Citywide, there are 11,632 units under construction, Richard Zigler, O'Connor's research director, tells GlobeSt.com. And, he's saying the added inventory and the current flat absorption will bog down the city's multifamily market for the foreseeable future.
Overall vacancy is hovering at 8%, but will rise one to 1 1/2 points by year's end, Zigler predicts. Class A vacancy, also about 8%, is forecast to jump possibly as much as six points before the year is over. The caveat for his predictions: the war with Iraq.
Zigler agrees with Dr. Barton Smith, the leading economist from the University of Houston, that an economic rebound is a year away. Thus, Zigler says, either interest rates or job growth, preferably both, will need to rise to absorb the units coming on line this year.
Cheap money is draining the class A market in particular and flat absorption is adding fuel to the fire, according to Zigler. In 2002, only 4,610 units were absorbed while single-family sales had a banner year, with the final count up 9% based on calculations by the Houston Association of Realtors. In comparison, there were 11,308 units absorbed in 2001.
The Galleria submarket, this year's favorite building ground, will need some improvement in its office sector if the under-construction units are going to be filled, according to Zigler. The upshot is more jobs will be needed to fill the units.
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