The first signs of COVID-19’s impact on the local apartment market are here, and experts say they’re significant.
After four months of steady rent increases in North Texas, rents in April fell by an average of $9 per unit to end the month at $1,166, according to a new report from ApartmentData.com. Every apartment class saw decreases in rents with the most dramatic fall coming in the Class A space, which saw rents fall an average of $12 per unit.
“I think it’s significant. The rent portion of this spoke to me right off the bat. It’s usually positive this time of year,” said Bruce McClenny, president of ApartmentData.com.
During the last downturn, rents in North Texas fell by 2.2 percent. So far, rents have down 0.8 percent. Historically, rents have risen in April between $6 and $9 per unit on average since at least 2015.
“April’s are always strong. Leasing season is cyclical and typically starts in February and runs through August, then slows down. People are out there looking for places to live. This mirrors single-family, as well. Absorption is always stronger this time of year. This April, rents are backing up, which is uncommon, and absorption was a trickle of what it normally is,” McClenny said.
While absorption was positive, numbers were far below average. Total net absorption was 962 units in April, down year over year from 3,070 units and down from 2,240 in March 2020. Class A units saw the most new net absorption with 704 units, while Class B ended the month with negative 414 units absorbed, the only apartment class to end the month in the red.
“We were expecting things to be slow and this is an expression of that. Clearly there aren’t as many people looking for apartments. I don’t know how to judge that in terms of what the future will look like,” said McClenny.
Like rents, April net absorption represented just a fraction of historical figures. Since 2015, April has always seen quadruple-digit net absorption growth, ranging between 1,810 units in 2015 to 3,129 units in 2018.
While this trend could be a good thing for existing apartment complexes that have already been leased up, properties facing the biggest challenges are those brand new Class A complexes that are in initial lease up.
RealPage data from the beginning of April showed that Dallas-Fort Worth leads the country with the most new apartments looking to be leased up at nearly 20,000 units across 65 projects. This is more than double the second- and third-place cities, Washington, D.C., and Austin, which sit at less than 9,000 units each.
The first week of May will be another telling one for the apartment market. During the first week of April, 85 percent of renters in Texas paid rent, according to software firm Entrata. This was slightly above the national average of 83 percent for April.
Publication: Dallas Business Journal