Class-A Multifamily Rents Fall In DFW As Class-C, D Move Higher
The Dallas-Fort Worth multifamily sector lost some of its rental price growth in the wake of the coronavirus pandemic, but the property type remained stable overall with older properties even seeing marginal rental price gains in recent weeks.
The average monthly DFW apartment rent hit $1,159 in mid-June, according to data from ApartmentData.com. This is down from $1,175 in March, a 1.4% drop.
Price declines in the market are mostly attributed to Class-A properties seeing a $34 drop in prices between March and June, from $1,509 on average in March to $1,475 most recently, ApartmentData.com found.
Class-B apartments held their rates flat, but Class-C and Class-D properties saw their rental rates rise $5 and $3, respectively, during the same time period.
“[In] Class D and C, there wasn't as much activity there as I was expecting,” ApartmentData.com President Bruce McClenny said about rental price changes. “I am seeing those classes firm up a little bit more. Those are coming back as we get in the third phase of reopening.”
The higher-priced segment simply has farther to fall in price and, because of recent development activity, more spaces to fill, McClenny said.
Transwestern Dallas Research Manager Andrew Matheny said older properties have less to lose in terms of price when compared to Class-A properties that sit well above the $1,200 per month rate.
“We have seen similar trends with most of the movement happening on the Class-A side, but I think that is a function of really where they are price wise,” Matheny said.
That is particularly challenging as apartment dwellers are staying in place because of the virus and not looking for new spaces.
“With the downturn in rental activity, the economic shutdown and the staying at home, people are not looking at apartments anymore like they used to, so we saw that in absorption numbers ... with that reduced activity especially at the top end where there is a lot of availability — that is where the pricing is going to be most sensitive, and it was,” McClenny said.
DFW apartment unit absorption was 1,155 units in April and 495 units in May, according to ApartmentData.com. That is down from 3,083 units and 3,367 units, respectively, in April and May last year.
As absorption drops, more landlords are offering renters concessions like periods of free rent in recent months.
ApartmentData.com shows 31% of DFW apartments offered concessions to renters in May 2019, a figure that increased to 39% in May 2020 during the early stages of the pandemic. Most of the concessions occurred in the Class-A space, with that segment seeing concessions rising from 48% last May to 59% this May.
By submarket, rental rates in DFW have fallen 1% to 4% in the past few months, with the key submarket of West Plano/Frisco/East Lewisville reporting rental rate declines of 2.1% on average over the recent three-month period, and North Central Dallas and Upper Greenville Avenue reporting three-month price declines of 4.6%, ApartmentData.com says.
Overall, rents are considered stable for the first free months of the virus shutdown, McClenny and Matheny said. But July is considered a potential bellwether with stimulus programs set to end then, particularly extra unemployment benefits.
“I think we are going to start seeing the shape of things at the end of July when those generous extra unemployment benefits from the CARES Act start cooling off. It is going to be a test once those benefits go back to normal levels,” Matheny said.
McClenny said a six-month apartment outlook is hard to forecast with the fate of the coronavirus and unemployment numbers still uncertain.
“It all depends on how the unemployment world looks,” McClenney said. “Sooner or later things are going to have to settle down, and we are going to have to see what kind of numbers are still unemployed.”
