Three submarkets in the Greater Fort Worth area saw an 8% or more change in average net rent per unit over the last 12 months. Last year at this time no submarkets had managed to achieve that feat in the prior year. Unfortunately, not all three of these areas moved in the preferred direction. Let’s take a closer look at these submarkets, and what accounted for the movement in net rent.
All figures are year-over-year for May and refer to conventional properties with at least 50 units unless stated otherwise. Net Rent refers to the average net rent received in the region by factoring rent loss from concessions and vacancies.
Grapevine – Roanoke – Keller: Net Rent (+8%)
After adding nearly 1,500 new units between May 2017 and May 2018 and seeing average occupancy decline by more than 6%, the construction pipeline let up in the most recent 12 months. This area added only one new property of about 300 units in the last year. As a result, average occupancy recovered to the tune of a nearly 6% jump to finish May at 92%. Demand also picked up compared to previous annual periods. Net absorption* was nearly 1,000 units, which is more than double the previous year-over-year total.
Average effective rent growth was a healthy 3%. This is an improvement from the previous year but failed to match the gaudy performance from May 2017 to May 2018 when that figure was 6%. Part of the reason effective rent growth wasn’t higher was the return of rent concessions. Only about 11% of properties in the area were offering a rent discount last May, but that number rose to nearly 20% by the end of May this year. Additionally, the average value of the concession package rose nearly 30% in the past year. The average discount is now around 3.5 weeks off a 12-month lease.
North Fort Worth: Net Rent (+9.5%)
New construction deliveries ramped up in the North Fort Worth area compared to previous periods. Nearly 700 new units were added in the last year and average occupancy gained 90 basis points to finish May at 89%. Once again, the story here was an increase in net absorption. There were over 650 newly leased apartments in the submarket, triple that of the previous year.
Thanks to the increased demand, and the inflow of new units at the top of the market, average effective rent rose by about 8.5%. That marks the largest year-over-year increase of any Greater Fort Worth submarket. Aiding the rent growth was the fact that both the availability and value of rent discounts decreased. Only 10% of properties in the area were offering a concession package as-of the end of May, down from nearly 15% in May of 2018. Likewise, the average value of the discount decreased, ending May at just under four weeks off a 12-month lease.
Central Fort Worth: Net Rent (-8.3%)
This submarket has added more than 5,500 new units in the last 36 months, with about 3,200 new units being delivered in the last 12 months. That three-year volume added an astounding 54% to the area’s capacity. The impact on average occupancy has been profound. Overall average occupancy in May of 2016 was 90%. As-of the end of May 2019, average occupancy was just under 76%. When looking at properties that were already stabilized, average occupancy has dropped from about 93% to 90% in that span. This shows there is some cannibalization of existing properties already going on. Net absorption has been strong. More than 2,600 units have been newly rented in the last 36 months, with about 1,100 units absorbed in the last 12 months. However, plenty of vacancies are awaiting new renters.
Predictably, the already common rent concessions have become more prevalent over the last year, and the average value has risen as well. More than 40% of properties were offering a discount by the end of May — up from around 30% of properties a year ago. The average concession package is now valued at almost 4.5 weeks off a 12-month lease. The result has been an increase in the average effective rent of just over 3.5%. This is below the market average of about 4.5% in the period, a disappointment for the area with by far the newest units.
For al three submarkets, demand has been strong in the last year. The difference in performance largely came down to the ability, or lack thereof, to deal with continued new supply. The Grapevine – Roanoke – Keller submarket got a reprieve from the construction pipeline and took advantage. The North Fort Worth area experienced an uptick in new supply but managed to absorb the new units without relying on rent concessions.
The Central Fort Worth area, on the other hand, continues to feel the pressure of new supply and is struggling to absorb the new units even while rent discounts become larger and more common. There is unlikely to be any near-term change, as there are roughly 1,900 units under construction in the submarket that haven’t started leasing yet. These, in addition to 3,600 units currently in lease-up and the more than 2,600 units that have yet to break ground.
*Net absorption refers to the net number of newly rented units