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Houston Apartment Construction Strong as Market Faces Some Economic Headwinds

Stacy Hunt of Greystar addresses the Houston Apartment Association. (Photo credit Ralph Bivins, Realty News Report.)

HOUSTON – (Realty News Report) – Houston apartment developers will be swinging hammers and stacking bricks at a rapid pace in 2020, even though the Houston economy is showing signs of softening.

Some 17,000 new units are expected in 2020, following 15,936 units in 2019, according to ApartmentData.com. Even with the hefty supply of new units, the market appears to be able to absorb it, says Bruce McClenny of ApartmentData.

McClenny, speaking at the Houston Apartment Association’s State of the Industry event, forecasts that occupancy will be mostly flat – 89.6 percent in 2020, down slightly from 89.8 percent in 2019.

Houston apartment rents will be up about 3 to 4 percent in 2020, McClenny said. Concessions, such as free rent, still remain prevalent in the Class A market. He also noted apartment construction is heaviest in The Heights, Montrose and the Inner Loop. Suburban construction is delivering more attainable rents in outlying areas.

But Houston job growth is forecast to be down a bit in 2020 and the energy sector is sailing through choppy waters. Oil prices have drifted to around $50 a barrel and drilling activity is down – negative economic indicators in the Energy Capital of the World.

“Houston definitely has some headwinds coming to it,” said Loyal Proffitt, president property management of Allied Orion Group, told the Apartment Association crowd.

Home prices are rising and housing affordability for those looking to buy a house continues to be a problem, particularly for Millennials, and that means rental dwellings are an attractive option, says Cyrus Bahrami of Alliance Residential. The Houston firm is also delivering additional units with more affordable rents to reach broader segments of the market, he said.

Moderation in the energy industry means Houston should not expect robust job growth from the oil and gas sector, said Patrick Jankowski, economist with the Greater Houston Partnership. Houston is experiencing growth in the innovation and health sciences sector, with new projects such as The Ion collaborative redevelopment of the old Sears store in Midtown with Rice University.

On the national level, multifamily construction is robust with some 400,000 new units expected, said former HAA president Stacy Hunt of Greystar.

Feb. 4, 2020 Realty News Report Copyright 2020

 

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