For several years, Houston has represented the most active market in the country when it comes to multifamily project starts. But energy company layoffs and budget cuts, coupled with declining interest from equity sources and a vacancy rate of nearly 7 percent, indicate Houston will fall from this position moving forward.

During the first quarter of 2015, developers started nearly $150 million of rental projects in H-Town compared with $318 million during the same quarter last year –this according to construction data firm CMD Group. Earlier in the year, the firm predicted overall multifamily starts would decline by 26 percent in Houston this year.

If multifamily development activity in Houston mimics first-quarter figures, it’s possible that less than $600 million of new projects will break ground in 2015. If this occurs, it’s fair to assume a number of proposed projects will have been nixed or delayed.

When identifying unappealing markets for future investments in ground up multifamily, Houston ranks highest on the list for large equity sources like Goldman Sachs, Heitman, Clarion Partners and Bentall Kennedy.

All these sources have said they’ll pull back from or avoid investments in Houston multifamily development altogether.

The avoidance of Houston by some equity sources doesn’t mean 2015 project starts won’t occur. Most developers with upcoming starts will have broken ground on numerous deals in Houston during the past two years and possess in-depth knowledge of the city’s various submarkets.

National or regional groups with upcoming starts or recent groundbreakings include Transwestern Development, Crescent Communities, Trammell Crow Residential, NRP Group and Camden Property Trust. Several local developers, CityStreet Residential Partners and Guefen Development, should continue to be active.

Unlike Houston, several other major markets should see an increase in groundbreakings during the remainder of 2015 — Los Angeles and San Francisco. Both markets enter the second half with attractive market conditions for developers — occupancies above 96 percent and noticeable April-to-April rent growth of 9.3 percent and 6 percent, respectively.

A sign that these two California cities will attract more development moving forward is the fact that a host of real estate investment trusts (REITs) and large, national developers are lining up deals, often in both markets.

AvalonBay Communities, Equity Residential, Wood Partners and Associated Estates Realty all have projects lined up in both cities.

Other large developers with Los Angeles starts include Forest City, Trammell Crow Residential and Alliance Residential. In San Francisco, Hanover Company, Lennar Multifamily and Mill Creek Residential Trust comprise a group of nationally focused developers with upcoming groundbreakings.

Email Erik Pisor.

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Thank you for subscribing to Morning Headlines.
Back to top
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription