In the apartment construction industry, one simple premise often guides developers: Increased job growth creates a demand for housing, which leads to new construction.

However, despite significant declines in job creation, apartment developers have an estimated 30,000 units under construction in the Greater Houston area—including more than 1,300 in Conroe and Montgomery.

Unlike much of the Houston region, the city of Conroe has not seen a shift in job creation because of the oil and gas downturn. City Manager Paul Virgadamo said that while growth in local oil and gas companies may have slowed down to some degree,  the city’s medical sector continues to grow—particularly with the addition of Houston Methodist Hospital The Woodlands in south Conroe.

“We feel like we are pretty diverse in Conroe from the job standpoint, and unemployment here is still fairly low,” Virgadamo said. “We watch permits and tax indicators every month to prepare for next year’s budget, but we haven’t seen anything that has swayed us one way or the other.”

With job growth still strong in the Conroe area, the demand for multifamily projects in the region remains prevalent, Virgadamo said.

Regional outlook

In contrast, despite the job diversification in the Greater Houston area, there still are not enough new jobs to sustain the apartment construction boom throughout the region, said Patrick Jankowski, senior vice president of research for the Greater Houston Partnership.

The Greater Houston area created 23,300 jobs in 2015, and projections for 2016 show 21,900 jobs will be added, Jankowski said. In comparison, an average of more than 89,000 jobs were added per year from 2011-14.

“We have—what looks like—a three-year supply [of apartments] without the job growth to sustain the [Greater Houston area] market,” Jankowski said. “There are going to be too many units coming online.”

Bruce McClenny, president and CEO of Apartment Data Services LLC, said he expects a slowdown in apartment development throughout the Greater Houston area once ongoing projects are complete.

“It is more about the investors saying that they don’t want to deploy their capital in this kind of market,” McClenny said.

Local outlook

Conroe has witnessed an increase in demand for multifamily housing in recent years. Nancy Mikeska, assistant director of community development for Conroe, said residents looking for apartments in the city over the past three years have had to wait about two months before finding their new apartments.

Mikeska said residents are now looking at apartments as long-term living solutions as opposed to temporary housing arrangements. She said apartments now offer high-end amenities to attract residents, such as granite countertops, large closets, stainless steel appliances, small parks and even commercial space.

“Everybody knows that Conroe has always been a small town, old-timer type of city,” Mikeska said. “The mindset was apartments were for college kids, but that has really changed.”

The Conroe and Montgomery area will increase its apartment inventory by about 25 percent within the next few years following the completion of seven ongoing apartment projects, coupled with two recently completed Conroe projects on FM 1488—The Mansions Woodland and Grand Estates in the Forest, according to Apartment Data Services. Apartments under construction include West Creek, Anatole at Conroe and Capri Villas in Conroe as well as The Heritage and Harbor Shores in Montgomery.

Those ongoing and completed projects account for 2,065 new units in an area that only boasts about 8,240 units overall. Still, the cities of Montgomery and Willis are in need of multifamily housing.

The majority of the Montgomery population resides in single-family homes, most of which cost $250,000 or more, Economic Development Director Shannan Reid said. Because those homes tend to be too expensive for service workers or those employed at retailers, such as the incoming Kroger Marketplace, Reid said the city could benefit from additional apartment communities.

“There [are] a lot of reasons why, at this point in [their life] and in our national economy, people can’t get into homes of their own,” Reid said. “The way banks do loans now has forced the demand on rental situations for people who would have otherwise considered themselves a viable candidate for a home loan.”

Willis City Manager Hector Forestier said the city is in need of multifamily housing and affordable single-family dwellings. Willis only offers a handful of apartment options and has no apartment projects in development.

“Apartment complexes would definitely be a plus, especially as we continue to grow,” Forestier said. “We have people moving to the area, and we don’t have enough housing—whether it is apartments or single-family dwellings.”

Attracting renters

With new complexes on the horizon, many developers may resort to different tactics to attract renters, Jankowski said.

“You should really be able to get a good deal on an apartment in the next two years,” Jankowski said.

When a new apartment complex opens for leasing, its management group may offer concessions based on the number of nearby apartment communities, said Kae Mercer, assistant vice president  for SunRidge Management Group Texas, which manages several apartment complexes in Conroe and Montgomery.

For example, Mercer said the management group might offer rent concessions for West Creek Apartments—which opened Feb. 26 in Conroe. Since the property is located near other apartments that do not offer amenities like granite countertops or dog parks, they are offering concessions to stay competitive.

“When you build a new property the prices are going to be higher because of the amenity packages,” Mercer said. 

Despite the slowdown in the economy and job growth, the millennial generation has a desire to live in apartments, not single-family homes, said Cyrus Bahrami, a managing partner with Alliance Residential Houston, one of the largest multifamily development and management companies in the U.S.

“Millennials are a big part of this—they’re apartment-driven,” Bahrami said.