MF Vacancies on the Rise

"What's hitting the markets is that developers really love Texas," Stuart Showers, manager, research and consulting with O'Connor & Associates in Houston tells GlobeSt.com. "As a result, we have construction pipelines moving along and putting units into the inventory."

[IMGCAP(1)]Statistics from O'Connor & Associates puts the number of units under construction statewide at 66,910. M|PF YieldStar in Carrollton, TX shows 47,712 units under construction, the difference being San Antonio figures were not included.

Additional numbers from O'Connor & Associates show state-wide occupancy is in the upper 80s, with every city showing a decrease. Austin took the hardest hit with occupancy at 89.63% compared to a year ago, when the state's capital city was 93.25%. San Antonio also saw a huge drop in occupancy. Last year at this time occupancy was 91.02%. Recent figures show occupancy at 88.87%.

[IMGCAP(2)]M|PF YieldStar's numbers show similar trends. Occupancy in Austin was 89.2%, down close to 6% from the year before. Dallas' occupancy was slightly above 90%, down 3% from the same time the year before. Houston's occupancy, also a hair above 90%, was down 2% from early 2008.

Greg Willett, M|PF YieldStar's vice president, research and analysis says job cuts and excess inventory coming on line will likely result in further occupancy declines during the next year in all four cities. He tells GlobeSt.com that out of the four cities, Dallas is likely to see the most decrease in occupancy, due to the large number of units under construction.

[IMGCAP(3)]If there is a bright side, it's that the frozen credit markets mean new construction financing is almost non-existent. "After this year and next year, we won't see a lot of new development, if any," comments Edward Nwokedi, director of apartment brokerage services with Cushman & Wakefield of Texas Inc. "There'll probably be a good two-year gap after that with no new product coming onto the market."