November ALN Market Report

by ALN Apartment Data

Submarket Spotlight

The end of the year is fast approaching, and Q4 will be over before we know it. This makes for an opportune time to have a look at which Greater Fort Worth submarkets have stood out, either positively or negatively, so far in 2018.

Average Occupancy

Overall, the Greater Fort Worth submarkets lost about 0.75% in average occupancy from January through October of this year. This was the result of more than 5,000 new units being delivered in that span. That was 1,000 more units than were delivered in the same period in 2017, and 3,500 units more than were delivered in those months in 2016.

The strongest average occupancy gains were unsurprisingly in the areas with less new supply. The Grapevine-Roanoke-Keller submarket improved by more than 3% so far this year while adding just under 500 units. Both the North and South Arlington areas managed 2% occupancy growth after no added units were delivered.

On the other side of the coin, areas like Denton-Corinth slid the other way. A loss of 4% year-to-date in average occupancy was the worst performance of any of the Greater Fort Worth submarkets. Net absorption was strong, crossing the 1,000-unit mark in fact, but new supply totaled nearly 2,000 units. The Mid-Cities area and North Fort Worth each declined by 2.5%. As would be expected, these three geographies accounted for 70% on the newly delivered units.

Average Effective Rent

Average effective rent for Greater Fort Worth has risen by about 5% so far this year. Despite a significantly higher number of new units, this growth rate falls short of that found in the same period in both 2017 and 2016. We also expect that number to decline some by year-end as seasonal concessions kick in. The good news is that it would appear most of the rent growth is legitimately demand-driven rather than relying simply on expensive new units being rented. When looking at rent growth amongst only properties that were stabilized prior to the start of 2018, the growth figure goes down only slightly to around 4.5%.

Where new deliveries were high, in Central and North Fort Worth, effective rents climbed by more than 7% in the first ten months of the year. Central Arlington, Denton-Corinth and East Fort Worth all appreciated more than 5.5%.

The Grapevine-Roanoke-Keller and South Fort Worth sections of Greater Fort Worth failed to touch 3% growth, putting them at the bottom of the group regarding rent growth. North Richland Hills-Hurst-Haltom City and the Mid-Cities submarkets also came in under the market average—at approximately 4% and 4.4% respectively.

Concessions

Lease concessions are slowly creeping back into the market. While only about 13% of conventional properties were offering a concession to end October 2016, that number was at 18% to end October of this year. The value of the average concession package has not increased wildly, however. 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 4%, equivalent to about 2-weeks free on a 12-month lease.

Takeaways

New construction has been the story here for the last couple of years. Despite the ever-increasing flow of units, there isn’t much evidence for any sort of market softening. Effective rent growth, while not matching that of previous years, is still a very healthy 5% so far this year. Even with the anticipated Q4 retraction, rents are looking good.

Occupancy change has been a little more mixed, but absorption has been very strong so far this year. In fact, more than double the 2017 figure for the period. The Greater Fort Worth area seems to be on a stable path to maintain the general trajectory of recent quarters.