To meet this demand, developers are building multifamily complexes in the area. Since June 2018, four apartment complexes have opened in the Katy area, according to ADS data. Another 15 with about 5,000 units are under construction, and eight more are proposed.
Half of the units under construction will deliver in 2019, and the remaining 2,500 will be delivered sometime in 2020.
However, the market for leasing apartments in the Katy area has nearly reached capacity, and areas allowing multifamily developments are filling up quickly, according to demographic firm Population and Survey Analysts.
“Katy is kind of tapped out,” McClenny said.
The occupancy rate in the Katy area across all apartment types is 89.8% and about 92% when factoring out lease-ups, which are multifamily complexes still under construction.
Many of the multifamily units in Katy were constructed along the I-10 corridor because apartments are typically built in high-density areas with a lot of retail and businesses, PASA demographer Justin Silhavy said.
“We are going to run out of sites along the I-10 corridor,” Silhavy said. “There will be some sites along the Grand Parkway, but not as many.”
Roughly 50% of the new units are single-bedroom floor plans.
“That is typical of any market,” McClenny said. “Single people are moving to Katy, too. They may work in retail or nearby hospitals. That’s where the rental market comes in.”
He added there is a high number of millennials moving to the Katy area who do not make enough money to buy a single-family home, there is a high demand for multifamily units.
Millennials moving to the Katy area are not contributing to the single-family home market dominated by baby boomers, a recent study by the Texas Real Estate Center shows. Millennials typically have to earn $150,000 to buy a home, but many millennials make as little as one-third of that amount.
“There is a mixture of people coming in from all stages of life,” McClenny said.
The last housing boom in the Katy area was from 2011 until the end of 2014, according to PASA.
Residential developments decreased during the oil price downturn in the Greater Houston area from 2014-16, and ADS data shows a spike in rental price and occupancy in the Katy area in August 2017 when Hurricane Harvey displaced locals from their homes.
After Harvey, rents in the Katy area spiked, and it was difficult for staff at complexes to convince tenants who were fixed at a lower rate prior to the storm to renew their leases, McClenny said.
Although rates were lower from 2018-19 than they were from 2017-18, rent has increased by almost $70 in the last three months.
PASA predicts the energy sector will remain steady and the Katy area will experience a stable economy through 2028.
“The economy is picking back up,” McClenny said, “Katy had the Hurricane Harvey impact over the last two years and also had some of the highest rent rates. I expect a $35—3%—increase by the end of 2019. That’s just keeping up with regular inflation. It’s a normal growth that is reasonable for everybody.”
This article is part of our 2019 Real Estate Edition. View more real estate coverage here.