El Paso 1Q 2024 Market Report

MARKET SNAPSHOT

AVERAGE RENT

$1,033 1Q 2024

1Q 2024 RENT CHANGE

2.1%

OCCUPANCY RATE

95.1% 1Q 2024

ANNUAL OCCUPANCY CHANGE

-70 BASIS POINTS

TOTAL OPERATING EXPENSE ANNUAL CHANGE

6.1% (FEB 2024)

NET OPERATING INCOME ANNUAL CHANGE

9.1% (FEB 2024)

* Please note that these employment figures have been adjusted for seasonal variations and are based on Moody’s Analytics forecast as of January 1, 2024.

** Please note that these unemployment rates are estimates that have not been adjusted for seasonal variations, and they are derived from Moody’s Analytics forecast as of January 1, 2024.

KEY TAKEAWAYS

  • Sustained Rent Performance: El Paso’s rents have risen by 2.1% year-over-year to $1,113 per month, exceeding both the national average and the growth rates of other major Texas markets. With occupancy rates stabilizing and the pace of development slowing, rental rates are projected to climb to 3.0% or higher by the end of the year.

  • Narrowing Supply-Demand Gap: In Q1 2024, El Paso, TX, experienced a significant narrowing of the supply-demand gap. The market saw a robust absorption of 290 units, far exceeding the 80 units introduced during the same period.

  • Above Average Occupancy Rates to Persist: El Paso’s robust economic foundations, driven by key institutions such as the University of Texas at El Paso and Fort Bliss, are expected to sustain strong apartment demand. This is anticipated to keep occupancy levels near 95% into the next year.

Supply & Demand

1Q 2024

290 Units

QUARTERLY DEMAND

80 Units

QUARTERLY COMPLETIONS

Annual Demand vs Completions

Demand Trends

After two quarters of negative absorption, demand in El Paso’s multifamily market rebounded in the first quarter of 2024. Renters absorbed 290 units on a net basis, substantially surpassing the number of units completed during the quarter. Out of El Paso’s ten submarkets, six experienced positive absorption. The Outlying El Paso County submarket was especially active, leading the charge with 139 units newly occupied on a net basis.

Construction Trends

Construction activity in the El Paso multifamily market has remained consistent, if low, over the past 10 years, with a typical 12-month period witnessing roughly 470 new units being added to the market over this period of time. The majority of construction here is in the Class B segment, though some luxury unit construction has taken place over the preceding five years. As of the first quarter, only 600 units are under construction, representing 1.3% of existing inventory.

Occupancy & Rent Trends

RENT VS OWN MONTHLY PAYMENT

OCCUPANCY TRENDS

In the first quarter of 2024, the El Paso apartment market demonstrated resilience with a positive net absorption rate, despite a slight decrease in overall occupancy to 95.1%—a 70-basis point drop from the previous year. However, occupancy levels have shown improvement, rising by 30 basis points since Q4 2023. The market’s returning stability is evident, with six out of ten submarkets reporting occupancy rates above 96%. Notably, Socorro stands out with an impressive 97.0% occupancy, marking a 100-basis point annual improvement—the highest among all submarkets. In contrast, the Central submarket recorded the lowest occupancy at 93.6%, highlighting the diverse performance landscape of the El Paso apartment market.

RENT TRENDS

While the U.S. apartment market grapples with a general slowdown in rent growth, El Paso, TX, continues to show a strong performance with a 2.1% year-over-year rent increase as of the first quarter of 2024. This increase has brought the average rent for new leases in El Paso to $1,033. While the Northeast submarket experienced a slight 0.2% decline, all other submarkets in South Texas reported rent increases over the past year. Notably, the Fort Bliss/Biggs Field area saw a significant growth rate of 3.8%, underscoring the base’s economic impact on the region.

$1,455

Average Monthly Mortgage Payment

$1,033

Average Monthly Rent

Submarket Rent & Occupancy

Submarket Construction Pipeline

Sales Activity

Early 2022 was one of the top years for total annual sales volume in the El Paso multifamily market. However, 2023 did not maintain this momentum, and 2024 seems unlikely to reverse this trend. In the 12 months ending in March 2024, only two transactions valued over $2.5 million occurred in the El Paso market. The nondisclosure nature of transactions in Texas and the predominance of smaller-scale properties in El Paso make it challenging to ascertain the true volume of the market. Most of these sales involved smaller Class C assets, with mid-range properties making up a minority of sales. Notably, no luxury apartments changed hands in the last 12 months, reflecting the general scarcity of high-end stock in El Paso today.

TRANSACTION VOLUME


Annual Transaction Volume

Annual Volume Y-O-Y Change

Individual Transaction Count

* Trailing 4Q average PPU

* Preliminary Data from RCA – Individual transaction $2.5M +

Income & Expense Analysis

Please note that the income and expense data presented in this section is sourced from third-party providers. Our firm does not provide any warranty or guarantee as to the accuracy or reliability of this information. We recommend that users exercise their own discretion and professional judgment when interpreting and utilizing this data.

Income & Expenses

Income AssumptionsValue / UnitYear Change (%)
Rental Income / Occupied Unit$990.92 9.0%
Recoverable Expenses / Occupied Unit$61.69 10.1%
Other Income / Occupied Unit$54.37 11.0%
Total Income / Occupied Unit$1,106.999.2%
Operating Income
Rental Income$920.83 7.5%
Recoverable Expenses$57.33 8.6%
Other Income$50.53 9.5%
Total Income$1,028.69 7.6%
Operating ExpensesValue / UnitYear Change (%)
Payroll$120.47 4.6%
Repairs & Maintenance$50.14 2.5%
Leasing$34.68 14.5%
General$35.65 -1.6%
Marketing & Advertising$15.44 44.1%
Repairs & Maintenance$64.57 7.9%
Cleaning$10.49 6.8%
Roads & Grounds$11.34 5.2%
General$42.74 8.9%
Administrative$34.13 35.6%
Security$2.51 39.7%
General$31.61 35.3%
Management Fees$39.67 4.8%
Utilities$87.61 8.9%
Electric$9.66 -19.1%
Gas$6.46 -26.1%
Water/Sewer$71.49 18.6%
Real Estate & Other Taxes$87.61 -11.9%
Insurance$41.50 22.3%
Other Operating Expensees$0.00
Total Operating Expense$491.00 6.1%
Value / UnitYear Change (%)
Net Operating Income$537.69 9.1%

Market Outlook

At the start of 2024, the El Paso apartment market experienced a return to positive absorption, signaling a promising beginning to the historically strong spring and summer leasing seasons. With the average occupancy rate holding steady above 95% and demand outstripping supply in the first quarter, El Paso’s apartment market contrasts with its larger Texan counterparts, which have seen supply outpace demand for several quarters. Additionally, El Paso’s rental growth rate currently stands at 2.1%, with projections to rise to 3.5% over the next year, positioning it as one of the few Texas markets where rent growth exceeds the national average, which was 0.9% in the first quarter.

Looking at the immediate quarters ahead, El Paso’s strategic importance as a major logistical hub, along with the economic influence of Fort Bliss and the University of Texas at El Paso, significantly contributes to sustained apartment demand. The city’s unique role as a transnational urban center for a large cross-border population ensures it remains a vital part of regional and national supply chains, promising continued growth and investment opportunities in its apartment market.

Sources: MSCI, Yardi Matrix; Costar.

To Gain Further Insights Into The El Paso Market Please Reach Out To Our local Team

Michael Moffitt

Managing Director

Michael Watson

Managing Director/Director of Revenue Production

Mark Diebold

Senior Director

Richard Mireles

Senior Director

Nick Ling

Senior Director

Sanders Campbell

Senior Advisor

Alex Thompson

Associate Advisor

Tyler Salter

Associate Advisor

Nathan Allison

Associate Advisor