Greater Fort Worth Multifamily Weathered the 2nd Quarter Storm 

by Jordan Brooks, ALN

The second quarter was the first complete quarter in which COVID-19 and its associated response measures were in full force. As such, it provides the clearest picture yet of what the new economic reality looks like for multifamily.  

Using conventional properties of at least 50 units, let’s consider how the Greater Fort Worth area held up. 

Net Absorption and Average Occupancy 

Net absorption for the Greater Fort Worth region was 96% of that from the second quarter last year with more than 2,000 previously unoccupied units being leased in the quarter. To put that in some perspective, net absorption nationally was only about 25% of second quarter absorption from 2019. On the Greater Dallas side of the metroplex, net absorption was only about 80% that of the same period last year. Encouragingly, demand was spread fairly evenly across the Greater Fort Worth submarkets. 

Around 1,200 new units were delivered in the quarter, down from nearly 1,500 last year during the same time. This reduction was enough to offset the slight downtick in demand and average occupancy rose by 0.7% to 90% as a result. This occupancy improvement is the highest average occupancy increase in the second quarter in the last 3 years. There was one clear exception, though. In the Grapevine – Roanoke – Keller submarket, the location with the most new supply, more than 500 new units were enough to send average occupancy tumbling by 2.5% down to 82%. No other submarket suffered an average occupancy decline of even 0.25%. 

Average Effective Rent and Concessions 

While average occupancy rose in the quarter more than in recent years, effective rent growth did take a hit. After a second quarter gain of right around 2% in both 2019 and 2018, average effective rent rose by 0.25% this year to end June at $1,104 per unit. While this is obviously a disappointing result when considered solely on the basis of previous performance, the fact that rent growth did not slide into negative territory as it did on the Greater Dallas side of the metroplex can be viewed as a small victory. 

One of the reasons rent growth remained in positive territory was a relatively minor move toward lease concessions compared to other markets. After an increase in availability of about 8% in the quarter, just under 30% of conventional properties were offering a discount at the end of June. For the most part, the submarkets that entered April with availability of discounts above the market average experienced slight declines in availability in the quarter. It was in the areas without much concession presence to begin with that contributed  to the growth in availability at the market level. 

Typically, we would expect to see the availability of discounts decrease in the second quarter. So, an increase does show the impact of the extraordinary circumstances that are ongoing. The silver lining, though, is that there has not been the wholesale stampede toward discounts yet that have occurred in other areas.  

Takeaways 

The headline here is the net absorption number. The Greater Fort Worth market massively outperformed many markets around the country in which demand cratered in the second quarter. In most areas of the US, market-level average occupancy at the expense of rent growth, or vice versa. That the Greater Fort Worth area managed to add to both average occupancy and average effective rent without a substantial reduction in deliveries during a period with so much tumult is a positive sign for the market’s resiliency moving through the rest of 2020.