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Apartment renters likely to pay more

Kevin Batchelor, senior managing director at Hines, talks about the future with Nancy Sarnoff during a visit to the 33rd floor of the La Colombe d’Or Hotel & Residences.

The La Colombe d’Or Hotel & Residences is being built in Montrose, one of the hottest urban neighborhoods in Houston.

Increase is biggest since Harvey
Apartment rents are expected to rise 4.2 percent next year, the biggest increase since the short-term boost in 2017 when Hurricane Harvey displaced thousands of Houstonians from flooded homes, new data show. The increase would be well above the area’s 20-year average annual increase of 3.2 percent, according to a report from multifamily consulting and research firm

“It’s not exorbitant, but was needed for the industry, which has been lagging over the last several years,” Bruce McClenny, the firm’s president, said. Rent growth slipped to 1.2 percent a year after Harvey and has been steadily growing. The average apartment rent was $1,054 per month at the end of August. Occupancy among Houston-area apartment complexes is expected to remain flat next year at around 90 percent, even as supply is expected to grow. Some 17,000 units are slated to open in 2020, up from 15,000 this year.

At the end of August, there were 22,319 units under construction and 28,279 proposed. “With the job growth we’re expecting, we should be OK with this level of construction,” McClenny said. Much of the new growth is in the the Katy/Cinco Ranch area and inside Loop 610. The hottest urban areas are the Heights/Washington Avenue and Montrose/Museum/Midtown which have 3,020 and 2,068 units under construction, respectively.

While the Houston employment market is holding up, the number of high-paying energy jobs have moderated and newer, luxury apartment buildings have been slower to fill. Occupancy in the high-end buildings developed in 2017 is 88 percent, McClenny said. Normally after a year to 15months, landlords aim for at least 90 percent occupancy.

“Once you get to those $2,000-a-month options and even higher, the number of people able to qualify for that drastically shrinks,” he said. Concessions have been rampant in the urban core, especially downtown, where 600 units are under construction. Aris Market Square is advertising three months free on a 13-month lease. Catalyst, near Minute Maid Park, is offering $1,000 to renters who apply for a unit within 48 hours of visiting the property.

Midtown’s Drewery Place, a 27-story tower apartment tower across from Midtown Park, opened in July and is offering one month of free rent on new leases. Hanover Montrose is offering up to 8 weeks free.

—HOUSTON CHRONICLE: Story by Nancy Sarnoff, Photo by Mark Mulligan