The Woodlands area has seen a boom in new apartment units as well as rising rental rates this past year for existing apartment complexes as new residents and large businesses move into the area. However, even with the rising number of apartment units, occupancy levels for these apartments are still low, and have been for the past couple of years.
A data report by Houston-based Apartment Data Services shows the number of apartment units in the Woodlands has increased about 30 percent since June 2012.
Apartment Data Services President Bruce McClenny said the area has continued to see population growth because new construction projects, such as Houston Methodist Hospital The Woodlands and Texas Children’s Hospital The Woodlands, are drawing more people to the area.
“The Woodlands and Spring area have tons of growth. The Grand Parkway is helping with mobility in that area, and new business are coming in,” McClenny said.
In the Apartment Data Services report, occupancy levels for apartments in The Woodlands decreased by 9 percent from June 2012 to June 2014, with vacant apartment units becoming more common. However, there has been a 6 percent increase since June 2014, with an 88 percent occupancy rate reported for July of this year. The recent increase means the rapid growth the area has seen is finally catching up to housing availabilities as more people move to the area, said Gil Staley, chief executive officer for The Woodlands Area Economic Development Partnership.
“For the lower occupancy rate, inventory is just catching up with demand,” Staley said. “It’s going to slow down after everything is completed, but eventually it will start to catch up again.”
Staley said new apartment developments are still greatly needed in the area because of big projects, such as ExxonMobil, Houston Methodist Hospital and Texas Children’s Hospital. The developments are due to bring thousands of employees who will need housing in the area,
“We’re also looking at the growing population of renters over buyers now,” he said. “And there’s a growing population of the millennial workforce in this area.”
Filling units is still proving to be a challenge for some property companies. Patricia Mancillas, regional operations manager for Western Rim Property Services, said the four developments the property company owns have seen low occupancy numbers and more
apartment units staying vacant.
The property company owns The Towers Woodlands, The Estates The Woodlands, The Grand Estates The Woodlands and Mansions on the Park.
“We haven’t seen as many people move to the area as we thought, and last year we dropped over 4,000 units at our properties and have been 5 percent lower in occupancy than we should be,” she said.
Mancillas said the job growth is not what property developers expected, which has created vacancies at both new and old apartment complexes in the area.
“What this does is that if these low occupancy rates continue, it lowers the market value for everyone in the area,” she said. “Housing prices will also start to [go] lower, and in the next year it will be good to buy a home rather than an apartment.”
Mancillas said because of the low occupancy rates that have been seen, apartment management in The Woodlands area began offering more concessions and specials in August and September of last year. Concessions and specials offered to residents include enticements, such as no rent for one or more weeks, waived fees and gift cards.
“Currently in my market we give an average of two weeks free, some more and some less than others,” she said. “Specials are now necessities to provide some kind of an incentive for the residents. Almost all apartments in The Woodlands area are doing it.”
Mancillas said she expects by the end of 2015 the market will catch up and properties will begin to stabilize as more people begin to move to The Woodlands area as a result of new hospital developments and job opportunities at ExxonMobil.
“This year we’re absorbing the growth, and we’re still expecting growth,” she said. “I don’t think there’s need for new products, but I don’t know what is in store for this area. I do think property on the outskirts is needed since there is no space for multifamily development in The Woodlands.”
Staley said there has been a rise of new apartment complexes on the outskirts of The Woodlands, such as the upcoming Woodmill Creek community on Sawdust Road that will feature a new apartment complex and townhome development.
“Developers are taking advantage of land opportunities outside The Woodlands because the inner area of The Woodlands is already devoted to a developer [The Woodlands Development Company],” Staley said. “Price point also gets less competitive the farther you get away from Town Center. Residents take advantage of this and are quick to move in, while still having a short drive to their jobs in The Woodlands.”
David Toone, a principal with Pinpoint Commercial, a national real estate development company that is the master developer for the Woodmill Creek master-planned community, said the location of the upcoming residential development is the ideal spot for bringing in new business and residents.
“The availability of the land and the location is prime,” Toone said. “We’re surrounded by The Woodlands development and it’s just outstanding.”
Toone said Alliance Residential Co., a Phoenix-based private multifamily developer, is in charge of developing the two residential projects in the 75-acre
Woodmill Creek community. Broadstone Woodmill Creek will be a wrap apartment complex, where the apartments surround the parking garage and feature 380 units. The company is also developing The Townhomes at Woodmill Creek, which will be available for lease this fall and feature 171 units.
With the rise of the new apartments and despite lower occupancy rates in the past few months, apartment rates and prices have risen continuously in around the The Woodlands area.
The Apartment Data Services report that while the average apartment pricing in June 2012 was $1,007, pricing for June of this year was at $1,177.
McClenny said new apartment complexes tend to add more competition to the area and since The Woodlands is composed of newer and higher-class developments, this typically means higher rent prices for all complexes.
“New properties tend to have higher prices then existing properties,” McClenny said. “However, if rent trends flatten with new properties, then that’s when properties will have to start making concessions for rent. But right now that’s not happening—we’re seeing prices rise and hold.”
McClenny said as long as apartments are seeing a certain number of renters sign leases each month, then prices will continue to stay the same at apartments and not lower. However, rental rates might continue to increase in the future .
“New developments raise rent in the whole area and occupancy is going to be lower at new properties,” he said. “The Woodlands is generally a well-maintained area and a great spot, and that’s why people are going to keep coming to the area.”