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Low Oil Prices Choke Off Investment In Houston Apartment Construction

Houston-area builders should complete 20,000 new units this year, about the same as they did in 2014. But 2016 doesn’t look nearly as rosy.

 

Investment in new apartment construction for Houston has all but dried up. That was the consensus of a panel of economists and industry experts at a Tuesday meeting of the Houston Apartment Association.

The economic boom from high oil prices has drawn huge numbers of new residents to Houston in search of work. That, plus a shortage of single-family homes, led big investors to pour money into new apartment construction. Although the shortage persists, most investors now see the region as overbuilt.

“They’re looking at the number of apartments that are under construction right now that are going to be delivered in the next 12-to-18 months, and they’re looking at job growth being reduced, because of the price of oil,” said Kirk Tate, a principal with Orion/Allied Realty, a real estate management firm in far west Houston.

The trend is hitting other large construction projects as well, according to Brandt Bowden, chief investment officer with The Hanover Company, an apartment developer based near the Galleria. “We basically have seen capital stop flowing into Houston for multifamily development – I mean, also for office [construction] and a lot of oil projects,” Bowden said. “It’s been very tough for anybody investing to just look at Houston with falling oil prices and get comfortable that there’s a near-term good investment opportunity.”

Apartment Data Services estimates that builders will complete work on roughly 20,000 new apartment units across the Houston area in 2015. That’s about the same pace as they set last year. Most of those are luxury apartments. 

 

HAA’s presentation on Apartment construction

 



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Andrew Schneider

Andrew Schneider

Politics and Government Reporter

Andrew heads Houston Public Media’s coverage of national, state, and local elections. He also reports on major policy issues before the Texas delegations in the U.S. House and Senate, as well as the Texas governorship, the state legislature, and county and city governments. Before taking up his current post, Andrew...

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