With Texas multifamily construction continuing to boom, a new CBRE Research study shows that rising apartment rents are being paired with concessions for renters at newly built projects. But the study predicts that these concessions won’t last forever. The lesson for North Texas renters: given the market, now could be the time to change apartments, as the authors of the study project even higher rents and lower concessions for the summers of 2018 and 2019. In fact, the forecast for DFW’s multifamily delivery takes a sharp plunge between now and 2019 (see chart). This is important to note as free rent is considered standard when a new property is in lease-up; lower levels of new properties equates to fewer possibilities for receiving such discounts.
Over the last six months, DFW concessions have already seen stagnant growth at one month’s free rent—an approximate monthly saving of $1,900. In terms of savings, the city of Houston continues to lead the Texas market with an average of $2,700 in savings, or 1.5 months of free rent. However, that market has already seen concessions begin to slide. At the close of 2016, Houston properties were averaging two months’ free rent and an average of three months for some brand-new properties. On average, Texas Class A properties offer one month of free rent. Concessions like those in Dallas and Houston provide renters with an incentive to move instead of renewing their leases, the study says.
According to the research, DFW leads the state with the highest Class A stabilized occupancy rate, at 93.4 percent. At the same time, Class A effective rents in North Texas have climbed 3.2 percent in the last six months, compared to Houston’s 1.7 percent rent growth rate.
DFW is on track to add 30 percent more units than Houston this year. North Texas also leads the state in deliveries, with about 28,900 units coming to the market this year. Throughout the recent construction cycle (2015-2017 year-to-date) Texas’ largest cities have combined to deliver more than 133,000. The state is expected to add an additional 74,400 units by 2019.