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Apartment occupancy across all property classes ticked up in recent months. This reflects a seasonal pattern, not a fundamental shift in the market. Rents and occupancies remain below where they were this time last year. 

Only Class D properties have seen any stability in occupancy in recent months. However, this group represents only eight percent of the market. Occupancies in all other classes are lower today than this time last year. Rents have fallen across all property classes.

The Houston market absorbed roughly 15,000 units (all classes) in the 12 months ending June ’24, according to Partnership analysis of MRI Apartment Data. Normally, that would be a strong performance. However, total inventory expanded by 22,000 units over the same period. 

The Partnership estimates there are over 34,000 unoccupied Class A units in the market, up from 30,000 units this time last year and 23,000 two years ago. There are nearly 25,000 vacant class B units as well.

Class A rents and occupancy have trended down for well over a year now. The average monthly rent for a Class A unit in a “stable” property, i.e. one that has been open for over a year, was $1,768 in June, down $20 from last year. The average for a Class A unit in lease-up, i.e., opened less than 13 months, was $1,622 in June, down $112 from last year.  The large number of new properties coming onto the market continues to put pressure on all Class A rents.

Concessions continue to dominate the market. These may include free rent, waiver of a security deposit, or floorplan upgrades. As of June ’24, over half of all Class A units have an incentive, over one-third for B, and over one-third for Class C. The concessions have effectively reduced monthly rents by 5.0 to 7.0 percent across the board.

Roughly 19,000 apartment units, virtually all Class A, were under construction as of July 1. Another 34,000 were proposed or in the planning stages. An industry rule of thumb holds that Houston absorbs one apartment unit for every six jobs created. At the current pace of construction, Houston will need to create roughly 114,000 jobs to absorb what’s currently under construction. The Partnership’s forecast calls for the region to create half that many jobs (57,000) this year.
 

Prepared by Greater Houston Partnership Research Department

Patrick Jankowski, CERP
Chief Economist
Senior Vice President, Research
pjankowski@houston.org

Leta Wauson
Research Director
713-844-3661
lwauson@houston.org