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Houston's Multi-Housing Market to Continue to Experience Growth in 2015 Despite Struggling Energy Industry

Tuesday, May 05, 2015

The Houston apartment market and multi-housing buildings are coming off four years of exceptional growth in fundamentals. Employment and Population Totals
This has been led by a booming energy industry, along with growth in other sectors such as medical services and education.

However, the recent dip in oil prices has introduced some uncertainty into the market. In the short term, this may mean lower job growth. Being more diversified than other energy reliant markets, Houston’s apartment market and multi-housing buildings should not feel too much strain in the short term. As long as oil prices rebound in the near future, there should not be too much cause for alarm.


Houston Multi-Housing Development

More than 17,100 new apartment units were delivered in 2014, showing growing demand for multi-housing buildings in Houston, with another 15,100 units expected in 2015. More new units have come to market in Houston than to any other U.S. metro in the past two years. Though much of the new development has been initially focused on the urban-core Montrose/River Oaks submarket, several new deliveries have come to The Woodlands, where the new Exxon Mobil headquarters will be located. There has been no indication of any delays for planned projects, but there may be some delays in starts in 2015 once the impact of lower oil prices become clearer.


Multi-Housing Building Occupancy and Absorption

Occupancy increased 50 basis points in 2014 compared to 2013, reaching 94.6 percent. This speaks to the demand for multi-housing buildings and apartments in the Houston metro. Axiometrics expects occupancy to trend closer to 94 percent in the forecast period, which is still 70 basis points better than the long-term average.

Houston Occupancy Houston Completions and Net Absorption

Rental Rates for Multi-Housing Buildings

Average effective rent increased 23 percent in Houston since 2010. This is a function of exceptional job growth, coupled with a delay in new supply hitting the market. New supply really only picked up in 2013 with 9,000 units, but still didn’t come close to covering the demand. This allowed for rents to be pushed early in the recovery and expansion period. Since then, job growth has continued to be strong, and the demand has allowed for the continued raising of rents. In 2015, Axiometrics expects to see moderation in rent growth, not necessarily because of the drop in oil prices, but because the rent growth of the past four years is not sustainable. Rent is expected to grow at a more moderate 3 percent in 2015.

Houston Rental Rates Houston Annual Rental Rate Growth

Contact HFF Houston for more information regarding multi-housing properties on the market in this area. 




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