Apartment Market

[TheNiche]

edited to add (and hopefully this works):

Oh, ****. We may have a bigger problem than I thought.

Will follow up soon.

[houston-development]

theres a few you can take with a grain of salt (camdens superblock) but i see a majority of these deals going forward.

if we dont pick up north of 50k jobs, its going to be a renters market for some time to come.

if the lender lends, the builder will build

[TheNiche]

Of those 52 projects that O'Connor lists as under construction, I can only find a match for 25 of them from the ADS list, and of those 25, nine were matched with ones that ADS says are just proposed. Each knows something the other doesn't, and each seems to have a pretty significant error rate.

Scary.

[buildingunbuildingrebuilding]

ADS and O'Connor classify projects differently. ADS breaks out separately properties that are leasing and open but not finished, while O'Connor tracks whether they are open and leasing but does not have a separate category for that. Because of this, you also get more detail on projects under construction from O'Connor.

And your ADS list is, I believe, a quarterly list. O'Connor shows them under construction because its updated real time and hence more current.

Anyway you slice it, quite a bit of units. Houston is about the easiest market in the country for apartment development.As mentioned, some of the proposed projects won't get built (at least this year), but most will.

The flip side of the Houston development coin is that since it takes much less time to get a project approved, the market responds quicker. You don't have projects that have been in predevelopment for 2 years that you are afraid to pull the plug on because of all the invested time. We get overbuilt quicker than most markets, but we get back in balance quicker (albeit our balance is at an occupancy rate a few points below most everywhere else).

[Houston19514]

on paper, your theory is correct. however, you are demolishing affordable housing for $1.50+ rents, so its not off-setting each other.

additionally, per ADS, there were 11,000 units (a majority market rate, NOT tax credit) under construction at the end of last year with 17,000 proposed. therefore, we most likely will see about 17,000 market rate units available this year, as i stated earlier

edited to add (and hopefully this works):

UNDER CONSTRUCTION

Central:

Camden City Centre I / Camden 379 493P Montrose/Museum

City Plaza / Koontz McCombs 404 493J Montrose/Museum

Metropole / Cambridge 290 492X Inner Loop W/Greenway

Camden Plaza / Camden 271 492W Inner Loop W/Greenway

Alexan Kirby / Trammell Crow 230 492Y Inner Loop W/Greenway

Alexan Main Street / Trammell Crow 286 532L Med Center/Bellaire

Mosaic / Wood Partners 393 533B Med Center/Bellaire

Taylor Heights / Martin Fein 326 493F Heights

Southwest:

Gables 6464 / Gables 163 490R Galleria

Alexan Post Oak / Trammell Crow 394 491R Galleria

Woodlake Site / Sueba 265 490S Woodlake/Westheimer

Broadstone Memorial / Alliance Comm 400 488C West Memorial/Briar Fst

Portico at West Eight/Richfield 510 489V Westchase

Lakemont / Verde 312 526E Fort Bend

Sienna Plantation Site / Martin Fein 270 609Z Fort Bend

Wynhaven at Fort Bend / Trammell Crow 300 571S Fort Bend

Brazos Ranch / Judwin 308 605R Richmond/Rosenberg

Villas at River Park/Internacional 300 607J Richmond/Rosenberg

Northwest:

Broadstone Lofts W 18th/Alliance Com 304 452S Brookhollow

Alexan Bunker Hill / Trammell Crow 398 450X Spring Branch

Torrey Chase Site I/ Bohannon 232 331W FM 1960 W/Champions

Conservatory Champions Fst** 190 330T FM 1960 W/Champions

Cypress Pointe / Woodmark 228 329P FM 1960 W/Champions

Stoneleigh Spring Cypress II/Woodmark 242 330B FM 1960 W/Champions

290 & Skinner Site / New Quest 252 367F FM 1960 W/Steeplechase

Boardwalk @ Town Center/ Cambridge 450 251G Woodlands/Far North

Abbey Woodlands / Abbey Res 360 251U Woodlands/Far North

Conservatory Alden Bridge** 190 216K Woodlands/Far North

Alexan Woods / Trammell Crow 280 252W Woodlands/Far North

River Pointe III / Martin Fein 224 Conr Conroe

Northeast:

Villas @ Foxbrick II 70 334U FM 1960 E/IAH Airport

Wynhaven @ Deerbrook / Trammell Crow 360 335T FM 1960 E/IAH Airport

Lafayette Village* / Dwayne Henson 250 457Y Far East

Stone Park II / Greystar 276 457U Far East

Fall Creek III / Martin Fein 246 375Z Far East

Magnolia Cove Site / DMC 192 337G Lake Houston/Kingwood

Southeast:

Anna Dupree* 176 573D Hwy 288/South

Carrington Park @ Sabo / Davis 258 576Y Gulfgate/Almeda Mall

Tuscan Lakes II / Martin Fein 204 659B Clear Lake

Bayview**/ CIS 240 461Y Baytown

Village @ Morningstar**/DMA Dev 78 TEXC Texas City

======

Total (41 properties) 11,501

PROPOSED:

Central:

Mid Town Site I&II / Camden 600 Montrose/Museum

Post Mid Town III / Post 136 Montrose/Museum

Camden City Centre II / Camden 263 Montrose/Museum

4310 Dunlavy I&II / Marom 486 Montrose/Museum

City Place / Farb 183 Montrose/Museum

Alexan Westheimer Sq / TCR 244 Montrose/Museum

Museum Site / Grayco 219 Montrose/Museum

Gables River Oaks I / Gables 378 Inner Loop W/Greenway

Gables River Oaks II / Gables 350 Inner Loop W/Greenway

HISD Site / Morgan & TCR Commercial 600 Inner Loop W/Greenway

Comfort Inn Site / DMC 309 Inner Loop W/Greenway

The Belle Meade / Grayco 119 Inner Loop W/Greenway

Verandah @ Meyerland II / Verandah 174 Med Center/Bellaire

Genesis Park II / Archstone 400 Med Center/Bellaire

OST & Almeda Site /Simmons Vedder 304 Med Center/Bellaire

OST & Kirby Site / Simmons Vedder 293 Med Center/Bellaire

N Braeswood Site / Grayco 344 Med Center/Bellaire

Washington & Waugh / Morgan 236 Heights

Park Tower / Finger 347 Inner Loop East

Southwest:

Regency Arms Site / Marom 350 Galleria

Gables 6464 Phase II / Gables 220 Galleria

Alexan Voss / Trammell Crow 400 Galleria

Eldridge/Briar Fst / Simmons Vedder 330 West Memorial/Briar Fst

Lofts on Briar Forest / Guefen 352 West Memorial/Briar Fst

Camden Oak Crest II Camden 300 Westchase

Bridgegate / Hettig 324 Fort Bend

Shadowbrooke II / Cornerbrook Dev 300 Fort Bend

West Bellfort at Hwy 6 / Funding Inc 288 Fort Bend

Northwest:

Nexus Site / Gross 300 Brookhollow

Enclave @ Tidwell*/Hettig 40 Brookhollow

Northbrooke II / Cornerbrook Dev 260 FM 1960 W/Champions

Torrey Chase Site II/ Bohannon 204 FM 1960 W/Champions

San Cierra / Sueba 362 FM 1960 W/Champions

Vintage Oaks / Sueba 350 FM 1960 W/Champions

Cypresswood & 249 / Michael Stevens 324 FM 1960 W/Champions

Stoneleigh at Ella / Woodmark 400 FM 1960 W/Champions

Paramatta & I-45 / Woodmark 250 FM 1960 W/Champions

Wynhaven @ Grant Rd / Trammell Crow 372 FM 1960 W/Steeplechase

Huffmeister Cypress N Houston / Davis 250 FM 1960 W/Steeplechase

Alexan Somerall / Trammell Crow 368 Bear Creek/Copperfield

Barker Cypress & 529 / Davis 250 Bear Creek/Copperfield

Alexan Yorktown / Trammell Crow 306 Bear Creek/Copperfield

Mason & Oak Pk Trail / Judwin 308 Katy/Far West

Foxlake Drive Site / Beeler 320 Katy/Far West

Vizcaya @ Park Harbor II / 276 Katy/Far West

Legends @ Cinco Ranch 270 Katy/Far West

Landmark at Katy / Landmark 240 Katy/Far West

Mason Park / Today Realty Advisors 312 Katy/Far West

The Mansions Woodland / Westerm Rim 250 Woodlands/Far North

Lakes @ Westview II & III / Realm 372 Conroe

Wedgewood Falls/ Allen Acq 120 Conroe

Northeast:

Green Pines II* / SPM 220 Eastex Frwy/Near NE

Waterside Court*/Hettig 118 Northline/Aldine

Fair Lake Cove* / Greater Coastal 200 Lake Houston/Kingwood

Harbor Walk II / Chancellor 100 Lake Houston/Kingwood

Southeast:

Landmark City Park / Landmark 240 Hwy 288/South

Shadow Creek Ranch II / Davis 300 Hwy 288/South

South Shore Harbor Site / Flournoy 300 Clear Lake

Nasa Road I Site / Davis 250 Clear Lake

======

Total (59 properties) 17,116

Sorry, that does not add up to 17,000 units being delivered during 2007. First off, surely none of the 17,000 units that are only "proposed" will be delivered during 2007, so that brings us down to a possible delivery of 11,501.

And of the 11,501 "under construction" one would presume that they are at various stages of construction and almost certainly not all of them will be delivered during 2007.

Furthermore, as has been pointed out earlier, several of those under construction are replacing old apartment complexes, so the net addition to the market is less than the number of units being constructed. Yes, we know they are replacing Class C apartment with Class A apartments, but at the same time, some other, older, Class A apartments are slipping into Class B category and older Class B apartments slip into the Class C category. It's all one apartment market.

[TheNiche]

ADS and O'Connor classify projects differently. ADS breaks out separately properties that are leasing and open but not finished, while O'Connor tracks whether they are open and leasing but does not have a separate category for that. Because of this, you also get more detail on projects under construction from O'Connor.

And your ADS list is, I believe, a quarterly list. O'Connor shows them under construction because its updated real time and hence more current.

Anyway you slice it, quite a bit of units. Houston is about the easiest market in the country for apartment development.As mentioned, some of the proposed projects won't get built (at least this year), but most will.

The flip side of the Houston development coin is that since it takes much less time to get a project approved, the market responds quicker. You don't have projects that have been in predevelopment for 2 years that you are afraid to pull the plug on because of all the invested time. We get overbuilt quicker than most markets, but we get back in balance quicker (albeit our balance is at an occupancy rate a few points below most everywhere else).

Yes, that is a partial explanation. But, scanning through the list, there were many projects listed as under construction by both O'Connor and ADS that had already started leasing. There are also quite a few listed in ADS that O'Connor doesn't have at all. And by the way, O'Connor may be able to post updates in real time, but they certainly don't gather information for each project in real time.

And as you stated in an earlier post, O'Connor does track tax credit and seniors projects, but ADS tracks some as well, if not comprehensively. And true, Class A and Tax Credit aren't the same, but the new Tax Credit projects suck tenants out of Class B and C properties, undermining Class A indirectly as market rents adjust across all classes to reflect a new equilibreum. No subset of the housing market exists in a vacuum.

You're right about our lack of red tape causing frequent, if less severe, volatility. You're also right that it keeps our occupancy and rents relatively low, as a long-term average. And this is good for both the developer and consumer. But this is a funny situation. The Katrina/Rita effect has obscured the true depth of the market just as capital markets have shifted focus away from the coasts. In the short term, capital markets are sticky. There are also a number of projects that are already pretty far along and have good momentum, so they're also somewhat sticky. ...and particularly in this short term, we grapple with both imperfect and skewed information.

[buildingunbuildingrebuilding]

Yes, that is a partial explanation. But, scanning through the list, there were many projects listed as under construction by both O'Connor and ADS that had already started leasing. There are also quite a few listed in ADS that O'Connor doesn't have at all. And by the way, O'Connor may be able to post updates in real time, but they certainly don't gather information for each project in real time.

O'Connor is on a 30-day survey cycle, so theoretically every project gets updated each month. They actually post the update date now, so you can see how close they get. Its typically between 80-90%. But you are right, both of them occasionally miss properties. Its nice to have access to BOTH services, but even then some things are still missing!

[buildingunbuildingrebuilding]

And as you stated in an earlier post, O'Connor does track tax credit and seniors projects, but ADS tracks some as well, if not comprehensively. And true, Class A and Tax Credit aren't the same, but the new Tax Credit projects suck tenants out of Class B and C properties, undermining Class A indirectly as market rents adjust across all classes to reflect a new equilibreum. No subset of the housing market exists in a vacuum.

True. The new Class A product has really hurt some of the older Class A and nicer Class B products in areas of high construction. The Tax Credit products tend to be in areas without as much Class A product, although there is overlap in certain areas (greater Med Center, for example). The Tax Credit properties seem mostly to negatively impact the Class C and some Class B properties.

While it would be nice for developers to exercise some restraint on Class A, the capital markets tend to do that eventually. The Tax Credit development scares me more. Not only are many of these products struggling, they really hurt the older properties and that decay can drag down a neighborhood more than the new Tax Credit property improves it. The state really needs to reevaluate where they incentivize developers to build Tax Credit properties.

[TheNiche]

O'Connor is on a 30-day survey cycle, so theoretically every project gets updated each month. They actually post the update date now, so you can see how close they get. Its typically between 80-90%. But you are right, both of them occasionally miss properties. Its nice to have access to BOTH services, but even then some things are still missing!

Only 32 of the 92 listed Under Construction and Proposed projects have been updated within the last 30 days.

35% ≠ 80-to-90%

The state really needs to reevaluate where they incentivize developers to build Tax Credit properties.

Tell me about it!!!

[buildingunbuildingrebuilding]

Only 32 of the 92 listed Under Construction and Proposed projects have been updated within the last 30 days.

35% ≠ 80-to-90%

Fair enough. The percentage was overall. The properties on the proposed and under construction list are updated less, as until they start leasing the key points are when/if they broke ground and when leasing starts. If a property broke ground today and no leasing until fall, no need to update every month.

[TheNiche]

Fair enough. The percentage was overall. The properties on the proposed and under construction list are updated less, as until they start leasing the key points are when/if they broke ground and when leasing starts. If a property broke ground today and no leasing until fall, no need to update every month.

That is precisely their way thinking. Unfortunately, they don't seem to follow through on it very well.

Of the 32 properties updated in the last 30 days, only nine are classified as under construction. Of those nine, only three have started leasing.

[houston-development]

Sorry, that does not add up to 17,000 units being delivered during 2007. First off, surely none of the 17,000 units that are only "proposed" will be delivered during 2007, so that brings us down to a possible delivery of 11,501.

And of the 11,501 "under construction" one would presume that they are at various stages of construction and almost certainly not all of them will be delivered during 2007.

Furthermore, as has been pointed out earlier, several of those under construction are replacing old apartment complexes, so the net addition to the market is less than the number of units being constructed. Yes, we know they are replacing Class C apartment with Class A apartments, but at the same time, some other, older, Class A apartments are slipping into Class B category and older Class B apartments slip into the Class C category. It's all one apartment market.

there very well could "only" be 11k units this year. rather than taking 3 years to absorb, it will only take a two and a half. regardless, its a crap load and we will be a renters market. if you honestly believe there will be a positive absorbtion, more power to you. i mean, we had negative absorbtion last year, so why would this year be better?

[TheNiche]

there very well could "only" be 11k units this year. rather than taking 3 years to absorb, it will only take a two and a half. regardless, its a crap load and we will be a renters market. if you honestly believe there will be a positive absorbtion, more power to you. i mean, we had negative absorbtion last year, so why would this year be better?

Woah, now. Our 2006 absorption was negative, but that was just the net difference between the gains from job creation and household formation as subtracted from the losses that occured throughout the year (and continue to occur at a slower pace) from the bleeding off of Katrina/Rita evacuees that had shocked the market in 2005.

Barring some sort of an economic collapse, we will have positive absorption in 2007. It may still be slightly undercut by the tail end of the Katrina/Rita effect, but is certain to be positive. I'm not so sure that it will be sufficiently high to maintain the occupancy or rental rates that we've got today.

[houston-development]

Woah, now. Our 2006 absorption was negative, but that was just the net difference between the gains from job creation and household formation as subtracted from the losses that occured throughout the year (and continue to occur at a slower pace) from the bleeding off of Katrina/Rita evacuees that had shocked the market in 2005.

Barring some sort of an economic collapse, we will have positive absorption in 2007. It may still be slightly undercut by the tail end of the Katrina/Rita effect, but is certain to be positive. I'm not so sure that it will be sufficiently high to maintain the occupancy or rental rates that we've got today.

i honestly hope you are right and my gut feeling is wrong.

[buildingunbuildingrebuilding]

Our absorption is still skewed because of the hurricanes. We added an extra 20,000+ units filled in 2005 because of evacuees. As some of them left, 2006 was negative. There will continue to be more leaving, although they are leaving much slower than they came. The number I would focus on is Class A absorption- if we get 4-5,000+, that is solid growth (albeit less than construction). If we get less than this, we have a problem.

[citykid09]

Our absorption is still skewed because of the hurricanes. We added an extra 20,000+ units filled in 2005 because of evacuees. As some of them left, 2006 was negative. There will continue to be more leaving, although they are leaving much slower than they came. The number I would focus on is Class A absorption- if we get 4-5,000+, that is solid growth (albeit less than construction). If we get less than this, we have a problem.

I just read an article that many of the Katrina Evacues who left Houston are coming back, because New Orleans isn't the same.

[Houston19514]

there very well could "only" be 11k units this year. rather than taking 3 years to absorb, it will only take a two and a half. regardless, its a crap load and we will be a renters market. if you honestly believe there will be a positive absorbtion, more power to you. i mean, we had negative absorbtion last year, so why would this year be better?

Don't get all defensive on us. I never said anything at all about absorption, positive or negative. I just prefer to discuss these things with realistic, rational numbers. And you're still exaggerating the numbers. Even from the numbers you've given us, it appears quite unlikely that there will be as many as 11,000 units delivered this year. Seems more likely to be in the range of 6-7,000 I would guess.

[houston-development]

Don't get all defensive on us. I never said anything at all about absorption, positive or negative. I just prefer to discuss these things with realistic, rational numbers. And you're still exaggerating the numbers. Even from the numbers you've given us, it appears quite unlikely that there will be as many as 11,000 units delivered this year. Seems more likely to be in the range of 6-7,000 I would guess.

im not exaggerating nor getting defensive, im backing my statements up with numbers from services that do this research as a business. they are not always right but ill take their extensive research over your "guess" (nothing personal).

i guarantee (which is the first time ive said that on these boards) that there will be more than 6,000 - 7,000 units delievered this year. i can think of 5,000 just off the top of my head that will be leasing by summer but what do i know....

[Houston19514]

im not exaggerating nor getting defensive, im backing my statements up with numbers from services that do this research as a business. they are not always right but ill take their extensive research over your "guess" (nothing personal).

i guarantee (which is the first time ive said that on these boards) that there will be more than 6,000 - 7,000 units delievered this year. i can think of 5,000 just off the top of my head that will be leasing by summer but what do i know....

LOL Get serious, man. You told us there would be 17,000 units delivered this year. The "numbers from the services that do this research" that you showed us came no where near that. Let's review the numbers from those services that you posted. Even if we were to (wildly) assume that ALL of those that were under contruction at the end of 2006 would be delivered this year, we only get to 11,501, only 2/3 as many as you stated. Perhaps I'm wrong in my presumption about construction times for apartment complexes. If so, I will happily stand corrected. But even if that is the case, and even if all of those 11,501 units are delivered this year, you till need to have 5,500 of the 17,000 proposed units actually START construction and deliver units in 11 months or less... in order to meet your prediction of 17,000 units delivered. Is that possible?... Likely? You tell me.

[houston-development]

LOL Get serious, man. You told us there would be 17,000 units delivered this year. The "numbers from the services that do this research" that you showed us came no where near that. Let's review the numbers from those services that you posted. Even if we were to (wildly) assume that ALL of those that were under contruction at the end of 2006 would be delivered this year, we only get to 11,501, only 2/3 as many as you stated. Perhaps I'm wrong in my presumption about construction times for apartment complexes. If so, I will happily stand corrected. But even if that is the case, and even if all of those 11,501 units are delivered this year, you till need to have 5,500 of the 17,000 proposed units actually START construction and deliver units in 11 months or less... in order to meet your prediction of 17,000 units delivered. Is that possible?... Likely? You tell me.

you must have missed this post that i made:

there very well could "only" be 11k units this year.

its a couple of posts above and not hard to find.

if you want to disregard ADS and o'connor, more power to you. every apartment developer i know takes their word, especially considering how much their services cost.

and by the way, a lot of the properties listed "under construction" broke ground several months ago and will begin leasing shortly. some have already started pre-leasing and waiting for their COs. their timetables are all scattered and you cannot just assume they all broke ground at the same time.

heres a clip from o'connor's apartment forecast:

A large number of new apartment projects

[Houston19514]

you must have missed this post that i made:

its a couple of posts above and not hard to find.

if you want to disregard ADS and o'connor, more power to you. every apartment developer i know takes their word, especially considering how much their services cost.

No, I did in fact see that. Let me make sure I understand fully. Was that your way of saying that the 17,000 number was indeed an exaggeration? I have not in any way disregarded ADS and O'Connor; it seems to be you who is "disregarding" their numbers. Their numbers say 11,500 or now 13,000 "under construction". You have not shown us any of their numbers that say or even imply that we will have 17,000 units delivered this year.

[Gary]

You have not shown us any of their numbers that say or even imply that we will have 17,000 units delivered this year.

As Niche posted earlier.... Per O'Connor & Associates, there are 13,342 units under construction and another 9,296 that are proposed. I think that a number of those that are proposed will get killed, but a fairly sizable portion already have enough momentum and will likely move forward...or are already under construction and haven't been updated in the stats.

Maybe that helps.

[TheNiche]

As Niche posted earlier.... Per O'Connor & Associates, there are 13,342 units under construction and another 9,296 that are proposed. I think that a number of those that are proposed will get killed, but a fairly sizable portion already have enough momentum and will likely move forward...or are already under construction and haven't been updated in the stats.

Maybe that helps.

And as I also pointed out, ADS has some projects listed as under construction that O'Connor doesn't. So it sounds to me as though there are at least 13,342 units under construction. Probably not quite 17,000, but a large number. A scary number.

I'll merge the two lists later tonight and see what I come up with.

[Gary]

And as I also pointed out, ADS has some projects listed as under construction that O'Connor doesn't. So it sounds to me as though there are at least 13,342 units under construction. Probably not quite 17,000, but a large number. A scary number.

I'll merge the two lists later tonight and see what I come up with.

Right. But if a minimum of 13,342 units are now under construction, that would mean we only need an additional 3658 units to get to the 17,000 that HD was commenting on. Doesn't sound unreasonable to me at all. But hey, what do I know?

[TheNiche]

Right. But if a minimum of 13,342 units are now under construction, that would mean we only need an additional 3658 units to get to the 17,000 that HD was commenting on. Doesn't sound unreasonable to me at all. But hey, what do I know?

I don't know, but will find out. Could be...

By the way, would a moderator mind moving this tangential discussion over to the thread that I'd created for it a couple weeks ago? Thanks.

Note: This post originated in the Allen House: it was nice knowing you - thread - moved per request.

[Houston19514]

Right. But if a minimum of 13,342 units are now under construction, that would mean we only need an additional 3658 units to get to the 17,000 that HD was commenting on. Doesn't sound unreasonable to me at all. But hey, what do I know?

But, again, that assumes that every one of those 13,342 that are listed as "under construction" will be completed and delivered to the market this year. That strikes me as unlikely, but I really don't know what the time frame for apartment construction is like.

[Gary]

But, again, that assumes that every one of those 13,342 that are listed as "under construction" will be completed and delivered to the market this year. That strikes me as unlikely, but I really don't know what the time frame for apartment construction is like.

Neither do I. I would assume no more than 8 to 10 months. Anybody?

[Houston19514]

Neither do I. I would assume no more than 8 to 10 months. Anybody?

That seems surpisingly fast to me, but as I said, I really don't know. Can mid-rises be built that fast? I'm certain high-rises cannot be. But I also don't know if there are any mid or high-rises included in the 13,000 + number.

[TheNiche]

Neither do I. I would assume no more than 8 to 10 months. Anybody?

Depends entirely upon the kind of product. I don't have figures broken down in fine detail, though.

[Gary]

Depends entirely upon the kind of product. I don't have figures broken down in fine detail, though.

Of course, I should have been more clear. I was assuming that most of what's going up is in the three to four story variety.