According to RealFacts' market overview for the Houston-Sugar Land-Baytown region, occupancy was 91.2% in the 328,126-unit inventory at the end of 2007, down 1.2% from the year before. In Apartment Data Services' yearend report, it had occupancy at 87.2% in a 537,679-unit inventory.
"Absorption is at its lowest that it's been in 10 years. And we have an unprecedented number of new units under construction at 19,526 and an additional 18,254 units proposed," says Teresa Lowery, principal with Colliers International in Houston. "Something's out of whack."
It's not so much out of whack as out of sync. Lowery tells GlobeSt.com that developers are betting on the probability that people will return to rentals in droves as single-family foreclosures increase. Lowery says this has been the case nationwide, but it hasn't happened yet in Houston.
Lowery and Douglas Lockwood, vice president in Grubb & Ellis Co.'s Houston office, agree that the region's economic and market fundamentals are so strong that developers and investors are taking note and taking action to position themselves. "The catalyst for all of the new development is the job growth and energy prices," Lockwood says. "They don't see Houston's fortunes turning down and believe the energy sector will continue to drive jobs."
Neither broker sees huge swings in occupancy or absorption during the next year. However, Lockwood does say occupancy could continue to soften, especially in the suburbs. "The inner loop in Houston is still very strong," he points out. "You'll likely see some concessions in newer properties, but nothing dramatic."
Lowery, in the meantime, predicts a flat year. "While I don't think we'll see any improvement, I don't see any further decline," she adds.
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