In looking back and evaluating the performance of the 12 ALN Apartment Data submarkets of the Greater Ft. Worth area for Q4 2017, some definite softening was apparent. The final quarter of the year is generally a cooldown period. One of our concerns though, was the volume of new units in the construction pipeline, given the relative underperformance of the area in the 4th quarter, even against previous years.
Units Being Delivered
The first piece of the puzzle is supply entering the market in the immediate-to-short term. The Denton/Corinth submarket has about 600 units entering the market, and total net absorption* over the last three years has been just over 800 units. It is the only submarket to have less units in lease-up or construction/lease-up than its last three years’ absorption. Central Arlington has had negative net absorption in half of the previous 12 quarters, and just over 500 units are currently in lease-up for the area. The Mid-Cities submarket has also experienced a loss of net rented units in six of the 12 previous quarters, and more than 600 units are currently in lease-up.
Two Ft. Worth submarkets, Central and North, are where much of the pipeline is focused. Central Ft. Worth has added nearly 1,500 net rented units in the last three years. There are currently 3,000 units either in lease-up, or nearing completion- a supply equal to 6 years’ worth of absorption. North Ft. Worth has nearly 1,500 units entering the market, and barely a quarter of that amount has been absorbed in the last three years combined.
Units Under Construction
Fortunately, there are only six submarkets with ongoing construction of properties not yet leasing. Most of this construction activity is in Central Ft. Worth, where nearly 2,200 units are under construction. Denton/Corinth has another 700 units being built, and Grapevine/Roanoke/Keller has just over 500 units being built, but not leasing. North and South Ft. Worth, along with Central Arlington each have less than 300 units currently under construction.
In theory, pre-construction projects can be delayed or canceled. For this reason, these units are less concerning than those that are, or will inevitably be, hitting the market. There are over 10,000 units across all 12 Greater Ft. Worth submarkets that have yet to break ground. Any difficulty in renting newly delivered units should precipitate a decrease in these pre-construction numbers.
To absorb the units that will be coming online, new renters must come from somewhere. According to the most recent government data available, the overall Dallas-Ft. Worth metroplex experienced a gain of nearly 150,000 people moving from out of state in 2016. Additionally, more than 260,000 people moved from counties across Texas into the overall DFW metroplex during that year. Because 2017 numbers are not yet available, these numbers provide a baseline for new residents brought to the area in 2017 by companies like Toyota and State Farm. Facebook also will continue its data center expansion in Ft. Worth as we move through 2018.
The DFW metroplex is obviously large, and these new residents will disperse across it. Single-family housing will also take its fair share of the pie, but the influx of new residents to the area will help lessen the burden of the multifamily construction pipeline to some extent.
The Greater Ft. Worth area experienced a Q4 cooldown in 2017 compared to prior years, and a red flag for 2018 is adding a high volume of new units to that environment. Every submarket is delivering significantly more units than they typically absorb annually. However, the pipeline has already begun to winnow in terms of geographic spread. Strong population and job growth are expected to continue this year as well. While there is a supply/demand imbalance, the extent will largely depend on the decisions of those involved with the construction pipeline.
*Absorption refers to the net change in the number of rented units
Jordan Brooks works as an analytics specialist for ALN Apartment Data. For more information, you can contact Jordan at 1-800-643-6416 x 216