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Houston Apartment News - local economists and developers weigh in amid the oil slump!

How is Houston's apartment market during the oil slump? The answer depends on whom you ask.
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Apartment developers and economists weighed in on Houston’s multifamily market at the Houston Apartment Association’s annual state of the industry event on Jan. 26.

Generally, developers painted a more upbeat picture of Houston’s multifamily market while economists delivered sobering statistics and forecasts for 2016. Here is how Houston’s apartment market is faring, from the view of economists and developers:
Economists’ take
Houston apartment construction is tied closely to the city’s job growth. A general rule of thumb is for every five or six new jobs created, the Bayou City should be able to support one new multifamily unit.
However, job growth is falling in Houston as energy companies laid off thousands of employees. The Bayou City is expected to create about 21,900 jobs in 2016, a far cry from the 105,100 jobs created in 2014, according to the Greater Houston Partnership.

“We won’t return to that kind of job creation anytime in the near future,” said Patrick Jankowski, vice president of research at the Greater Houston Partnership. “When prices do recover, jobs won’t come back immediately. We’ll be lucky if we can get back to 50,000 to 60,000 new jobs next year.”
Houston currently has 102 properties totalling 29,000 units in the pipeline for the next two years, according to Apartment Data Services LLC. That’s too many apartments for the number of jobs Houston is expected to see in the coming years, experts said.
“Developers got caught out,” Bruce McClenny said. “We should have five times the job growth than what we have here.”
The Houston multifamily data firm predicts about a third of the new apartment units will get absorbed into the market. About half of the new projects are located inside the 610 Loop and the Galleria area; the remainder are in the suburbs of The Woodlands, Katy, Energy Corridor and Conroe.
Apartment Data Services predicts overall rent growth will grow about 2.5 percent to 3.5 percent in 2016. Occupancy rates are expected to dip below 90 percent for the first time since the energy boom. Class A properties have a flat-to-negative rent outlook, while Class B, C and D will still see positive rent growth in 2016, McClenny said.
Developers’ takeApartment developers acknowledged the challenges facing the market in 2016. Ric Campo, the CEO of Camden Property Trust (NYSE: CPT) called 2016 a tenant's market, not a landlord's market.However, developers like Camden also saw the downturn as an opportunity to pull ahead of their competitors.“I am in love with this environment,” Campo said. “Let’s have a really difficult market. That’s how we started in 1984, 1985. During times like this, our competitors get weak. They whine and worry about oil prices and things they have no control over. It makes for really lousy competition. But guess what? We can kick butt and differentiate ourselves.”Camden, while stalling on new apartment projects in Houston, plans to create more value for their residents to keep occupancy rates up during the oil slump. The major Houston apartment developer is rolling out a bundled Internet and cable package to all of its residents, which is 30 percent cheaper than traditional plans. It also plans to keep investing in its employees, who will keep heads on beds.Likewise, Alliance Residential Co. also views the energy downturn as an opportunity to scoop up distressed apartment properties. The Phoenix-based developer is continuing to build new projects, including one breaking ground in Sugar Land this spring, that the company hopes will open just as oil prices rebound.“Let’s not overreact,” said Cyrus Bahrami, Houston managing director of Alliance Residential. “Let’s be excited about where we are right now. We have a lot of opportunities to take advantage of this situation. Let’s focus on how we can differentiate ourselves, because Houston isn’t going anywhere.”
Paul Takahashi covers residential and multifamily commercial real estate for the Houston Business Journal. 

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