SOURCE: Axiometrics Inc.

Axiometrics Inc.

November 19, 2014 17:00 ET

New Supply Exerts Pressure on Houston Apartment Rents, Occupancy

DALLAS, TX--(Marketwired - November 19, 2014) - Though the Houston-Sugar Land-Baytown Metropolitan Statistical Area (MSA) continued to boast an apartment annual effective rent growth above 5% in October 2014, new supply has been exerting downward pressure on occupancy and rents.

According to Axiometrics, the leader in apartment market research and analysis, October's annual effective rent growth stood at 5.1%, lower than the 5.4% reported in September, while the October occupancy of 94.5% was more than 20 basis points lower than the 94.7% September occupancy.

"The downward trend really isn't too surprising to anyone who follows this market," said Stephanie McCleskey, Axiometrics' Vice President of Research. "A lot of units were delivered in 2014, and it makes sense that occupancy and effective rent will drop, as the market works to absorb the new supply."

Specifically, Axiometrics has identified 14,552 units for delivery throughout 2014, close to twice the number delivered in 2013. Even more are scheduled in 2015; according to Axiometrics, 14,609 identified units are expected to be delivered next year.

"Even with all of this new supply, the Houston market is still robust," McCleskey said. "Annual effective rent growth has stayed consistently above 5% since March of this year, meaning landlords believe demand is there."

October's annual effective rent growth compares well with the 4.9% rent growth of October 2013. Meanwhile, occupancy was 50 basis points higher than the 94.0% from the same time the year before. The average effective rent was $1,049 in October, up from the $987 from the year before.

Even a healthy market has its limits, and McCleskey said that more new supply in 2015 will likely mean a further erosion in occupancy and effective rents. "This level of effective rent really isn't sustainable," she said.

Another aspect to consider, she continued, is that sustained low oil prices could reduce job growth momentum in the metro. Though oil and gas accounts for approximately 4.0% of area employment, auxiliary businesses could be impacted by depressed oil prices as well. "We'll have to keep an eye on this, as it could mean slower unit absorption," McCleskey said.

About Axiometrics

Axiometrics improves property and portfolio performance for apartment investments. Confident investment decisions begin with reliable, timely information. No one has more accurate, detailed, and up-to-date research on the apartment and student housing markets. Learn more at www.axiometrics.com or by calling 214-953-2242.

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