The volume of multifamily unit deliveries in Houston during 2016 will nearly match job growth tallies for the year. This, along with the fact that developers are more commonly offering two-month concessions for newly delivered projects, suggests Houston’s multifamily sector is entering overbuilt status.
- The oversupply is concentrated within four regions.
- Two-month concessions are already becoming commonplace.
- Houston's eastside (Baytown) and southwest (around Sugar Land) won't be as affected by multifamily deliveries.
The volume of Houston apartments to be delivered during 2016 will nearly match job growth tallies for the year. This, along with the fact that developers are more commonly offering two-month concessions for newly delivered projects, suggests Houston’s multifamily sector is entering overbuilt status.
At the start of February there were 98 multifamily projects underway in the Houston metro totaling 27,941 units, according to data from Bruce McClenny, president of Houston-based Apartment Data Services. Of these units an estimated 18,000 to 20,000 will be delivered this year, depending on project delays related to manpower and availability of building materials.
McClenny estimates that only half of these units, roughly 10,000, will be absorbed, which will drive the metro’s overall multifamily occupancy rate down to an estimated 89.3 percent by year’s end.
Developer rule of thumb typically says that from the creation of five or six jobs, the demand for one apartment unit is born. This year job growth is expected to reach 22,000, this following a year with job expansion of 23,000.
Four regions impacted the hardest
According to McClenny roughly 85 percent of upcoming Houston apartments will be in the Inner Loop, Woodlands/Conroe, Galleria and Energy Corridor/Katy markets.
Each of the regions has at least 16 projects underway.
The Inner Loop leads the way with 26 projects underway, this includes 12 developments in the Montrose/Museum/Midtown submarket and ten in downtown Houston. During the previous 12 months the Inner Loop has seen nine project deliveries.
Thanks in part to the 11 projects underway in the Tomball/Spring submarket the Woodlands/Conroe region has 23 projects underway. Spanning February 2015 to January 2016, a total of eight projects had opened in the region.
The Galleria and Energy Corridor/Katy regions currently have 18 and 16 developments underway, respectively.
The Energy Corridor/Katy region has already seen its share of deliveries, as during the past 12 months a wave of 24 projects reached completion. During that same span 12 projects were delivered in the Galleria.
As McClenny puts it, Houston is a huge market and developers are still out their planning deals. According to his figures, 57 projects (16,576 units) are in the planning stages. The Inner Loop has the most proposed deals at 16.