Fort Worth Submarket Performance Increasingly Divergent
The end of the year is fast approaching, and 2020 will be here before we know it. Before next month’s 2019 review, let’s have a look at which Greater Fort Worth submarkets have stood out, either positively or negatively, in the last 12 months.
Average occupancy moved less than one basis point in the Greater Fort Worth submarkets over the last year and finished November at a little above 90%. This stasis comes after two consecutive annual periods of occupancy declines. Helping to reverse the decline was an uptick in demand combined with a small drawdown in new supply. After adding about 6,300 new units from November 2017 through November 2018, the Greater Fort Worth area delivered approximately 4,800 new units in the time since.
The picture changes when drilling down to the submarket level. Remove the 7% year-over-year improvement in the Central Fort Worth submarket, and the average change in occupancy for a Fort Worth area submarket was a loss of 125 basis points.
As noted, the strongest average occupancy gain was in Central Fort Worth. However, this increase only brought the average in that area up to just below 84% with the addition of more than 1,300 new units in the last 12 months. The South Arlington submarket added 2% to their average occupancy to finish November at 95% after a year of negligible new supply. The only other submarket to cross the 1% gain threshold was North Richland Hills – Hurst where a pause in construction deliveries resulted in a 130-basis point gain to 93%.
On the other side of the coin, areas like Denton-Corinth slid the other way. The area finished November at 87% after a loss of almost 5% in average occupancy. The Grapevine – Roanoke – Keller region also lost a little more than 4% in average occupancy, down to 87% as well, as a result of demand failing to keep pace with the almost 1,300 new units brought to market in the period.
Average Effective Rent
The average effective rent for Greater Fort Worth has risen by about 3% since November of last year. This growth rate falls short of that found during the same period in both 2018 and 2017, which were both above 5%.
Interestingly, effective rent growth was strongest in submarkets with little or no new units. West Fort Worth led the way with a 5% annual growth. South Fort Worth was close behind, with an appreciation rate of 4.8%. East Forth Worth also beat the market average, gaining 4.2% in the last year.
The North Fort Worth section of Greater Fort Worth failed to touch a 1% growth in a period where 600 new units were brought online. Central Fort Worth, the submarket with the most new supply in the past 12 months, suffered an average effective rent decline of 2%. Which brings us to concessions.
Lease concessions are increasingly available across the market. While only about 14% of conventional properties were offering a concession to end November 2016, that number was at 24% to end November of this year. The value of the average concession package also increased. This time two years ago, the average package amongst those properties offering a concession was just over 3% on a 12-month lease. That figure now stands at 5.5%—equivalent to nearly three weeks free on a 12-month lease.
A handful of submarkets are particularly worthy of note. In just the last 12 months, the East Fort Worth area has seen a 55% increase in the number of properties offering a rent discount. Currently, 25% of conventional properties there are offering a concession. 28% of properties in the Grapevine – Roanoke – Keller region are offering a discount after a 65% annual increase. 29% of North Fort Worth properties are offering a discount, which marks a 123% year-over-year increase. Not to be outdone, 41% of North Arlington properties are running concessions. Lastly, the average discount nearly doubled in 12 months for Central Fort Worth – the average is now 9.6%, more than 1 month free on a 1-year lease.
New construction has been the story here for the last couple of years. Despite the recent reduction in volume, the Greater Fort Worth market is showing signs of strain. As an example, the Central Fort Worth area had strong demand, absorbing more than 2,000 units in the last year. Unfortunately, that was on the back of substantial concessions increases which led to a regression in average effective rent.
Occupancy change has been a mixed bag, with more bad than good. An annual average rent gain of 3% is solid for this late in the cycle but well short of the performance of recent annual periods. Concessions continue to roar back into the market. With almost 8,500 units under construction that have yet to reach a lease-up phase, 3,000 of which are in Central Fort Worth, 2020 may be a bit of a mixed bag at the submarket level.