Developers Target Katy and Spring with New Deliveries

HOUSTON—Berkadia recently released its 2020 Houston forecast and there’s a sweeping trend expected for the metro area. While a significant share of multifamily deliveries are scheduled inside the 610 Loop, developers are poised to bring about 16,900 deliveries throughout the year, mostly in the Katy and Spring/Tomball markets, thanks to proximity to important transit routes such as Interstate 10 and Grand Parkway.

With strong in-migration and 1.6% employment growth metrowide in 2020, leasing activity is forecast to remain positive in these submarkets, though trail the influx of new supply. The suburban trend is expected to be reflected across the metro this year as sustained demand for apartments will keep annual net absorption positive while lagging deliveries, says the report.

This will result in a 50 bps decrease in the occupancy rate. Even with the decrease, occupancy will be 10 basis points higher than the five-year average. With occupancy still healthy, operators are expected to keep upward pressure on rent. Monthly effective rent is forecast to increase 2.6% to $1,142 by year-end, keeping Houston a compelling market, Berkadia stats show.

Moreover, developers are showing confidence in the health of the Greater Houston apartment market in general as annual deliveries are scheduled to nearly double this year. Builders are planning to bring approximately 16,900 market-rate units on board during the next four quarters, outpacing the more than 8,700 additions in 2019.

“Hiring across a variety of sectors was as a catalyst for demand throughout the area, strengthening Houston’s multifamily fundamentals,” Ryan Epstein, Berkadia senior managing director, tells GlobeSt.com. “We can expect uninterrupted growth in the job market to carry over for 2020, which is giving investors confidence in the Houston market and improving fundamentals.”