The Woodlands area has seen a boom in new apartments built over the past two years, which initially resulted in struggling occupancy rates because of the surplus of units. However, local real estate officials said job growth and a recovery from the sluggish oil and gas prices that have struggled since 2015 is filling up existing apartment inventory and bringing new developments to the region.
In addition to job growth and the oil and gas recovery, residents who were affected by Hurricane Harvey and lost their homes are expected to raise occupancy rates in the apartment market.
Robert Kramp, director of research and analysis at CBRE, the world’s largest commercial real estate services firm, said interest is expected to grow in single-family rentals due to homes damaged by Hurricane Harvey.
“The demand from displaced renters and residents seeking temporary housing spiked dramatically after the storm–around 6,000 units were leased in the weeks following Harvey’s landfall,” Kramp said.
Apartment Data Services President Bruce McClenny said the apartment market in The Woodlands—as well as the overall Greater Houston area—will continue to build itself back up after Hurricane Harvey and the oil and gas industry struggles, which created an overflow of units that could not be filled in the past.
“Over the last two years, apartment units increased, and this drove down occupancy,” McClenny said. “At the same time, we were suffering from the low price of oil. Things have been getting better though.”
By the end of 2015, occupancy in The Woodlands-area apartments began to drop, according to a report from ADS, a Houston-based company that collects current information on multifamily residential properties
In May 2016, the apartment occupancy rate in The Woodlands was at its lowest point in the past two years at 80.5 percent. By August 2017, however, the apartment market in The Woodlands had seen an uptick to a 90.4 percent occupancy rate, with 168 units added to The Woodlands area since May 2016.
“Job growth has come back to Houston,” McClenny said. “Developments of new apartments in The Woodlands has gone through a cycle.”
According to the ADS report, occupancy levels for apartments in The Woodlands increased nearly 6 percent from January to July. Business and real estate experts agree local job growth is driving the market change.
Laura Lee Palmer, vice president of business retention and expansion for The Woodlands Economic Development Partnership, said she believes the township’s two largest growth sectors—health care and education—have contributed to rising occupancy rates in apartments.
New health care options in The Woodlands area include Texas Children’s Hospital The Woodlands, which opened in April 2017, and Houston Methodist The Woodlands Hospital, which opened earlier this summer. New schools in the surrounding area include Lucille J. Bradley Elementary School, which opened this August and Grand Oaks High School, which is slated to open in August 2018 near the Grand Parkway.
“We’ve brought in over 1,000 jobs with the new hospitals we have here, and education is growing with new schools,” Palmer said.
Priyanka Johri, founder of Woodlands Eco Realty, said many of her clients are coming to The Woodlands for jobs at big companies like oil and gas production company Anadarko Petroleum Corporation, and single residents are looking at apartments as a more affordable living option.
“Rent for apartments is slowly rising, but there will not be a major impact until oil prices really rise,” Johri said. “I still think there are too many apartments being built in the area, but people are moving [into]them for the amenities.
McClenny said that despite Hurricane Harvey, which hit southeast Texas in August and damaged 15,662 units throughout the Greater Houston area, occupancy rates are expected to remain high.
“Pockets of the [Greater Houston] area have seen a lot of traffic with leases,” McClenny said. “Single-family homeowners need to find a home quickly. In general, storms help the apartment market and because of that, rent prices tend to go up 6 or 7 percent.”
McClenny said the 15,662 damaged units will be back up in the next year and bring more supply back to the Greater Houston area. The ADS report showed that The Woodlands had 502 units that were damaged from the storm.
Although new apartment complexes are still developing inside The Woodlands, the surrounding area of The Woodlands has seen more complexes developing in the past year, McClenny said.
“The Woodlands and surrounding area is a desirable area,” he said. “You have the ExxonMobil campus, and the Spring area is also seeing a lot of new apartments.”
Recently opened complexes in The Woodlands area include Harper’s Retreat, Broadstone Woodmill Creek Apartments and Broadstone Harmony, which all opened 2016.
McClenny said many of the new apartments that have recently been built around The Woodlands area with more amenities are considered Class A buildings—which are usually considered high-quality structures. However, according to the ADS report, Class A apartments in The Woodlands only have an occupancy rate of 88.3 percent.
McClenny said when comparing the occupancy rates of apartments in The Woodlands, Class C apartment complexes like Fawn Ridge Apartments on Sawdust Road, which was built in 1979, are seeing the biggest increase in residents, with a 94.2 percent occupancy rate. McClenny said Class C apartments offer rents below the average for the area.
“Class C apartments haven’t had any new units built for the past two years,” McClenny said. “Existing properties now have the opportunity to lease up.”
The ADS report shows Class A apartments now have 2,801 units more units in The Woodlands since 2015.
Another Class A development, Creekside Park Apartments, is being constructed on Kuykendahl Road and is expected to open in mid-2018. The 292-unit, gated residential community is a project by The Woodlands Development Company.
Jim Carman, vice president of commercial development for The Howard Hughes Corporation, said it should take about 18 to 24 months before Creekside Park Apartments reaches at least 90 percent occupancy.
“These apartments are catered to young families and empty nesters,” Carman said. “Our apartments in The Woodlands are not isolated from the growth outside and around The Woodlands. We haven’t set rates yet, but we expect rates here to be higher than properties that don’t have the amenities we have. ”
Carman said more residential development is possible in the future, but the Development Company is monitoring growth around The Woodlands.
“We’re careful how we monitor supply and demand,” he said. “Leasing rates are down from two years ago, but are expected to rise. Occupancy rates for our apartments in The Woodlands, such as the Millennium Waterway Apartments, remain at 90 percent or higher.”
Harper’s Retreat, an apartment complex on Hwy. 242 in Conroe, is also expected to attract more residents in the future. Cortney Osepian, assistant property manager at Harper’s Retreat, said since opening last September, the apartment complex is 69 percent occupied, with the occupancy rate expected to rise to 79 percent in upcoming months as more leases are signed.
“We are right by The Woodlands medical center, so a lot of doctors and nurses are relocating here,” Osepian said. “Texas Children’s Hospital and CHI St. Luke’s Hospital are bringing in people. More apartments are going to develop around this area of The Woodlands.”