HOUSTON-Recent articles on GlobeSt.com have reported on a very robust multifamily sector in Houston. Even as the development pipeline continues chugging along, creating more and more units, the question becomes, will it be too much?
In a MarketView white paper entitled “Is Houston’s Multi-Housing Market Overheated?” CBRE research analysts Analee Micheletti and Lauren Paris paint a picture of frenzied multifamily property development throughout Oil City – building permit activity was up a whopping 120.7% as of Q3 2012, with the Inner Loop and Far West submarkets seeing the most units under construction. Approximately 4,000 units were delivered in 2012, with almost 10,000 under construction.
That might seem like a lot of units, but Micheletti and Paris also point out that net absorption for 2012 was 16,000 units, well above the supply delivery/construction. The reasons for huge demand boils down to the energy economy which has, in turn, fueled jobs growth. Employment is anticipated to increase by 8.5% through 2017. Houston also has a younger population distribution (younger people are more likely to rent than buy) and a declining interest in home ownership. It is likely that continued low interest rates on mortgages could lure some renters into buying, but this shouldn’t slow down the multifamily sector.
The researchers conclude their report by noting that three checks – changes in capital, how equity partners deploy their money and job growth – should prevent overbuilding in the multifamily sector. “In the past, developers used to be awarded capital on a more generalized basis, however, new developments now receive deal by deal funding reducing the chance of overbuilding,” they write. “Job growth is the strongest stimuli of the multifamily market and, with 76,000 new jobs predicted for 2013, the outlook is positive for Houston in the near future.”