Texas Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in Texas.
Issue link: https://texasrealestatebusiness.epubxp.com/i/817755
40 • May 2017 • Texas Real Estate Business www.REBusinessOnline.com I N T E R F A C E C O N F E R E N C E C O V E R A G E Tumbling rents, landlord conces- sions and weakening levels of absorp- tion have defined Houston's multi- family market for much of the oil bust of late 2014 to mid-2016, but the mul- tifamily market is now on the mend, says a third-party multifamily data analyst. Bruce McClenny, president of Apart- ment Data Services, which tracks vi- tal signs of nearly 3,000 multifamily properties nationwide, believes Hous- ton's multifamily market is about nine months past rock-bottom. As the opening speaker at the Inter- face Houston Multifamily conference on Tuesday, March 28, McLenny ex- plained why he believes a slow turn- around has already begun. "The first six months of 2016 was the bottom, economically," McLenny said during the conference at the Royal Sonesta Hotel. "Things have gotten better from that moment on. Through the first two months of this year, we had more than 1,900 units absorbed." In 2016, south- and east-side sub- markets — Pearland West, Baytown, Pasadena, Galveston — fared better than other parts of town, according to McLenny. All four of these submarkets attained positive rent growth, with only Pearland West clocking in less than 4 percent growth year over year. Negative rent growth in 2016 was more pronounced in construction- heavy submarkets on the west side — Katy, Medical Center, The Energy Corridor. The biggest hit to Houston occurred between 2015 and 2016, when annual net absorption dropped from 13,296 units to 4,552 units. Furthermore, rent growth shrunk from 4.8 percent to -0.1 percent during this period, a trend stemming from the poor performance of Class A properties. Escalated con- struction of these properties coincided with the oil slide, compounding the negative impact on rents. "2016 became a year of flat, mildly negative rent growth, led by Class As and all their new construction," he said. "We just didn't have the absorp- tion for it." While McLenny anticipates a contin- ued slide in average rents, other posi- tive factors should limit the severity of the problem, he said. The Greater Houston Partnership is forecasting 37 percent job growth year over year, and a positive net absorption of 2,448 units. McLenny also points to the Energy Information Agency's projected medi- an oil price of $53 per barrel for 2017 as an indicator of market stability. Within Houston, consistency in oil trading is bound to produce steadier job growth and raise the ceiling for wages. This enables consumers to af- ford higher-rent properties and bol- sters investor confidence in quick stabilization periods for newly devel- oped properties of this caliber. These figures give credence to McLenny's notion that investors should have a bullish outlook for 2018. "2018 is going to be a year, for sure, where we're back in the green," said McLenny. "It's time to get back in the market. The later you wait, the more opportunity you're going to miss." Slow Healing Process The Houston multifamily market must wait for renter demand to absorb much of its existing supply before the benefits of the job growth and stabi- lized oil prices can be leveraged and the turnaround made complete, ac- cording to McLenny. Concessions like free rent won't dry up until this hap- pens. Harris County led the nation in population growth for eight consecu- tive years before the disappearance of oil and gas jobs in 2016. This routinely robust growth will be instrumental in eating into that excess supply and keeping the recovery moving forward. According to McLenny, when peo- ple start seeing more leasing activity, the snowball effect will occur. "As these properties start to get some occupancy and leasing behind them — when they start to see more people opening the doors — conces- sions are going to ease back." 35W 820 30 20 35E 635 45 FORT WORTH DALLAS KELLER Keller Economic Development | 1100 Bear Creek Pkwy. | Keller, TX | 817-743-4020 | CityofKeller.com/ED Keller embraces the expansion of the City in an effort to strengthen opportunities for growth in population, jobs and patrons. Conveniently located in the Dallas-Fort Worth metroplex, Keller offers easy connections to three major airports within a 30 mile radius and multiple major highways. Locating your business to the City of Keller will provide an opportunity to thrive in a unique and growing community. The City of Keller offers a warm and welcoming atmosphere, an excellent school system, a wide variety of shopping and dining destinations, and an award-winning hike and bike trail system that stretches more than 23 miles. Keller has been recognized as one of the "Best Small Cities in America" by Wallet Hub, and was listed on the "Top 10 Neighborhoods Overall" list by the Dallas Morning News. YOUR WILL R H T E IV HERE. Fort Worth Alliance Airport DFW Airport Dallas Love Field Airport 35E JOB GROWTH, OIL STABILITY TO SPUR HOUSTON MULTIFAMILY REBOUND