Q2 2012 Houston, Texas Apartment Submarket Trends

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Q2 2012 Houston, Texas Apartment Submarket Trends

The West Side

  • Development in recent years has focused most heavily on west side submarkets, from the close-in Galleria area to the Texas Medical Center area farther west and to areas beyond Loop 610.
  • Expansions within both the energy and medical sectors in this region have played large roles in generating demand for apartments.
  • The 3,708 market-rate units that completed construction over the past two and a half years in Montrose River Oaks and, to its west (west of Loop 610), Briar Grove/Westchase amounted to 35.1% of the metro area completion total for the period.
  • Construction deliveries, while absent in both submarkets during the first half 2012, will soon increase.
  • In the four chief close-in west-side submarkets combined, the two cited above along with Braeswood-Bellaire and Briar Forest/Ashford, no market-rate units completed construction during the first half 2012 following a combined total of 506 in 2011.

Inner Loop I/Midtown and Uptown (Montrose-River Oaks); Downtown

  • Houston’s close-in west side has been the area most affected by the boom in energy sector employment and the persistent strength in that sector.
  • The high-end Montrose-River Oaks, including the part of the Galleria area east of Loop 610, Texas Medical Center and Allen Parkway areas along with downtown Houston itself has dominated recent development and dominates current construction and planning as well.
  • Wood Partners/TREB describes this region, along with a handful of other west side areas, as among the current “hotspots for new development.”
  • As of August, 16 projects with a combined total of 4,828 market-rate units, fully 45.6% of the unit total metrowide, were under construction in this submarket.
  • Of this total, two with a combined total of 657 units are expected to deliver this year, both in December.


  • The 316-unit Gables Post Oak on Post Oak Drive is scheduled for a December finish. Construction started in June 2011. The project is a joint venture by Gables residential and Northwestern Mutual.
  • The Pearl, with 341 units, is due on line the same month at N.E. Richmond Avenue and Cummins Street. The Morgan Group is the developer. Construction began in September 2011.


  • 2,609 units were underway in nine market-rate projects per report date for completion in 2013. That total could increase, however, as planned projects step off the sidelines: Reis’ mid-year analysis calls for the completion of 3,117 units next year.
  • The 396-unit District at Washington broke ground at TC Jester Boulevard and Allen Street in July. Completion next June is expected. Kaplan Companies is the developer.
  • More. Rents in this “high-end” mid-rise complex range from $1,209 to $1,959, Texas Real Estate Center (TREC) reported in July.
  • Project highlights for 2013 include Greystar Real Estate Partners LLC’s 392-unit Elan Avenue R, which started in November at 5455 Richmond Avenue and will deliver next August.
  • A December finish is planned for the 22-story, 300-unit Sage at Westheimer at Broadway and Westheimer. Whiteco Residential is the developer.
  • Among the latest projects to start, breaking ground in July is the 372-unit Park Memorial Apartments at Memorial Drive and Detering Street. The completion date was not specified. JLB Partners is the developer.
  • Other 2012 starts to date include the February launch of the 431-unit 2900 West Dallas complex at that address (at La Rue Street). The completion date was not specified. Finger Companies is the developer.
  • A December 2012 start is awaited for the 950-unit Regent Square Apartments at Allen Parkway and Dunlavy Street. The planned completion date was not available. GID Urban Development is the developer.
  • In July, Houston Business Journal reported at the time, The Finger Companies bought the former Art Institute building in the Galleria area. Plans call for demolition and subsequent development of “a new midrise apartment complex.”
  • Including the above-cited planned projects and in addition to the large volume currently underway, Reis reports 6,818 market-rate units in planning and proposal stages in 22 properties in this submarket.
  • Net absorption through first half 2012 alongside no new supply delivered was 141 units.
  • Second quarter vacancy was 6.1%, down 40 basis points from a quarter earlier, down 210 year-over-year. Average asking and effective rents for the quarter were $1,300 and $1,196, up 1.7% and 2.1% following virtually identical gains the quarter before following increases of 1.2% and 1.4% in 2011.
  • Outlook. The surge in development, with more on the way, is the main story here. Demand could fall slightly behind in 2013 and 2014. An increase in the vacancy rate to about 8.0% is anticipated for the latter.
  • Gains of 6.6% and 8.2% in the asking and effective rents in 2012 will be followed by slower price growth. Per annum gains, however, should remain substantial, even with the coming upturn in the vacancy rate.

Inner Loop II/Braeswood-Bellaire

  • The large-scale expansion of the Texas Medical Center has been cited as a significant source of new demand for apartments in this area.
  • In the Braeswood-Bellaire submarket, adjacent and south of Montrose, the latest construction cycle came to an end in 2009 with the delivery of 1,826 market-rate units. No projects delivered in 2011 or year-to-date in 2012.
  • Four projects with a combined total of 1,524 market-rate apartments were underway per report date, two of which, with 826, will complete this year, as follows:
  • The 474-unit Archstone Toscano Apartments from Archstone Communities is underway at 2900 N. Braeswood near Texas Medical Center for delivery in December.
  • Due on line the same month is the 352-unit Connection at Buffalo Pointe at Buffalo Speedway and W. Bellefort Street. Embrey Partners is the developer.
  • Two projects with a combined total of 698 units were under construction per report date for delivery in 2013, as follows:
  • A July finish is expected for The Hanover Company’s 379-unit Hanover Rice Village property at Rice Boulevard and Morningside Drive. Construction commenced in July 2011.
  • The 319-unit Lakes at 610 at 8811 Lakes is scheduled to complete next September. Construction began in January 2012. Grayco Partners is the developer.
  • The 226-unit, 21-story Ashby high-rise at Ashby and Bissonnet, part of a mixed-use project according to SAD, which has been described as “controversial,” a subject of years of neighborhood opposition, moved closer to starting with an agreement between the city and developer Buckhead Investment Partners Inc. that allows the project to move forward.
  • More. A 187-unit Ashby condo project also is planned, Reis reports.
  • Cancelled. Moody National Companies’ 250-unit Cambridge Tower has been cancelled, SAD reported in August.
  • Absent new supply, net absorption in Braeswood-Bellaire through first half 2012 was 208 units. The second quarter total alone was 69 units.
  • Vacancy has been declining. At 4.5%, the second quarter rate was down 30 basis points for the period and was down 130 year-over-year. Average asking and effective rents for the latest quarter were $1,085 and $1,030 per month, up 1.6% and 2.0% for the quarter, up 1.5% and 2.1% year to date in the wake of gains of 1.6% and 1.8% all told in 2011.
  • Outlook. Reis expects 2012 to provide a relative balance between demand and new supply, with a slight nod going to demand. Vacancy should end the year at 4.7%. Rents should stay strong: growth rates of 3.8% and 4.9% are projected for the asking and effective averages for the year.

West of Loop 610/Briar Grove-Westchase

  • Energy. West of Loop 610, the Briar Grove-Westchase submarket, like the Briar Forest/Ashford described below, is located in what is loosely referred to as The Energy Corridor for the presence of large energy industry employers. Growth in this industry sector, naturally, affects demand for apartments.
  • Exxon-Mobil’s recent decision to depart the Energy Corridor in favor of a massive new campus to be built in north Houston, south of The Woodlands, was a source of come concern for this submarket. Some local sources, however, do not expect a loss of vitality for the Energy Corridor.
  • Construction in the Briar Grove-Westchase submarket (directly west of Montrose-River Oaks to the west of Loop 610) came to a halt but has started again but in small volume. No units will complete in 2012.
  • The latest delivery, last year’s sole completion, was the September 2011 finish of The Ava, a 321-unit property at Westheimer and Highmeadow Drive.
  • Wood Partners broke ground in February 2012 for the $32.4 million, 256-unit Alta Woodlake Square luxury complex at 2630 Tanglewilde Street at Westheimer Road. A June 2013 finish is planned.
  • Current planning includes the proposed 200-unit second phase of Domain at City Centre on Town and Country Boulevard, SAD reports. The 370-unit first phase completed in January 2010. Simmons Vedder is the developer.
  • The 280-unit second phase of Portico at West 8 is planned for Seagler Road and Meadowglen Lane.
  • Accompanied by no new supply additions, total first half 2012 net absorption in Briar Grove-Westchase was counted by Reis at 334 units. The total for second quarter alone was 200.
  • Second quarter vacancy was 6.2%, down 60 basis points for the period, down 170 year-over-year. Average asking and effective rents for the quarter were $934 and $862 per month, up fully 1.0% and 1.2% for the period following larger gains the quarter before—in the wake of gains of 2.3% and 2.4% all told in 2011.
  • Outlook. With no units delivering in 2012 and net absorption projected at 562 units, vacancy should decline to 5.5% by year’s close. Gains of 4.2% and 5.6% are projected for the average asking and effective rents for the year.

West of Loop 610/Briar Forest/Ashford

  • Still farther west, the Briar Forest/Ashford submarket is located to the immediate west of Briar Grove-Westchase, on the west side of Beltway 8 (Sam Houston Tollway).

320 units, all in the second phase of developer Simmon Vedder’s Domain at

  • Eldridge (a.k.a. phase II of Eclipse), will complete in October 2012. Construction began in April 2011.
  • The sole market-rate apartment project in the development pipeline is the proposed 240-unit Sunrise at Briar Forest at Briar Forest Drive and Highway 6. Sunrise Luxury Living is the developer.
  • Phillips 66 is looking for a site near I-10 and Beltway 8 (and within 10 miles of 600 N. Ashford Dairy Road, its current site) for a new headquarters, the Journal reported in March. That interchange is shared by three submarkets—Briar Forest-Ashford and Briar Grove-Westchase to the south and Spring Branch to the north.
  • First half 2012’s lack of new supply was accompanied by net absorption of 441 units in the wake of 2011’s 795, also with no new supply delivered.
  • The market continues to tighten: second quarter vacancy was 6.4%, down 40 and 140 basis points for the quarter and year-over-year.
  • Average second quarter asking and effective rents were $860 and $799 per month, up 1.3% and 1.6% for the quarter following growth rates nearly as high the quarter before. Respective increases for 2011 all told were 2.4% and 2.8%.
  • Outlook. Net absorption at more than 1,000 units in 2012 all told, more than tripling new supply, should drop the vacancy rate below 6.0% by year-end. Strong growth—gains of 4.3% and 5.1%—is forecast for the asking and effective averages for the year.

Bear Creek/Katy

  • Still farther west, the Bear Creek-Katy submarket, anchored by I-10 (Katy Freeway), was active with development in the recent past; substantial potential remains for the future. Katy is among the west side submarkets cited by Wood Partners/TREB as a current “hotspot” for new development.
  • The 956 units that completed in 2010 were followed by 920 in three projects in 2011.
  • 316 units, delivering in March in Judwin Realty Group’s Park at Cinco Ranch at within the Cinco Ranch master planned community, will comprise the total for 2012.
  • Two projects with a combined total of 478 units, each without had a specified completion date, were under construction in this submarket per report date, as follows:
  • The 250-unit first phase of Katy Ranch Crossing at I-10 and Katy Fort Bend Road began construction in July. A same-size second phase is planned. The project is part of a mixed-use development by the same name from developer Mike Baker.
  • The 228 Waterstone at Cinco Ranch from Davis Development is underway at 6855 S. Mason Road.
  • In addition, SAD reports the 160-unit Lakeside Villas at Cinco Ranch underway at 10441 Spring Green Boulevard, Katy. Resolution Real Estate is the developer.
  • Six additional projects with a combined total of 1,338 market-rate units wait in the planning-proposal pipeline, Reis reports.
  • The largest to reach the planning phase is the 230-unit La Centerra at Cinco Ranch Apartments at Cinco Ranch and Commercial Center boulevards. Vista Equities Group is the developer.
  • Net absorption of 456 units in first half 2012 ran moderately ahead of the 316 units of same-term new supply.
  • Vacancy ended second quarter at 5.3%, down 40 basis points from a quarter earlier, down 200 year-over-year. Second quarter asking and effective average rents were $916 and $837, up 0.7% and 0.9% for the period following first quarter gains of fully 2.4% and 2.7%.
  • Outlook. Demand should maintain its edge over new supply in 2012 as additional net absorption, albeit in small numbers, accrues over the remainder of the year. Vacancy is expected to slip under 5.0% by year-end. Large gains of 6.8% and 7.3% are projected for the mean asking and effective rents for the year.

Northwest/The Woodlands

  • Growth and development also have been factors in the Far Northwest-Montgomery County submarket, which includes The Woodlands, a major master planned community in the far north. Construction, following a brief absence, has returned.
  • The 324-unit Discovery at Kingwood completed in May 2012 at 150 N. Park Drive, Kingwood.
  • Greystar Development Group’s 300-unit Woodlands Lodge completed construction in August 2012 at 2500 S. Millbend, The Woodlands. Construction began in April 2011.
  • A September 2012 completion is scheduled for The Retreat at The Woodlands, a 240-unit project at College Park and Alden Woods drives, The Woodlands. The complex broke ground in June 2011.
  • A February 2013 finish is scheduled for the 405-unit second phase of The Mansions Woodland at I-45 and FM 1488. Construction began in August 2011.
  • Two other projects underway with unspecified completion dates are a 300-unit unnamed project which broke ground in February at 2500 South at Millbend Drive, The Woodlands and The Retreat, a 201-unit project in Conroe, broke ground in January in that town.
  • The 324 units of new supply delivered during first half 2012 were accompanied by 511 units of positive net absorption.
  • Second quarter vacancy was 7.1%, down 30 basis points for the quarter, down 240 for year-over-year. At $873 and $809, mean asking and effective rents for the quarter were up 1.4% and 1.5% from a quarter earlier following small first quarter increases and gains of 2.6% and 3.0% all told in 2011.
  • Outlook. 2012’s substantial addition to supply should meet with favorable absorption and stable vacancy through year-end. Strong rent growth—gains of 3.5% and 4.3% for the asking and effective averages—is expected for the year.
  • The massive Springswood development and demand generated by the new Exxon-Mobil campus likely will play crucial roles in this submarket and others nearby (see below) on the north side in the period ahead.

Other/North Houston-Springswood Village

  • The $10 billion, 1,800-acre Springswood mixed-use development, located within the Champions/FM 1960 submarket in north Houston, generated by the new Exxon-Mobil campus south of The Woodlands, is expected to result in the development of 4,500 to 5,000 “homes” described recently as “mix of luxury rental apartments, townhomes and several types of single family homes.”
  • Update. Martin Fein Interests has been selected as the multifamily developer for the first phase of Springswood Village, Houston Business Journal reported in July. The first phase will consist of the 339-unit Belvedere Apartment Homes. Construction should begin by year-end, this source reports. Move-ins would commence in first quarter 2014.
  • Reis reports 1,100 market-rate units proposed for the Parkside Village development at Wunderlich and Mittlestedt roads, Houston, in the Champions/FM 1960 submarket.
  • The 276-unit Villas at Louetta will complete construction at Holzwarth and Louetta roads in the town of Spring in this submarket this September.
  • “Looking ahead,” notes Marcus & Millichap, “demand should rise substantially in the Spring/Champions area, which posts some of the highest Class B/C vacancy in the metro, as construction-related payrolls rise as plans to expand West Loop North and Highway 290 progress.”