Market Update – November

by Jordan Brooks, ALN

Parsing Price Class Performance

In what has been a rough 2020 for the multifamily industry, Greater Fort Worth has been one of the positive examples of market performance. New supply has increased from 2019, but so has apartment demand. One area where there is some variance in results is from the perspective of price class.

ALN assigns a price classification of A, B, C, or D based on each property’s market percentile for average effective rent per square foot. Only conventional properties with at least 50 units will be included in the figures below.

Price Class A

Class A average occupancy was down just more than 5% through the first ten months of the year to 78% after the delivery of more than 4,000 new units. Although net absorption so far this year has been about 600 units less than during the same portion of 2019, the main driver of the average occupancy struggles in this subset of properties has been the timing of the new units. More than three-quarters of the new supply delivered so far this year entered the market sometime between July and October. It is unsurprising then that occupancy in these lease-ups is skewing the Class A average down. In fact, remove the lease-up properties from the Class A basket and average occupancy rises to 94%.

Average effective rent growth at the top of the market has been a respectable 2.9% this year. That is equal to the gain through October of 2019 and the highest mark of any price class this year. One phenomenon present in some other markets but not in Greater Fort Worth is lease-up units entering the market at a lower rent than the stabilized Class A properties. This dynamic has caused demand gains in lease-up properties and in Class B properties as the expense of stabilized Class A properties. In Greater Fort Worth, new units entering the market are about $120 more per month in rent on average than the existing Class A stock. This is one reason why stabilized Class A properties ended October with an average occupancy of 94%.

Price Class B

Class B average occupancy closed October just above 90% thanks to a 1% improvement since the start of the year. Demand has been significantly stronger than in 2019. Net absorption totaled about 2,000 units compared to around 1,000 units in the same period last year. A larger share of year-to-date absorption has occurred since the end of the second quarter in Class B than in any of the other price classes.

Effective rent growth of 1.4% did not quite reach the 1.6% rate from last year, but given all the tumult of 2020, close enough. Interestingly, unlike each of the other three price classes, Class B properties did not move toward an increased reliance on rent concessions as a group. About 25% of conventional Class B properties entered the year offering a lease discount and 25% were offering a discount at the end of October. The average concession value did increase slightly from 3.1 weeks off a 12-month lease to 3.7 weeks off an annual lease.

Price Classes C & D

The story has been different this year for Class C properties compared to last year. Negative demand through the first 10 months of 2019 turned to positive net absorption of 1,700 units this year. That was enough to propel average occupancy just above 93% after a 1.5% gain this so far this year. On a percentage basis, Class D properties look even better. Net absorption of nearly 600 units brought average occupancy to a hair below 94% after a 1.4% improvement. The nearly 600 absorbed units compared very favorably to less than 200 from the same period in 2019.

Average effective rent increased by 1.6% for the Class C group of properties. Once again, that was not an unwelcome sight in this new paradigm but fell short of the 2.6% gain from last year. One impediment to growth was lease concessions. The availability of lease discounts increased most in this group and at the end of October 30% of conventional Class B properties were offering a lease concession. For Class D, effective rent growth was 1.4% through October. This is also a lower mark than last year and as with Class C, part of the equation was the increased availability of discounts. 25% of these properties were offering a lease concession to close October, up about 15% from 22% availability at the start of 2020.


All things considered, Greater Fort Worth multifamily has weathered the 2020 storm fairly well so far. New supply has increased from last year and unlike in many areas of the country, apartment demand was right there to fill the gap.

From a price class perspective, only Class A exhibited some softness, but that had a lot to do with the timing of the new supply. Lease-up properties continue to enter the market at a price-point above that of the existing Class A stock and this has likely been a buoy to stabilized Class A occupancy.

With the exception of Class A, rent growth has not been as strong so far this year as last. However, it should be mentioned that there are markets where rent growth has already turned into negative territory for the year.