The new construction pipeline has been especially active over the course of the last few years, and that activity continues for the Greater Fort Worth area. For a look at the performance of rents across floorplan types, as well as any changes in floorplan mixes in new properties, we will consider conventional properties with at least 50 units.
Effective Rent Growth
Efficiency floorplans continue to lead the way in overall effective rent as well as rent growth rates while the one-bedroom units have receded back toward the pack a little. After a year-over-year gain of nearly 7%, the average efficiency floorplan rents for $1.74 per square foot. For one-bedroom units, the average effective rent is now $1.41 per square floor thanks to annual appreciation just below 4%.
In the last 12 months two-bedroom units outpaced the one-bedrooms in rent growth for the first time since the period between August 2016 and August 2017. In the last 12 months they gained just over 4% to $1.22 per square foot. Three-bedroom units saw effective rent per square foot climb 3.5% to finish August at $1.17.
The flattening of overall rent growth in the last few years is of course reflected in the rent growth breakdown by bedroom generally but is more pronounced in the efficiency and one-bedroom categories. Interestingly, the largest decreases in rent growth were found in the efficiency and one-bedroom units, while the two and three-bedroom units managed to increase their appreciation rates over the last year. These units did not match rent growth from two or three years ago but did surpass last year’s growth.
Changes in Floorplan Mix
The trend over the last decade of new construction in Greater Fort Worth has been a skew toward less bedrooms in terms of unit mix. This trend continued during the last year as 68% of new units were either efficiency or one-bedroom, with 58% of new units being one-bedroom. Only 2% of new units had three or more bedrooms. This can perhaps be partially explained by the volume of new units located in Central Fort Worth submarket, an urban core area.
The effect of these building trends can be observed in the average age of units by number of bedrooms. The average age of efficiency units has declined from 36 years to 27 years since August 2016. One-bedroom units have gone from an average age of just over 31 years to 28 years in the same span. Two-bedrooms have gone from an average age of about 31.6 years to 29.6 over the last 36 months and the average age of three-bedroom units has declined from just over 31 to 29 years.
One-bedroom units continue to make-up the bulk of new units, and the trend away from two and three-bedroom units continues. Rent growth over the last year has been strongest within the efficiency floorplans, which continue to be the most expensive on a square foot basis. The relatively strong rent gains amongst two-bedroom floorplans, where average rent growth surpassed that one one-bedroom units, could indicate stronger competition for these units within existing properties as new properties move away from dedicating a third or more of units to two-bedroom floorplans.
Increased rent growth in the two and three-bedroom floorplans could also be explained by an increase in demand as renters take on roommates or rent while starting a family due to affordability considerations. It’s also worth considering the implications for developers if a sustained cultural move away from home ownership within the younger generations apart from affordability leads to increased demands for more bedrooms as they begin families or desire extra space as they become financially stable.