(August 5, 2008) — While the credit crunch is holding down multifamily housing starts across much of the nation, apartment development activity is surging in Texas, according to industry research firm M/PF YieldStar.
Recently-released statistics show 56,194 apartment units under construction going into 2008’s second half within the state’s big four metropolitan areas — Dallas/Fort Worth, Houston, Austin and San Antonio. That figure is up a whopping 38 percent from the number of apartments under construction as of mid-2007.
“Capital sources clearly are taking into account that the Texas markets boast the nation’s healthiest economies, and that makes lenders more willing to fund additional development in the state,” said Greg Willett, M/PF YieldStar’s vice president of research. “Most of the builders we’ve talked to have said that financing for projects recently starting construction was finalized just during the past few months, well after the credit crunch hit. Thus, despite the fact that some deals are falling out of the pipeline, the number getting the green light is quite substantial.”
Dallas/Fort Worth leads Texas in ongoing apartment construction, with 19,217 units underway. That’s just ahead of the 18,848 units being built in Houston. Austin checks in with 12,810 units under construction, while the tally is 5,219 units in San Antonio.
So many recent starts and quite a bit of additional product ready to begin construction now put most of the key markets in Texas on a path toward overbuilding, according to M/PF YieldStar’s analysis.
“Even though job growth is strong across the state, San Antonio actually is the only major market generating substantial demand for apartments right now,” Willett says. “Elsewhere, excessive numbers of single-family homes offered for lease are stealing rental demand that otherwise would have gone to the apartment sector.”
The glut of apartments on the way appears most severe in Austin, as units now under construction translate to a stunning 8 percent growth rate in the metro’s total apartment inventory by the end of 2009.
“After ranking as the star apartment market performer in Texas over the past few years, Austin is about to lose its luster,” Willett says. “The metro is headed for a sizable drop in apartment occupancy, and rent cuts appear likely to emerge pretty quickly, too.”
About M/PF YieldStar
M/PF YieldStar provides asset optimization systems that maximize asset valuation and investment return and industry research for the multifamily industry. For more information, call 1-877-284-4938 or visit www.realpage.com/yieldstar.
Located in Carrollton, Texas, a suburb of Dallas, RealPage provides products and services to more than 20,000 apartment communities across the United States. Its six on-demand product lines include OneSite© property management systems that automate the leasing, renting, management, and accounting of conventional, affordable, and student housing properties; CrossFire© sales and marketing systems that boost occupancy and build retention; YieldStar© asset optimization systems that maximize asset valuation and investment return; VelocityTM utility and billing services that accelerate payments for resident charges and LeasingDeskTM point of lease systems that streamline the leasing process. For more information, please call 1-87-REALPAGE or visit www.realpage.com.