HOUSTON – Developers are poised to begin another wave of high-rise apartment construction in downtown Houston, even as vacancy rates have climbed with hundreds of new units coming online. Two significant projects are scheduled to start soon: a 21-story, 271-unit apartment tower from Camden Property Trust and a 40-story residential building by Trammell Crow.
Those planned groundbreakings come despite soft multifamily fundamentals in the central business district. In the second quarter, downtown recorded a 63 percent occupancy rate—the lowest among the many Houston submarkets monitored by Berkadia—largely because an influx of recently completed projects remains in lease-up.
The surge in downtown multifamily development was driven by the Downtown Living Initiative, a program launched about five years ago that offered developers tax incentives of $15,000 per unit to build in the Central Business District. Roughly 5,000 units participated in the program before it stopped accepting applications. Those incentives included deadlines for completing the projects, which is influencing the timing of some current construction starts.
Camden cited the program’s completion deadline in its decision to move forward with a roughly $125 million, 21-story tower near the corner of Leeland and La Branch by the Toyota Center. The 271-unit project is expected to break ground in November, with first move-ins slated for late 2019; Camden must secure a certificate of occupancy by June 2020 to meet the tax program requirements.
Ric Campo, Camden’s CEO and the company behind the McGowen Station apartments in Midtown, told industry analysts he expects Houston’s overall apartment market to stabilize in 2018 and to be in much better condition by 2020.
Camden also plans a second phase on a nearby block near the Toyota Center, though that phase is scheduled further into the future.
Trammell Crow is preparing to start a 314-unit project on Walker Street, close to the new Marriott Marquis hotel, with construction anticipated to begin in early 2018.
Data from the Downtown District indicate roughly 1,454 proposed new apartment units and 1,482 units currently under construction. By comparison, downtown’s existing housing stock totals about 4,500 residences.
The Downtown Living Initiative largely achieved its goal of increasing downtown residency. A growing residential population supports expanded dining and entertainment options, strengthens the downtown convention and hospitality offering, and helps create more walkable commutes for residents who work in the area.