Highlights:
- During the past two years, more apartment units were delivered in Houston than in any other city in the country. Nearly 30,000 new units were delivered, primarily in the West End/Downtown and Richmond submarkets as well as in the broader West Houston area.
- Demographic expansion led initially to the absorption of many of these units, but when the pace of absorption began to slow in late 2023, market fundamentals deteriorated. They held up better in East Houston, which had fewer deliveries than West Houston.
- Robust underlying demand drivers should lead to stronger operating conditions after supply is absorbed in the next year or two.
- The slowdown in sales activity in Houston was among the steepest declines in the country, driven in part by a pullback in REIT acquisitions.
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Additional Insights:
Apartment construction in Houston rapidly accelerated after the onset of the pandemic, as developers responded to increased demand. They were able to ramp up quickly, thanks to low-cost debt, a relatively easy permitting process, lack of zoning, and statewide tax advantages and abatements.
Houston soon became the top city in the country for new construction. Developers added nearly 30,000 new units in 2022 and 2023 combined, which was approximately 40% greater than the number of units added during the two-year period prior to the pandemic.
Shifting Sands, Changing Tides, one of Lument’s two Q4 2023 market spotlights, was developed in partnership with Rosen Consulting Group, and gives an in-depth look at the Houston market.
Each new quarterly national market report will be accompanied by market spotlights for two metros and will all be available on our site within the Insights section by selecting “Research,” where it joins other research-based materials, like our recently released multifamily investor sentiment survey report.
