The Texas job market performed strongly before the onset of the pandemic, with all three of its major markets showing up across rankings related to economic and demographic development. This created substantial demand for apartments, pressuring developers to keep up. Land availability, a friendly business climate, good weather and a high quality of life, all contributed to the rapid expansion of the state’s rental market.
Looking at Austin, Dallas and Houston through data provided by Yardi Matrix, the multifamily housing inventory has expanded substantially during the closing cycle, with Dallas leading by number of units and Austin by percentage of stock. Since 2012, Austin’s housing stock gained nearly 75,000 units, Houston’s increased by more than 113,000 and Dallas’ inventory grew by some 151,000 units.
Although diversified and balanced, the local economy was disrupted by the COVID-19 outbreak. Economic activity contracted sharply in the second quarter of the year due to safety measures, but started rebounding during the state’s reopening in May and June. Between March and April, the Texas economy lost 1.4 million jobs, but during the economic recovery, 475,000 jobs were added in May and June. In this piece, we look at development activity between January and August in Dallas and Houston, using Yardi Matrix data.
DALLAS-FORT WORTH
Texas’ main economic engine had 12,167 units, or 1.6 percent of the metro’s total stock, delivered in the first eight months of 2020. This comes after the cycle’s most abundant years in deliveries—27,882 units in 2018 and 26,550 units in 2019. By the end of 2020, Yardi Matrix estimates the metro’s inventory will expand by more than 19,000 units, or 2.5 percent of total stock, placing it first in the country for number of delivered units. In DFW, the average occupancy rate in stabilized properties slid 70 basis points year-over-year through July, to 93.7 percent.
In August, Dallas had 51,482 units under construction, with North Dallas leading with 27,048 units underway, 7,139 of which broke ground in 2020. Since the pandemic outbreak, 3,384 units entered the construction phase in North Dallas. North Frisco/West McKinney had nearly 6,000 units underway, followed by North Carrollton/The Colony with 3,505 units. The largest project delivered in the subregion in 2020 through August was the 445-unit Citron Allen Station in the South Frisco/Parker submarket, built by Davis Development.
HOUSTON
Developers added 8,061 units to the multifamily housing inventory in the first eight months of 2020, the equivalent of 1.2 percent of stock. In the years following the cycle peak that was registered in 2017, when 21,531 units came online in the metro, annual deliveries were halved, with totals for 2018 and 2019 dropping to 11,464 and 10,178 units, respectively. Yardi Matrix estimates that by the end of the year 10,404 units will come online in Houston. The occupancy rate in stabilized properties contracted by 80 basis points year-over-year as of July, to 92.2 percent.
The metro had 27,238 units under construction in August. The bulk of these was in the west side of the metro, where developers had 21,248 units underway. West End/Downtown led development activity with 6,197 units under construction, while next in line was The Heights submarket with 2,323 units underway. The largest multifamily project delivered in West Houston by August was Two Lakes Edge, a 386-unit upscale community in The Woodlands submarket owned by The Howard Hughes Corp. The property, which includes 11,000 square feet of retail space, was built with support from a $74 million construction loan issued in 2018 by Wells Fargo Bank.
East Houston had only 5,639 units underway. Developers had 1,082 units under construction in Atascocita and 905 in Mount Houston. The Nassau Bay/Seabrook submarket houses the largest delivery of the year through August—the 351-unit The Caroline. The property is owned by The Finger Cos. and was built with help from a nearly $34 million construction loan originated by BBVA Compass Bank.
