Rental rates in the Lake Houston area continue to level off as the Houston region deals with the ongoing oil and gas downturn.

However, apartment developers are moving forward with the construction of new properties in the area as they anticipate future population growth and demand. At least six apartment complexes are under construction across the Lake Houston area.

A report by Apartment Data Services LLC places 47 apartments operating in the Lake Houston and Kingwood region through August with 12,031 apartment units. The average monthly rent is $1,073, and overall occupancy is 88.8 percent.

The region’s occupancy only dipped below 90 percent because of new and recently opened complexes that have yet to fill up, which dilutes the figure, said Bruce McClenny, president and CEO of Apartment Data Services. Average rent has remained low since mid-2015, with prices now starting to increase.

Prior to April 2015, rental prices in the Lake Houston area were climbing, which is a sign of a healthy multifamily industry, he said.

“The market has been flat since April 2015, so prices really haven’t changed here over that period of time,” McClenny said. “I would say the downturn in the local economy has slowed this particular market down.”

New developments

About 5,000 new apartment units are projected within the boundaries of Humble ISD between 2015 and 2025, according to a study by demographics firm Population and Survey Analysts.

Despite the downturn, at least six new apartment complexes are under development in the area, including some near mixed-use commercial development Generation Park on Beltway 8 and two others around Hwy. 59 and Northpark Drive. Two additional apartment complexes are also planned in Humble mixed-use development Townsen Landing near Hwy. 59 and Townsen Boulevard.

Ravella at Kingwood, which is located near Northpark Drive and Loop 494, opened last year, and Kings Landing is under construction off Hwy. 59 south of Northpark Drive. 

The Trails at Lake Houston is also under construction and is partially complete near the intersection of West Lake Houston Parkway and Beltway 8. The complex offered its first leases in June. The Trails will offer 304 units when construction is complete, and its first two buildings now have residents.

Manager Jo Ann Burleson said the property features a large swimming pool and areas for outdoor cooking and includes upscale floor plans. Rates range from $945-$1,400 per month.

“It didn’t take long [for the two buildings] to fill up—in our first week we saw 78 [interested people],” Burleson said.

The high level of interest in the community is expected, however, said Burleson, who has managed properties for 27 years. She said the novelty of living somewhere new makes it easier to fill complexes.

The complexes opening in the area have filled their units fairly quickly, and the demand appears to be driven by young professionals, said Charlie Dromgoole, president of the Lake Houston Area Economic Development Partnership.

“I think we are seeing the demand from a lot of younger people moving out to this area, and they tend to look for apartments in the early stages of their lives,” he said.

Although Dromgoole could not attribute the growth to one industry, the Lake Houston area is projected to add more than 70,000 new residents between 2010 and 2020, according to census data. He said the population surge has attracted several new multifamily developers across the region.

Mixed economy

The Lake Houston area houses both downstream and upstream  energy industries, splitting economic success in the oil and gas downturn. Generally, when oil prices are down, downstream oil companies—such as the refineries and petrochemical plants in east Houston—are unaffected while upstream companies suffer, McClenny said.

“Kingwood and [the Lake Houston area] have not had that much new development, so it shows maybe the downturn has affected this [eastern] side of Houston,” McClenny said.

However, according to  the 2015 PASA study for HISD, downstream companies, which process, sell and distribute natural gas-and oil-based products, have at least $35 billion in new construction underway around Baytown and Mont Belvieu.

The study notes that it is common for the engineers and workers hired to work in these centers to live in nearby communities, which could increase demand for Lake Houston area multifamily and single-family housing.

On the upstream side of the industry, companies continue to cut budgets and are not expected to experience an uptick for another four or five years, according to the PASA study.

Despite energy sector struggles, in the past three months, rental prices in the Lake Houston area have risen by 3.1 percent, which McClenny said is an average increase and points toward a possible uptick in the economy next year.

In terms of the overall outlook of the market, McClenny said it depends on perspective.

“If you’re an owner or manager of apartments you’d rather see more rent increases, but if you’re a renter you’re probably happy to see lower rates,” he said.