submarkets a chance to gain ground in newly rented units and average occupancy.

Of the submarkets with no new supply in the quarter, only Denton-Corinth saw average occupancy decline—down just under 0.5% to about 94% after losing nearly 50 net rented units. Other submarkets with occupancy losses were North Fort Worth and West Fort Worth. This was predictable, as nearly 90% of the new units delivered to the market were in these two submarkets.

The only submarket to add supply and see an increase in average occupancy was Central Fort Worth—with an average occupancy gain of 2.5% to 83%. This increase reflects continued lease-up activity. There were more than 350 additional net rented units in the quarter, while only 90 were delivered.

Average Effective Rent

Average effective rent gains were positive across the board, but a mixed bag compared to the same period in 2017. Central Fort Worth and South Arlington were the only submarkets to outperform their 2017 opening quarter. Central Fort Worth saw effective rents rise more than 4.25% in the first three months of 2018 after experiencing less than 0.2% growth during that span in 2017. This increase can only slightly be attributed to new supply, as only 90 units were delivered to an area with more than 14,000 units. South Arlington doubled its Q1 rent growth this year compared to last, with a gain of more than 1.4% to $1.24 per square foot.

The rest of the Greater Fort Worth area underperformed in the quarter year-over-year, but some areas performed well even so. Submarkets to surpass 1% effective rent growth for 2018 Q1 were East Fort Worth, Mid-Cities and North Arlington- with gains of around 1.5%, 1.2% and 1.6% respectively. Other areas like North Fort Worth and North Richland Hills-Hurst-Haltom City very nearly hit 1% growth. In fact, only Denton-Corinth, Grapevine-Roanoke-Keller, and West Fort Worth opened 2018 with less than 0.75% effective rent growth.

Takeaways

After some red flags began popping up in the latter part of 2017, the opening three months of 2018 were a positive step. The Greater Fort Worth area largely took advantage of the break in deliveries. Effective rent growth, while not to the level of 2017 in most areas, was very strong. Occupancy gains were solid as well. The average occupancy increase for the quarter was only 0.3%, but take out North Fort Worth, where a handful of new lease-up properties are well below stabilized, and that average jumps to a 0.5% gain. However, with more than 5,000 units in properties that have yet to stabilize, and another 4,600 units under construction, the Greater Fort Worth area is still not out of the woods for 2018.