HOUSTON – (Realty News Report) – Houston’s apartment market has softened as occupancy declines amid the economic fallout from COVID-19 and weakness in energy markets, analysts report.
Thousands of new units remain under construction after a strong pre-pandemic development cycle. Many projects that began while demand was healthy are now completing into a very different leasing environment.
Since the coronavirus emerged in March, the Houston economy has lost roughly 250,000 jobs, according to Patrick Jankowski, an economist with the Greater Houston Partnership. That level of job loss makes apartment leasing more difficult, since employment growth is typically a primary driver of multifamily absorption.
Apartment occupancy in Houston fell to 88.8 percent in the second quarter, down from 90.2 percent a year earlier. The combination of reduced demand and a surge in new supply has left many units competing for fewer renters.
“The apartment industry, like many others, remains vulnerable to COVID-constrained demand,” says ApartmentData.com. “In Houston there are about 22,000 units in lease-up plus another 17,000 under construction, which will face challenging lease-up periods.”
Absorption slowed sharply in the spring but showed signs of recovery in early summer. ApartmentData.com reports that the market absorbed only 759 new rental units in April and experienced negative absorption of 46 units in May, before rebounding to 2,460 units in June and 2,505 units in July.
Average monthly rents in Houston have largely stabilized after an initial dip. Between March 31 and July 30 the market-wide average rent fell by about $11, roughly a 1 percent decline, but the market recovered $2 of that loss on the typical lease.
Class A properties have been hit the hardest: their average rent is now about $58 below March levels. Class B shows a modest $6 decline from March, while Classes C and D have held roughly flat since March.
Despite those challenges, Houston’s multifamily market has performed better than some expected given the combined pressures of a weak energy sector and the pandemic’s broader economic impact.
“The softening market conditions are a concern to all industry players, but so far Houston’s market has held up better than many had expected given the weak energy sector on top of the impact from COVID-19 and the broader economy,” CBRE said in its second-quarter multifamily report.
Aug. 27, 2020 Realty News Report. Copyright 2020.
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Photo credit: Ralph Bivins, Realty News Report. Copyright 2020.
