New Supply Leads to Competitive Leasing in Houston
Average monthly rents near $1,700 for Houston’s urban core mid-rise developments top the prices for similar projects in spots such as the Galleria-Uptown, Katy and The Woodlands by 10% to 15%.
HOUSTON—In much of the country, living downtown is on average 28% more expensive than living in surrounding/suburban areas. This is because central business districts often house the job center and cultural hot spots. For these reasons, higher premiums follow.
RealPage released a new report that takes a deep dive into the top five markets’ urban cores. The markets with the highest downtown premium rents are Austin, Philadelphia, Houston, Chicago and Cleveland.
Houston’s CBD premium can be attributed to sprawl more than any other market on the list. Downtown Houston encompasses three submarkets: Downtown/Montrose/River Oaks, Greenway/Upper Kirby and West University/Medical Center/Third Ward. Like many of the submarket names imply, this downtown area encompasses many medical jobs and hospitals, as well as white-collar jobs in company headquarters and colleges such as the University of Houston and Rice University. Houston’s museum district and main tourist attractions such as Discovery Green and Minute Maid Park also reside here.
With those three submarkets, Houston’s downtown is geographically much larger than any other area on the list. There are also a handful of urban-like spots nearby.
Outside of those areas, large suburbs such as Katy, Cypress and Spring make up most of the metro. The downtown submarkets have recorded high levels of new supply, averaging 6.2% annually since 2010, compared to 1.9% for the metro.
“Houston hasn’t had the same sort of urban core rent growth experienced in Austin during recent years, as lots of new supply has led to a more competitive leasing environment for individual properties in Houston,” Greg Willett, Real Page chief economist, tells GlobeSt.com. “Luxury towers in Houston’s urban core submarkets contribute to the rent premium achieved in that part of the metro, although high-rise pricing around $2,300 monthly isn’t nearly as much as the $3,000 typical monthly rents in downtown Austin’s high-rises. An urban location does yield more of a pricing premium for mid-rise product in Houston than in Austin.”
Average monthly rents near $1,700 for Houston’s urban core mid-rise developments top the prices for similar projects in spots such as the Galleria-Uptown, Katy and The Woodlands by 10% to 15%, according to the Real Page report.