Just a week into April, the local apartment market already is feeling some disruption.
Firms that track apartment market statistics on a month-to-month basis are seeing dips in rent and absorption, an unusual trend for this time of year. Analysts say other impacts are less obvious right now, but could include project delays, slow leasing for new
luxury units and record high renewals.
As with projects in other real estate sectors, analysts expect apartment projects to be delayed as a result of supply chain and construction crew staffing issues.
Adam Couch, market analyst at RealPage Inc. (Nasdaq: RP), says it’s typical to see about a quarter of all new units in the supply chain delayed about two to three months, but says numbers could spike due to the fluidity of the ongoing situation with the COVID-19 pandemic. For projects that have not yet broken ground, experts say delays could be even more significant.
“If they haven’t broken ground, I’d expect a much longer delay. It just depends on where they’re at. If they’ve been permitted and financed, those will go forward. For developers, once you get so far, you can’t go back. You have to ride it out, but it’s really on a property-by-property basis,” said Bruce McClenny, president of ApartmentData.com.
For new projects expected to deliver soon or are in the first cycle of lease up, a rough road may be ahead in the short term.
New RealPage data says Dallas-Fort Worth leads the country with the most new apartments looking to be leased up at nearly 20,000 units across 65 projects. That is more than double the second- and third-place cities, Washington, D.C., and Austin, which sit at less than 9,000 units each.
“Those units do face the biggest challenge,” said Couch. “Those that are about to complete or have just completed, these are typically the Class A, higher-end products. They face hurdles because there are so many of them, but also, you as a renter can always say, ‘I don’t like where the economy is going. I want to save a little bit of money and move into a middle-tier product type.’ On the other end, it’s more difficult to bump these renters from that Class B, middle stock to the higher end.”
Publication: Dallas Business Journal