HOUSTON—Houston's apartment market showed few signs of turning around in August, as average rent levels declined again. In addition, annual effective rent growth is at a low not recorded in more than six years, according to Axiometrics, apartment and student housing market number cruncher.

“Though job gains in education, health care and hospitality somewhat offset the continued job losses in the energy sector, the demand for apartments is just not there,” said Stephanie McCleskey, vice president of research for Axiometrics. “With new properties being completed every month, they just won't be filled as quickly as we would like to see until job growth picks up.”

Job gains picked up slightly in July, with employers adding 13,300 jobs in the 12 months ending in July. The mining and logging sector lost 13,400 jobs. Meanwhile, the peak of new deliveries is still to come, with 6,650 new units coming to market in the third quarter of 2016, another 7,134 identified for the fourth quarter and 6,725 in the first quarter of 2017. This leads one optimist to see a silver lining.

Jay Denton, senior vice president of analytics for Axiometrics, tells GlobeSt.com: “In 2017, expect to see a recovery in Houston, from both an overall economy standpoint and the apartment market. 2016 annual effective rent growth will likely be negative, which is largely attributed to the excess of supply relative to demand.”

In researching the Houston-The Woodlands-Sugar Lane Metropolitan Statistical Area as compared to the national market, Axiometrics reported average rent of $1,077 in August, annual effective rent growth of negative 2.9%, the lowest since June 2010, and occupancies of 93.2%, the lowest since 2013. The rolling two-year data for Houston shows the steep decline in rent growth since early 2015, as well as the volatile occupancy since early this year.

Of the 25 Houston submarkets with more than 1,000 units, the following areas comprise the top five for annual effective rent growth in August 2016. Of note, 15 submarkets had negative rent growth in August. The urban-core Montrose/River Oaks submarket, where the bulk of the new supply is going, had rent growth of -8% in August. In the top five, Northborough/Cranbrook rent growth was 3.1%, Imperial Valley/Greenspoint was 3%, Alief/Kirkwood was 2.8%, Baytown/San Jacinto River East was 2.4% and Sharpstown/Westwood was 2%.

In contrast, the national average rent was $1,293 in August, with annual effective rent growth of 2.9% (a mirror opposite of Houston's rent growth) and occupancy of 95.2%.

Steady gains in the US economy have resulted in net positives for the multifamily sector—will this wave continue for the foreseeable future? What's driving development and capital flows? Join us at RealShare Apartments on October 19 & 20 for impactful information from the leaders in the National multifamily space. Learn more.

In contrast, the national average rent was $1,293 in August, with annual effective rent growth of 2.9% (a mirror opposite of Houston's rent growth) and occupancy of 95.2%.

Instant Insights /

Axiometrics SVP Predicts 2017 Economic and Multifamily Recovery

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