Houston Apartment Construction Holds Steady Despite Economic Headwinds
Stacy Hunt of Greystar addresses the Houston Apartment Association. (Photo credit Ralph Bivins, Realty News Report.)
HOUSTON – (Realty News Report) – Despite early signs of economic softening, Houston’s apartment development market is projected to remain active throughout 2020, with developers accelerating construction and deliveries across the region.
ApartmentData.com projects roughly 17,000 new apartment units will enter the Houston market in 2020, following approximately 15,936 units delivered in 2019. Even with this sizable pipeline, analysts say demand appears strong enough to absorb much of the added supply.
At the Houston Apartment Association’s State of the Industry event, Bruce McClenny of ApartmentData forecasted largely steady occupancy levels, estimating an average occupancy of 89.6 percent for 2020, a slight dip from 89.8 percent in 2019.
McClenny also predicted rent growth of about 3 to 4 percent for Houston apartments in 2020. He noted that concessions—such as limited free-rent offers—remain common in the Class A segment. Construction activity is concentrated within The Heights, Montrose and the Inner Loop, while suburban projects continue to deliver units with more attainable rents for outlying neighborhoods.
At the same time, local job growth is expected to slow slightly in 2020, and the energy sector faces headwinds. Oil prices have settled near $50 per barrel and drilling activity has declined, which are challenging signals for Houston’s energy-dependent economy.
“Houston definitely has some headwinds coming to it,” said Loyal Proffitt, president of property management for Allied Orion Group, speaking to the Apartment Association audience.
Rising home prices have strained housing affordability for many potential buyers—particularly Millennials—making rentals a more attractive option. Cyrus Bahrami of Alliance Residential noted his company is expanding deliveries of more affordably priced units to reach a broader slice of the market.
Patrick Jankowski, economist with the Greater Houston Partnership, cautioned that a more moderate energy sector means the city should not expect strong job gains from oil and gas. Instead, Houston is seeing growth in innovation and life sciences, with projects like The Ion, a collaborative redevelopment in Midtown anchored by Rice University, contributing to diversification.
On a national scale, multifamily construction is also vigorous. Former HAA president Stacy Hunt of Greystar reported that roughly 400,000 new apartment units are expected across the country, underscoring widespread development activity beyond Houston.
