Market Update: September 2024

Lease Concession Availability Highest in Years

With an extremely active new construction pipeline over the last few years, and inconsistent apartment demand, lease concessions have returned to prominence after all but vanishing in 2021 and 2022. With the generally weaker fall and winter period ahead for apartment demand, discounts are likely to play a major role in the market moving forward as well.

All numbers will refer to conventional properties of at least fifty units.

Availability of Lease Concessions

At the end of July, 40% of conventional properties across Greater Fort Worth were offering a discount for new leases. Availability increased by 65% in the last twelve months, which was actually a smaller increase than in the previous annual period. As recently as twenty-four months ago, only 10% of conventional properties were offering a discount. By the end of July 2024, concession availability was at its highest point since 2014.

Concession availability ended July higher among lease-up properties than for stabilized properties, but not by a massive margin. For properties still leasing up, about 56% were offering a discount for new residents. About 37% of properties that entered the year already stabilized were offering a lease concession to end the period.

One reason for the relatively moderate difference in availability between stabilized and lease-up properties was the distribution of discounts across the price classes. At the top of the market, discount availability ended July at less than 40% - with 37% of Class A properties offering a discount and 34% of Class B properties doing the same. In the workforce housing segments, availability ended at about 42% for both Class C and Class D. These properties have especially struggled on the demand front over the last two years and operators have turned to discounts at a much higher rate than at any point in years.

Average Lease Concession Value

The average discount value, calculated from only those properties offering a discount, finished July at just under 3.5 weeks off an annual lease. This average represented a 20% year-over-year increase after an almost identical percent increase in the previous twelve-month period. Two years ago, the average concession value was barely above two weeks off an annual lease.

There was very little difference across the price classes from the perspective of concession values. The average for all four price classes fell between three and four weeks off an annual lease. All four price classes also saw an increase in the average discount value over the last twelve months. That was more of the same for the bottom two price tiers, but Class A and Class B has managed to reduce the average value from August 2022 through July of 2023 before the most recent uptick.

Five of twelve ALN submarkets for Greater Fort Worth ended July with an average lease concession value of at least one month off an annual lease. In North Fort Worth, one of the most active submarkets for recent new supply, the average discount closed the period at nearly 4.5 weeks off a twelve-month lease. Net absorption has at least been robust there. Submarkets like Central Fort Worth and East Fort Worth had an average discount value above the market average but without the corresponding healthy demand.

Takeaways

Lease concessions are playing a more prominent role in the Greater Fort Worth multifamily market than they have in a decade. Strong gains in both the availability and average value of discounts over the last twenty-four months have each metric at multi-year highs. For availability, not since early 2014 have such a large share of properties been offering a lease concession. The average discount value ended July equal to the pandemic peak in the winter of 2020. With both likely to continue their climb through the end of the year, their influence on market performance will not be decreasing in the near term.

Jordan Brooks
Senior Market Analyst – ALN Apartment Data
Jordan@alndata.com
www.alndata.com

Jordan Brooks is a Senior Market Analyst at ALN Apartment Data.  In addition to speaking at affiliates around the country, Jordan writes ALN’s monthly newsletter analyzing various aspects of industry performance and contributes monthly to multiple multifamily publications. He earned a master’s degree from the University of Texas at Dallas in Business Analytics.